Wednesday, May 23, 2012

History of HOA Abuses (HOA Reno Stonefield Brief)

Tina Pettie
P.O. Box 18143
Reno, NV 89511
Cellular (775) 303-3461


Tina Pettie, Claimant        Claim No. 12-45


Stonefield Homeowners Association, Respondent


Stonefield Homeowners Association, Counter-Claimant     


Tina and Helen Pettie, Counter-Respondents


Respondent's Attorney Gayle Kern believes that the Super Priority Lien statute in NRS Chapter 116 does not mean what it says.  More specifically, she believes there is not a nine month limitation to the amount of the lien.  To support her position, Attorney Kern quotes from a 1986, Nevada Supreme Court Decision, McKay v. Board of Supervisors, which stated that the words in a statute, “should be given their plain meaning unless this violates the spirit of the act.”

The case was not about the Super Priority Lien statute or any other homeowner association issue.  The case had absolutely nothing to do with the priority of liens or the extent of liens, but Attorney Kern believes the quote is applicable because she understands “the spirit of the act” better than the Judges that have examined “the spirit of the act,” as it relates to the priority and extent of association liens, and she has concluded that the statute violates the spirit of the act.

All parties agree that a super priority lien is that portion of a homeowners' association lien that survives a foreclosure by the mortgage holder.  All parties agree that some portion of the association's lien is extinguished by the foreclosure sale.  The parties disagree about whether the statute should be interpreted literally, word by word.  Attorney Gayle Kern believes a word by word interpretation leads to a conclusion that violates the spirit of NRS Chapter 116.   

Four Nevada Judges have recently considered whether the words in the super priority lien statute violate “the spirit of the act.” Judge Elizabeth Gonzalez, Judge Mark Denton, Judge Steven McMorris and Judge Persi Mishel all disagree with Attorney Kern.  They have all decided that a nine month limitation is consistent with the legislative intent of the statute and the other provisions in NRS Chapter 116.

All four Judges have determined that a specific phrase in the super priority lien statute, “to the extent of,” provides a clear and unambiguous limitation to an Association's Super Priority Lien.  Further, all four Judges have ruled that the limitation is numerical and not temporal in nature.

Attorney Kern does have allies that agree with her and believe the four aforementioned Judges have made an error in reaching their conclusions.  Some of Attorney Kern's allies are licensed attorneys in Nevada and Arbitrators for Nevada's Real Estate Division, however, most of Attorney Kern's allies are members of a lobbyist organization named Community Associations Institute (CAI).  Like many lobbyist organizations, CAI maintains its headquarters in a suburb of Washington, D.C. The location provides the lobbyists of CAI with close access to Congressmen and Senators from all 50 States.  There are local chapters of CAI throughout the country and they lobby state and local government officials for stronger laws to enable the governing bodies of homeowner associations to enforce their restrictions and assessments.

For example, a powerful enforcement action the CAI lobbyists have consistently lobbied for during the last three decades is the ability for homeowner associations to perform non-judicial foreclosures.  Only a handful of states allow non-judicial foreclosures by associations.  Nevada is one of the states that agreed with the CAI lobbyists and made non-judicial foreclosures permissible.  Nevada's legislature has been very accommodating to the lobbyists from CAI, but the legislature has also considered the recommendation of stakeholders with different interests to protect, such as the lobbyists from the Mortgage Bankers Association.   The exact words of the statutes in NRS Chapter 116 were often selected in the spirit of compromise.  

Many other states carefully weighed the recommendations of the CAI lobbyists and decided against granting the boards of homeowner associations the power of non-judicial foreclosure.  State legislators were examining the “spirit of the act” when they decided not to grant such powers.  They believed that having a judge review a process as serious as a foreclosure was the only way to ensure a fair and prudent process.

During the same period that state legislators were considering non-judicial foreclosure statutes, the legislators were considering another important piece of legislation being promoted by the CAI lobbyists.  It was a type of lien referred to as a super priority lien.  It would be the portion of an association's lien that would not be extinguished by a foreclosure conducted by the mortgage holder.  The lien would survive the mortgagee's foreclosure and would be attached to the property.  When considering super priority liens, state and local leaders had to carefully examine the “spirit” of their common-interest community laws.  There were many stakeholders involved, such as the defaulting homeowner, other members of the association, the mortgage lender, and the state's judicial system.   Some states wished to lessen the burden and costs on their courts.  

