Nevada HOA Liens: a 9-Month Super-Priority That Can Wipe Out the First Mortgage

Nevada's lien is created by recording the declaration. NRS 116.3116(9) says recordation of the declaration is record notice and perfection of the lien and that no further recordation of any claim of lien is required, so an owner who falls behind is already encumbered without a single document being filed against the unit. Subsection 1 sweeps in construction penalties imposed under NRS 116.310305, assessments and fines, and unless the declaration says otherwise it also makes penalties, fees, charges, late charges, fines and interest under paragraphs (j) to (o) of NRS 116.3102(1), plus collection costs charged under NRS 116.310313, enforceable as assessments. Subsection 10 is the deadline that runs against the association: the lien for unpaid assessments is extinguished unless a notice of default and election to sell is recorded, or judicial proceedings are begun, within 3 years after the full amount becomes due.

The super-priority is the part Nevada is known for. NRS 116.3116(2)(b) subordinates the lien to a first security interest recorded before the delinquency, but only to the extent set forth in subsection 3, and subsection 3 then carves three things back out and puts them ahead of that mortgage. The headline number is nine months of assessments for common expenses, measured on the periodic budget adopted under NRS 116.3115 and computed as if there had been no acceleration, counting back from the date the notice of default and election to sell is recorded. The second is any charge the association incurred on the unit under NRS 116.310312, the section that lets a board enter the grounds of a unit already in bank foreclosure to maintain the exterior or abate a nuisance. The third is the association's own enforcement costs, and Nevada is unusual in printing a line-item price list for them in subsection 5: $165 for a demand or intent to lien letter, $325 for a notice of delinquent assessment, $90 for an intent to record a notice of default letter, $400 for a notice of default and $400 for a trustee's sale guaranty, with no more than one guaranty and no attorney fees allowed into the priority amount at all. There is one shortening valve. If Freddie Mac or Fannie Mae regulations require a shorter period of priority, that federal period governs, except that the statute floors it at the 6 months immediately preceding the recording of the notice of default or the filing of a judicial action.

Fines sit on the other side of the line. They are in the lien under subsection 1, but subsection 3 lists only assessments, NRS 116.310312 charges and capped costs as prior to the mortgage, so a fine is always junior to the lender. NRS 116.31162(6) goes further and blocks the sale itself: an association may not foreclose a lien by sale based on a fine or penalty for a violation of the governing documents unless the violation poses an imminent threat of causing a substantial adverse effect on health, safety or welfare, or the penalty is for failing to adhere to a construction schedule required under NRS 116.310305. A Nevada board cannot sell a house over an unapproved paint color.

The payoff-and-cure machinery is spelled out step by step. Before the association may even mail an intent letter, NRS 116.31162(4) requires that no earlier than 60 days after the obligation went past due it send the owner a schedule of the fees that may be charged, a proposed repayment plan, and notice of the right to contest the debt at a hearing before the executive board, and then wait 30 days. If the owner requests the hearing or signs a repayment plan, collection stops unless the owner is unsuccessful at the hearing or misses a plan payment by more than 10 days. Only then comes the notice of delinquent assessment by certified or registered mail, and only 30 days after that may the association record a notice of default and election to sell. That notice must break the debt into four separate figures: the total prior-to-mortgage amount, the assessment portion, the NRS 116.310312 portion and the enforcement-cost portion, and it must carry, in 14-point bold type, the warning that the owner could lose the home even if the amount is in dispute. The owner then has 90 days from the later of recording or mailing to pay.

Only after the 90 days may the association notice the sale under NRS 116.311635: post for 20 consecutive days in a public place in the county, publish once a week for 3 consecutive weeks in a newspaper of general circulation, serve a copy personally, and mail copies to the owner, to every security-interest holder at the address published by the Division of Financial Institutions, and to the Ombudsman. NRS 116.31164 puts the auction between 9 a.m. and 5 p.m., at the courthouse in counties under 100,000 population and at the location the county designates for NRS 107.080 trustee sales in Clark and Washoe. Before bidding opens, the person conducting the sale must state whether the first-mortgage holder has paid off the super-priority amount. Insiders are barred from buying: anyone who exercised discretion in the foreclosure, the collection agency, the community manager and assistants, executive board members, the foreclosure attorney, relatives within the third degree, and the person conducting the sale.

A Nevada association sale does not end the story on the day of the auction. NRS 116.31166(1) vests title in the purchaser subject to a right of redemption, and subsection 3 gives the former owner, a successor, or any holder of a subordinate recorded security interest 60 days after the sale to redeem by paying the purchase price plus interest at 1 percent per month, plus any assessments, taxes or senior lien payments the purchaser made, plus reasonable amounts the purchaser spent to maintain or repair the unit to governing-document standards including standing water or snow removal. If the former owner redeems, the effect of the sale is terminated and the owner is restored to the unit subject to the security interests that existed at the time of sale. If nobody redeems within 60 days, the person conducting the sale delivers a deed without warranty and must send the Ombudsman a copy within 30 days.

Enforcement runs through the recorded documents rather than a courtroom. 31166(8) makes the recitals in the foreclosure deed conclusive proof of default, of the mailing of the notice of delinquent assessment, of the recording and mailing of the notice of default, of the elapsing of the 90-day period, of the notice-of-sale steps and of the recorded affidavit, and subsection 9 makes that deed conclusive against the former owner, heirs and assigns. 31168 no longer affects the rights of a bona fide purchaser or encumbrancer for value, so procedural defects have to be raised early or not at all.

31162(4), the 90-day cure window, and payment of the assessments and other sums due up to 5 days before the sale under paragraph (d) of subsection 1. 3116(13) requires the association to furnish a statement of unpaid assessments within 10 business days of a written request, in recordable form where the lien may be foreclosed, and that statement binds the association, the executive board and every owner. 31164(8) in a fixed order: reasonable expenses of sale, expenses of securing and maintaining the unit including taxes, insurance and, to the extent the declaration provides, attorney fees, then the association's lien, then subordinate claims of record in order of priority, then any excess to the owner.

3116, subsection 12 requires the judgment to include costs and reasonable attorney fees for the prevailing party, which cuts both ways. The Ombudsman for Owners in Common-Interest Communities and Condominium Hotels receives a copy of every notice of sale and every foreclosure deed, which makes that office the natural first call when the sequence looks wrong.