LAS VEGAS (KLAS) — A Nevada homeowners association discovered a lack of funds to repair its water system, raising concerns about the effectiveness of the HOA system and the need for homeowners to monitor community finances.
Gordon Rossi described the pools of water around his Somerset Park home as similar to an asphalt swamp bog, adding that stepping on the wrong spot would trigger air bubbles from the ground. Rossi is one of the dozens of homeowners who were stepping on swollen cracks and streams before the neighborhood’s homeowners association discovered the entire water system would need to be prepared.
When it was discovered that the association’s reserves didn’t have enough money to pay for such repairs, the City of Henderson came through for the residents, coming up with the nearly $700,000 needed for the repairs, ensuring 85 families could remain in their homes. Many residents wondered why there wasn’t enough money for the repairs in a reserve that had presumably been building since the 1980s.
Dues end up in two buckets. A checking and savings, if you will. The “checking” is for operational costs like routine maintenance, landscaping, pool cleaning, and the like. The savings, also known as the reserve, are specifically set aside to replace major components like roofing, streets, and electrical and water systems.
Somerset Park had $62,000 in its “savings,” three times less than experts say it should have had available, and nowhere near enough to pay the $700,000 required to make the water repairs. Residents said Nevada’s HOA system failed the neighborhood.
It’s a system in which approximately 600,000 Nevadans participate. Recently headlines have featured horror stories about monthly assessments increasing by as much as 160 percent. Sean Anderson, an attorney specializing in HOA litigation, said problems are exacerbated because people lack an understanding of the system, including the intricate nature of reserve studies.
Although Nevada’s Real Estate Division (NRED) requires them to be submitted, the documents are rarely reviewed due to the volume of submitted docs.
“Whether or not it’s their job, NRED absolutely does have the authority and the statutory ability to conduct and investigate these studies,” Anderson said.
Yes, the authority, but what about the manpower? Currently, there is only one auditor for the state of Nevada. Sonya Meriweather, a spokesperson for NRED, says the organization is understaffed.
“We have one auditor. We have 3,800 associations,” Meriweather said. “Can I say that every association every year is looked at? No, that wouldn’t be feasible.”
Will Bradley, a retired Army officer, believes NRED knows about the problems, saying that they’re “just not doing anything about it.” He said he was forced off his HOA board because he is a self-described whistleblower. Bradley fears that many association reserves are dangerously low.
“I want to see it in writing,” Bradley said. “How funded are our reserve funds? And I want to see the last report that our HOA submitted to the Nevada Real Estate Division, proving how funded it was.”
The process, which includes an expert visiting every three to four years to study major components to determine their lifespan and the cost of replacement, can be tricky.
“There’s no one that’s really going to be a safety net to alert you that you don’t have enough money,” Anderson said.
“Frankly, they can blame it on staffing. I don’t know what the cause is, but we are not being properly regulated and supervised,” Bradley said. “Chances are, if you’re in an HOA, your HOA is a mess, and you don’t even know it.”
Experts suggest HOA members attend meetings, review budgets, and ask to see reserve balances. They also recommend monitoring property management groups. Somerset Park’s property management group, Heritage Management Group, is accused of embezzling from multiple communities, with the business having managed 14 HOA groups.