Some states were more concerned with the potential for the abuse of power by associations, than with the potential cost savings produced by lessening the burden on their courts.  In the State of Washington, legislators decided that Condominium Associations could perform non-judicial foreclosures, however, if the associations pursued this fast track path, they would have to waive their rights to a super priority lien.  If associations wished to preserve their super priority liens, then they would have to pursue the more costly judicial foreclosure process (RCW 64.34.364).  It is clear that the legislators carefully considered the spirit of the law and decided it was not prudent to grant associations with both a non-judicial foreclosure process and a super priority lien.

The words in the Washington statute do not violate the spirit of their Condominium Act.  The legislators weighed the advice of the CAI lobbyists and incorporated some of the lobbyists' recommendations, but also included limitations and protections for troubled homeowners, lenders and investors.  

In Connecticut, the legislators have considered the spirit of the law and decided that associations should never have the power to perform non-judicial foreclosures.  Associations must perform the significantly more expensive process of performing foreclosures only with judicial review.  This makes Connecticut Law regarding foreclosure actions and the extent of association liens completely different than Nevada Law.  Connecticut's laws are simply not in any way applicable to the “spirit” of the law in Nevada which is a state where the CAI lobbyists have succeeded in providing associations with a non-judicial foreclosure process.  Attorney Kern's references to Connecticut in her pleadings regarding this dispute are completely misapplied. 

In NRED Arbitration Claim #10-87, Arbitrator Persi Mishel examined the spirit of the act by reviewing case law in states that have both, a non-judicial foreclosure process and super priority liens.  The Order states (page 10, line 13):

There are several states such as Colorado, Minnesota, New Jersey, Vermont, Alaska, and Delaware, whose super priority lien statute are substantially similar to Nevada's super priority lien statute (i.e. NRS 116.3116).  None of the courts of these states have interpreted their statute to mean that costs and fees related to unpaid assessments may be added to super priority lien amount even though such addition would increase super priority lien amount above the cap provided under their statute.

Attorney Kern must believe that in addition to the four previously mentioned Judges in Nevada, the Judges in six other states also do not understand the “spirit of the act.” 

Attorney Kern has been a member of the Nevada Chapter of CAI lobbyists for many years.  She is friends with one of the founding members of the Nevada Chapter of the CAI.  He is the former CIC Commission Chairman, Michael Buckley.  Mr. Buckley has lobbied Nevada's legislators to support the governing bodies of homeowner associations for many years.  Of course, as a lobbyist it was not his duty to consider the interest of all stakeholders and the laws he supported often created additional hardships for the individual homeowners who had become involved in disputes with the governing bodies of their associations.

This arbitration proceeding is an example of Mr. Buckley's lobbying efforts.  Claims such as those presented in this Brief must be arbitrated or mediated within the Nevada Real Estate Division's Alternative Dispute Resolution (ADR) program prior to receiving judicial review.  This legal requirement often causes hardship on the Claimant.  It is not unusual for an arbitration proceeding to take a year and cost the Claimant over $10,000 in attorney's fees.  It is unlikely that a low income Claimant could afford to complete an arbitration proceeding and then file an appeal in District Court.  In 1993, this ADR requirement was lobbied for by Mr. Buckley.

In Nevada's latest legislative session, Mr. Buckley lobbied for SB 254 which would have placed more roadblocks in front of an individual homeowner who felt aggrieved by their association and desired to have their day in court.  In a recent article for Nevada Lawyer, Mr. Buckley wrote, “In 2011, a bill providing for mediation and fast tracking the CC&R arbitration process (SB 254) passed the legislature but was vetoed by the Governor, primarily because of concerns about the cost of mediation to homeowners.  While these concerns are not unfounded, I can't help but think that the time has come for a better process.”

Clearly the Governor was carefully considering the spirit of the legislation when he vetoed SB 254.  Elected leaders, such as the Nevada Legislature and the Governor of Nevada have been carefully considering the spirit of common-interest community statutes for many years.  The words in the statutes mean what they say.  Mr. Buckley has been very successful in getting Nevada's leaders to consider the interest of association boards, collection agencies and property managers, but the State's leaders have also considered the interest of other stakeholders.

