Nevada high court makes key ruling on HOA liens

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LAS VEGAS (AP) — The Nevada Supreme Court has ruled that a lien held by a homeowners association can override a deed of trust involving a first mortgage on the property.

Real estate investors in Las Vegas who have been buying foreclosed property at bargain prices claimed a victory in the ruling on Thursday.

The state Supreme Court overturned an earlier Clark County District Court decision and ruled in favor of SFR Investments Pool 1, the Las Vegas Review-Journal reported (

Homeowners associations can place liens on properties within their communities for unpaid fees. Unpaid association dues land in a super-priority lien that must be paid off first when a foreclosed home is sold.

The justices agreed with the argument that the investors, by paying off the lien held by the Southern Highlands Community Association in 2012, wiped out a debt of $885,000 on the property that had been held by U.S. Bank as a first deed of trust.

Some investors have adopted the strategy of paying off the super priority liens with the belief it would extinguish the first mortgage of the foreclosed home.

Attorneys for U.S. Bank had argued that neither state law governing common-interest communities nor public policy, "justifies giving SFR such a tremendous windfall."

The bank also argued that if a lender cannot adequately protect its substantial residential loan investment, the lender will either cease lending in Nevada or charge higher interest rates to protect itself against greater uncertainty of the borrower's repayment of the loan.

Las Vegas attorneys Puoy Premsrirut and James Adams said the opinion written by Justice Kristina Pickering also clarified a long-standing dispute over what can be included in a super priority lien.

The dispute has centered on whether such liens can include costs and fees associated with recovering the unpaid assessments, including costs incurred by collection companies hired by the HOAs. The HOAs have argued that the fees are recoverable under the lien, while those who have purchased foreclosed homes argue only nine months of unpaid dues can be included.

"We interpret the ruling to say that the Supreme Court is stating that the super priority lien is a cap, a formula, limited to nine months of assessments and no more," Premsrirut said.


Information from: Las Vegas Review-Journal,

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