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State Supreme Court will decide whether homeowners associations can sue on behalf of individual owners

The Nevada Supreme Court will decide whether homeowners associations have the right to sue on behalf of individual homeowners in a case that could have a major impact on the number of construction defect cases filed in the state.

The court heard oral arguments Monday in fives cases involving HOAs. The court could take up to four months before issuing a decision, according to one attorney.


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  • Many potential onlookers were turned away as a standing room-only crowd packed the Regional Justice Center courtroom to hear developers question the legal authority of HOAs to file lawsuits alleging faulty construction. The builders, including D.R. Horton, Richmond American Homes and Johnson Communities of Nevada, said HOAs should only be allowed to sue for construction defects in common areas, and not for individual unit owners.

    Developers asked the full panel of justices for the right to challenge the associations' ability to bring defect lawsuits, and to deny their authority to sue for individual unit owners.

    "The developers point of view is simple on this," Jack Juan, an attorney who represents D.R. Horton, said after the hearing. "The individual homeowner should decide what he or she should or should not do with their property -- not board members, not associations."

    The lawyer expected a ruling in the developers' favor to bring down builders' liability premiums. "That's why there were insurance people in there (in the courtroom)," he said.

    Nevada law now allows "common-interest" ownership associations to file lawsuits on behalf of two or more owners. Attorneys for the developers argue that the term "common-interest" refers only to an actual ownership interest in the allegedly defective property, which would limit HOA lawsuits to common areas. Courtyards or pools are typical examples of common areas.

    Plaintiffs' lawyers decried the developers' efforts as an attempt to stop homeowners from seeking the monetary damages and repairs due them.

    George Bochanis, of the Nevada Justice Association, said many residents don't have the financial means to file construction defect lawsuits on their own. Further, individual cases might not be worth a lawyer's time, he said.

    The Nevada Justice Association, formerly the Nevada Trial Lawyers Association, filed a court brief on the side of the HOAs.

    "Our interest in this is that it is a crucial issue that affects every homeowner in Nevada and how their concerns are addressed," Bochanis said before the hearing.

    The number of construction defect claims could actually jump, as more residents filed individually, if the state Supreme Court stripped associations of their right to sue in many instances, said Bruce Mayfield, an attorney representing Monarch Estates Homeowners Association.

    A district court decision held that Monarch lacked the standing to sue Johnson Communities and Richmond American over alleged defects in a Monarch Estates wall because each individual unit owner owned the part of the wall that abutted their property.

    Of the five cases being consolidated -- Monarch Estates, First Light Homeowners Association vs. D.R. Horton, Court at Aliante Homeowners Association vs. D.R. Horton, Dorrell Square vs. D.R.Horton and High Noon at Arlington Ranch Homeowners Association vs. D.R Horton -- the lower courts had only ruled in favor of one HOA, First Light.

    Damage to individual units in a community is a matter of common interest to its HOA, argued Mayfield.

    "If you have a water leak in homes and you have mold, and people are leaving, the association has an interest because the property values and the livability of the development will go down," he said.

    Contact reporter Valerie Miller at vmiller@ lvbusinesspress.com or 702-387-5286.

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    lisa wrote on September 14, 2009 06:46 AM: hate the HOAs...even when they are legitimate


    Mike wrote on August 18, 2009 05:21 PM: I have to laugh! HOAs prey on residents who can't afford to fight them in court. Now they want to feed at the legal trough on our behalf?
    Wake up folks! HOAs have FAR to much power.
    I have an idea, lets reduce the HOAs power to executive only. Make homeowners the ONLY ones to make new rules and leave police and judicial powers to a State agency. We could fund that agency for just $25 A YEAR a piece! This would work great ONLY IF NO input was allowed from the preditory lawyers now crawling out of the woodwork in HOAs.


    HOA Critic wrote on June 23, 2009 06:39 AM: After reading the previous comments, I realize that some people are just not well informed on the process of a class action lawsuit involving home owners.

    Many have overlooked the fact that every person has the right to withdraw his (her) participation in the class action and deal with the developer on their own terms, OR file a file a claim for damages on their own and hire their own firms to research and document the damage and the necessary law firm to file. No one has yet taken those rights away.

    The problem with that approach is the cost to the individual may well be prohibitive, because of the delaying tactics, and the massive amounts of evidence needed, not to mention the fact of the absolute advantage of the developer’s lawyers.

    I am of the opinion that if you are governed by a homeowner association and a board of directors IT SHOULD BE MANDATED that the association protect you from the financial harm that relates to construction defects caused by the builder. There is too much incentive for possible collusion between the developer and the board members to pass the cost of repairs from the developer to the hapless home owner.


    Former HOA Board Member wrote on June 22, 2009 05:37 PM: This case is an example of how NV homeowners are under massive financial attacks from all sides by the developers, aligned attorneys, construction partners and cooperating board members. At stake are hundreds of millions of dollars due to Nevada homeowners from developers for willfully defective construction practices.

    Homeowners are clearly at a huge disadvantage, and the developers can afford to spend big money to win their agenda. Our only weapons are our votes for board members and members of the NV legislature, district courts, and the supreme court during the next election.

    Obviously, boards should not get involved in most homeowner construction disputes. But, there are some cases where the Directors are negligent when they do not use their leverage to assist homeowners in gaining just resolution of large-scale construction defects.

    Board actions must not be limited to community property alone, and we should not stand idly by and remain uncaring about the plight of our neighbors.


    Free Nevada wrote on June 10, 2009 06:19 PM: > "Our interest in this is that it is a crucial issue that affects every homeowner in Nevada and how their concerns are addressed," [a trial lawyer industry rep] said before the hearing.

    Your interest in that is preserving the carefully cultivated relationships you have with HOA Property Managers who scare the bejesus out of senior citizens by practicing law without a license until they agree to hire you.


    mammy wrote on June 10, 2009 03:46 PM: I can’t believe the gall of these supreme judges, I’m reporting them to the HOA, they need our approval before they can do anything.

    I also think they should wear different color bath robes, black is so 1998


    Suzanne wrote on June 10, 2009 10:21 AM: I am a homeowner living in an HOA development. I also have some construction defects I've been dealing with myself. I think the homeowner should be the only person empowered to sue for construction defects as once you allow the HOA to do so on your behalf, you have increased the powers of the HOA, something I find particularly frightening. Their powers are gestapo enough for me already.

    Think twice homeowners about this. Do you really want your HOA to have that much power?


    TK wrote on June 10, 2009 10:07 AM: Always follow the money. Lawyers can't get enough money from individual claims.


    Robert wrote on June 10, 2009 09:23 AM: Delray"

    You could not be more wrong. If you need the proof, recall this story:

    http://www.lvrj.com/news/29857184.html

    The reason this is a pervasive issue is that you have 5 homeowners who get to decide whether 700 other homeowners are going to be subject to litigation, depositions, destructive and invasive testing of your Unit and frankly whether you as a homeowner might be responsible for the Developer's attorneys' fees when the HOA litigation fails in Court.

    In other words, someone who does not own any part of your house throws you into a lawsuit as a Plaintiff against your will and you bear all the risk. If you want to be part of the lawsuit, sign up yourself.


    Fred wrote on June 10, 2009 09:08 AM: Time to stop the Plaintiff Attorneys. Homeowners can still make claims (if there are truly damages). Plaintiffs bring in so call "experts" and create damages (spray rack tests ect...) When is the last time it rained so much that windows actually leaked??????


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