In the same article previously mentioned, Mr. Buckley states that, “Over the years NRS 116 has been criticized by both lawyers and lay people as being overly complex - a lawyers full employment act.  I don't think there is any question; that is true.”     

While Mr. Buckley's criticisms of the very statutes that he personally lobbied for, may have much merit for some provisions, the limitation of a super priority lien is not overly complex.  The intent was a simple numerical nine month limitation.  The limitation was six months for many years.  In 2009, Nevada was deep in a foreclosure crisis and Nevada's legislators increased the limitation to nine months.  This was done after much debate.

Mr. Buckley has many friends at the Nevada Chapter of the CAI lobbyist organization that are unhappy with the nine month limitation.  They would like to have the limitation increased to 24 months or better yet, to have no limitation at all.  Employees of three of the corporations involved in this dispute have been members of the CAI lobbyist organization: RMI Management, Truckee Meadows Properties, and Kern & Associates.

In 2009, when the legislature was considering different limitations to the Super Priority Lien statute, Mr. Buckley lobbied the legislature to include the following words to the Super Priority Lien statute, “and reasonable attorney's fees and cost incurred by the association incurred in foreclosing the association's lien.”

The Nevada legislature declined to include those words.  They increased the limitation for a super priority lien from six months of assessments to nine months of assessments.  The legislature carefully considered many options.  It was already a difficult period for associations.  News about the recession and housing crisis was everywhere.  Many lenders and other financial institutions were already in bankruptcy.  The legislature was completely aware of these problems.  The legislature selected the new words in the super priority lien statute after weighing the interests of many different stakeholders.  Mr. Buckley's request for attorney's fees was not written into the statute.

In 2010, Mr. Buckley, acting as CIC Commission Chairman, wrote an Advisory Opinion about the Super Priority Lien statute.   He constructed a complex Opinion about super priority liens in other states and how the liens should be applied in Nevada.  The Opinion never explicitly states that super priority liens can exceed the nine month limitation, but Attorney Kern and others believe the Opinion implies the nine month limitation may be exceeded.  The Opinion states that late fees, interest and attorney fees may be part of the lien, but does not provide a clear statement regarding maximum limitations.  Contrary to supporting Attorney Kern's position, the Opinion references case law from Colorado that strongly supports the Claimant's position that there is a nine month numerical limitation. Further, the Opinion references a Wake Forest Law Review article that also supports the Claimant's numerical limitation position.  Regardless of Mr. Buckley's intentions, the Opinion brought little clarity and much confusion to the question of a numerical nine month limitation.

It is simply not accurate for any Party to make the claim that the Advisory Opinion is strong support for the position that a strict interpretation of the words in NRS 116.3116(2) violates the spirit of the act.  Unfortunately, the ambiguous Advisory Opinion has contributed to a regulatory environment which is, to borrow a phrase from Mr. Buckley, “a lawyers full employment act.”

When the Nevada Supreme Court wrote about the “spirit of the act” in 1986 they did not wish to create confusion and endless litigation that would increase the employment of lawyers.  In McKay v. Board of Supervisors, the Supreme Court was writing about a situation where the clear intent of the Open Meeting Law had been violated.  That is not the situation in this dispute.  The Super Priority Lien statute is legislation that considers the interest of various stakeholders, not just the interests of association boards and collection lawyers.  The words placed into the Super Priority Lien statute in 2009 accurately reflect the intent of the legislation.  They were not placed into the statute by accident or oversight.  They do not violate the spirit of the act.

Several months after the CIC commission adopted Mr. Buckley's Advisory Opinion, the commission adopted Regulation R199-09 which describes the fees collection agencies and attorneys may charge in their efforts to collect unpaid assessments.  At least one portion of the regulation clearly violates the spirit of NRS Chapter 116.  NRS 116.3116(4) explicitly states that the recordation of the Declaration perfects the association's lien and there is no need to record any other lien to complete a non-judicial foreclosure.  Recording a Delinquent Assessment Lien is an antiquated tradition that has survived from the days of NRS Chapter 117, Nevada's old Condominium Laws.  NRS Chapter 117 is no longer applicable to any common interest communities.  NRS Chapter 117 was never intended to govern single family housing units such as the units at the Stonefield Homeowners' Association.  More importantly, back when NRS Chapter 117 was applicable, a Delinquent Assessment Lien was completely subordinate to the lender's mortgage.

Unfortunately, Regulation R199-09 states that collection agencies and attorneys may charge homeowners $325.00 for recording a redundant and unnecessary lien.  It is obviously a regulation written by a commission that has not carefully considered the procedures for non-judicial foreclosure in NRS Chapter 116.

A regulation that encourages collection agencies to generate fees by filing unnecessary liens against homeowners is anti-homeowner.  It is anti-consumer.  The regulation is a violation of the spirit of the Common-Interest Community Act.  The regulation is a violation when viewed in the context of Nevada's Supreme Court Decision in McKay v. Board of Supervisors.

Commission member Gary Lein supported Regulation R199-09.  He is also the Registered Agent for the lobbyists at the Nevada Chapter of CAI.  Giving great deference to R199-09 is not consistent with giving consideration to all the stakeholders in common-interest communities.

If an Arbitrator decides to give deference to R199-09, he should recognize that at least one of the charges Attorney Kern has claimed in this dispute exceeded the limits in R199-09.  According to an Affidavit from Attorney Kern, the Claimant was charged $837.39 for the Notice of Default.  The limit in R199-09 is $400.00.

The total charges paid by the Claimant were extremely large in comparison to the $20 per month regular assessment.  After paying over $2,700.00, the Claimant received another demand from Attorney Kern for an additional $294.00 in attorney's fees.  The total of the payments made to Attorney Kern was equal to about 150 months of regular monthly assessments.  An additional $245.00 was demanded by RMI Management, the property manager.  

If a super priority lien can equal 150 months of assessments, then why would 1,500 months of assessments be inappropriate?  Placing limitations on super priority liens is not a violation of the spirit of the law.  It is sound governing that recognizes protecting lenders and investors are important elements of solving the difficult issues that occur when a financially troubled homeowner defaults on their obligations.

Attorney Kern has two pillars of argument to support her position that the super priority lien provision does not mean what it says, the case law in Connecticut and Mr. Buckley's Advisory Opinion.  A careful examination of those arguments reveals Attorney Kern's position simply does not have rational or objective support.

Attorney Kern's pleadings repeatedly urge the Arbitrator to consider that the Claimant made an unjust profit from her investment in the Stonefield community.  Upon close examination, the facts do not support Attorney Kern's allegation.  The Claimant did not make a profit of over $30,000.00.  The profit was not even close to that amount.  The closing statements show that closing costs charged to the Claimant were $12,398.29.  The closing costs do not include the nearly $3,000.00 paid to the Association.  The closing costs do not include the cost of fixing broken windows, replacing missing appliances, installing new carpets, painting the house or the county transfer taxes paid when recording the Trustee's Deed.

The Claimant's real profit on the investment was approximately 10%.  That is an attractive return, but it is certainly not unjust enrichment, when the amount of risk is considered.  On the other hand, of the nearly $3,000.00 paid by the Claimant to the Association, over 90% went to corporations such as Kern & Associates and Phil Frink & Associates.  Documents show less than 10% of the payments went directly to the benefit of the other homeowners in the Stonefield community.   That is an unjust distribution of the Claimant's payments.

Currently, Nevada is in the middle of the worst housing recession since the great depression.  All of the communities in the Reno area have struggled with abandoned houses, dead lawns and stripped out kitchens.  The capital to fix these houses is in scarce supply.  Investors have to make difficult choices.  Should they spend their capital painting the house or laying new sod in the front yard?  Some people believe that the highest priority for investor's capital should be to pay lawyers $290/hour for recording unnecessary documents at the County Recorder's Office.  Wasting scarce capital on the recording of unnecessary liens is not part of an efficient solution to Nevada's severe housing problems.

Investors should be spending their time and money on broken windows and missing appliances. Forcing investors to spend their time and money disputing association liens that exceed 100 months of regular assessments makes Nevada appear to be a lawless land with endless litigation, where keeping lawyers fully employed is the highest priority.  Validating hostile opinions such as Attorney Kern's opinion about unjust profits will discourage investment in Nevada's common-interest communities, and that will not help Nevada's crashing real estate values. 

Making a 10% return on an investment is an attractive return, but foreclosure investors cannot rely on succeeding on every investment.  During 2010, the Claimant purchased an Evergreen Condominium through a foreclosure sale.  The investment in the condominium lost a significant amount of the original principal invested.  The losses occurred primarily because the Claimant poorly estimated the price at which the condominium could be resold.  The Claimant made a mistake. Investing is often a risky and sometimes humbling activity.  However, one task that was not unpleasant was working with the condominium attorney.  Attorney John Rogers represented the Association.  He carefully read the words in Nevada's Super Priority Lien statute.  He concluded there was a nine month numerical limitation and he could not include late fees, interest or collection costs in addition to the nine months of assessments.  Nine months of assessments were paid without any dispute.

Attorney Kern is the only attorney headquartered in Northern Nevada that demands payments with claims that a super priority lien equals over 100 times the regular monthly assessment.

Attorney Kern clings to her belief that the words in the statute do not have a plain meaning and thus, in this particular dispute, she is entitled to charge the Claimant payments equivalent to almost 150 months of regular monthly assessments. The most important word in the statute that Attorney Kern claims is ambiguous is “extent,” but the meaning of other words are also in dispute.  Attorney Kern claims “institution” does not have a plain meaning.  If a Court accepts that a super priority lien has a numerical limitation, then the meaning of “institution” is of minor significance; however, if a Court holds that a super priority lien may be the sum of nine months of assessments and the collection costs incurred during the nine months, then the dispute regarding the definition of “institution” becomes significant. 

The word “institution” has several definitions in Black's Law Dictionary.  The first definition is, “The commencement of something, such as a civil or criminal action.”  The word's meaning is clear when used in the legislative phrase, “immediately preceding institution of an action to enforce the association's lien.”   Institution means beginning.  Institution means the first step in enforcing the association's lien.

Is the first step of enforcing the association's lien described in Chapter 116?  Yes. The steps are clearly described in Chapter 116.  Section 116.3116 is followed by section 116.31162.  The section's title is: 

Foreclosure of liens: Mailing of notice of delinquent assessment; recording of notice of default and election to sell; period during which unit's owner may pay lien to avoid foreclosure; limitations on type of lien that may be foreclosed.

The last phrase in the title of section 116.31162 is, “limitations on type of lien that may be foreclosed.”  The words show that the “spirit of the act,” includes protecting financially troubled homeowners, not just the association's board of directors.  The spirit of the law was to provide “limitations” that protect many different stakeholders.  It was consistent with the spirit of the act for the legislature to place numerical limitations on the Super Priority Lien statute to protect lenders and investors.

For the person that carefully considers the words in the title of section 116.31162, the conclusions are inescapable. The words in the sub-sections are also crystal clear.  The action for the association to institute is a non-judicial foreclosure. The words are plain, “Foreclosure of the lien.”  Foreclosure is the “action.”

The “institution” is the “Mailing of the notice of delinquent assessment.”  The institution is a very easy step for the association.  They simply have to go to the post office and fill out a certified mail card developed by the United States Postal Service for a certified mailing.  This institution of an action takes a few minutes and costs about five dollars.

If the Stonefield Association had instituted an action to enforce their lien and then simply waited for the lender to foreclose, they would have preserved their super priority lien.  The long wait may have forced them to write off about 15 months of assessments.  The write off would have been about $300.00.  It is unfortunate that the Association would have been forced to write off any amount, but many other stakeholders also suffered during this period.  The lender lost about two thirds of their loan on the Stonefield property.  The defaulting homeowner filed for bankruptcy protection and lost ownership of their home.

It is also important to consider that the Claimant paid Association transfer fees when she purchased the Stonefield property and again when she sold the property.  The transfer fee payments totaled about $500.00 which is more than the $300.00 of unpaid monthly assessments that the association could not recover through a nine month super priority lien.    

The Stonefield Association did not simply wait for the lender to foreclose.  Attorney Kern actually completed the step of mailing a Notice of Delinquent Assessment twice.  First on or about April 29, 2010, a certified mailing containing a notice of delinquent assessment instituted an action to enforce the association's lien.  Then, a virtually identical Notice of Delinquent Assessment was produced and the certified mailing step was repeated on or about September 8, 2010.  In addition to being sent to the defaulting homeowner, both notices were recorded at the Washoe County Recorder's Office, which is certainly not required by NRS Chapter 116.  The redundant and unnecessary activities all generated costs that Attorney Kern believes should be paid by the Claimant.

Regardless of the unnecessary extra steps, the association clearly instituted an action to enforce their lien in April of 2010.  In the Order for NRED Control # 10-87, Arbitrator Persi Mishel wrote, “An HOA may enforce its lien by instituting a non-judicial foreclosure pursuant to NRS 116.31162 to 116.31168…” (Page 22, Line 11.)

Community associations have lobbied for and received this simple “institution of an action.”  The Nevada Legislature has provided associations with an extremely powerful action, non-judicial foreclosures, and provided for such a simple step to complete the institution of an action.   It is absurd that association lawyers, such as Attorney Kern, are arguing that the words in the statutes do not mean what they say. 

Attorney Kern proposes that the institution of an action to enforce the association's lien is the completion of a Trustee's Sale conducted in August of 2011.  The sale was conducted at the request of the lender, following a lengthy foreclosure process.  The super priority lien period may very well be defined this way in the statutes of states such as Connecticut, but it is not the definition in Nevada's Super Priority Lien statute.  Nevada law clearly states that the super priority lien period precedes the association's institution of an action.  Attorney Kern wants all parties to ignore the fact that the lender's Trustee's Sale was not the beginning of an action.  The Trustee had already recorded a Notice of Default and a Notice of Sale.  The Trustee's Sale was not the institution of anything.  It was the completion of a non-judicial foreclosure by the lender.

The institution of an action was the certified mailing by Attorney Kern on April 29, 2010.  The nine months immediately preceding the institution of an action were approximately August of 2009 through April of 2010.  Therefore, the costs incurred by the corporation known as Phil Frink & Associates, LLC, cannot possibly have occurred during the super priority lien period.  The statements of charges from Phil Frink, LLC, claim the corporation to be a “Foreclosure Services” corporation.  Phil Frink, LLC's work occurred in November of 2010, approximately six months after the institution of an action.

The Association's Collection of Assessments Policy repeatedly references the “Collection Agency.”  Phil Frink, LLC, is not a licensed collection agency.  More importantly, circumstances demonstrate that Attorney Kern and Phil Frink, LLC, never had any actual intentions of foreclosing on the property prior to the lender's foreclosure sale.  Over eight months transpired between the time Phil Frink, LLC, recorded the Notice of Default and the foreclosure sale was completed by the lender; however, during the eight months, Phil Frink, LLC, never completed the next step of a non-judicial foreclosure which would have been to record a Notice of Sale.  Phil Frink, LLC's work was simply a method to generate more fees and then claim the fees as part of a super priority lien.

The Respondent has never produced a written contract between the Association and Phil Frink, LLC.  There were no memorandums of understanding, letters or e-mails between the two parties that might be construed as a binding contract.  The Association never made any payments directly to Phil Frink, LLC; however, Phil Frink, LLC, must have believed it would be paid for performing collection activities.  Phil Frink, LLC, recorded a Notice of Default and Election to Sell which contained a warning to the homeowner that they may lose their home in a foreclosure sale if they do not pay their unpaid assessments.  The Notice of Default was recorded at the County Recorder's Office and it claimed that the Phil Frink, LLC, was a Trustee and an Agent for the Association.  The claims were brazen when considering that the Phil Frink, LLC, had no written authorization of any kind from the Board of Directors for the Association.  Phil Frink's foreclosure services corporation must have been confident that there were virtually no State Regulators concerned about who was performing foreclosure services.

There is no support anywhere in NRS Chapter 116 for hiring a corporation who is not licensed to practice law or to perform collection services, and then charging the homeowner for the corporation's collection services.  Phil Frink, LLC, was unlicensed by the State of Nevada as a collection agency and unauthorized by the Board of Directors to conduct a Trustee's Sale.  Further, their actions were not part of a good faith effort to foreclose on the property.  They never had any intention of completing a Trustee's Sale.  

If an Arbitrator entirely accepted that Phil Frink, LLC, was a valid Trustee and performed legitimate collection activities, and further, accepted Attorney Kern's position that the limitations of a super priority lien are temporal, and further, accepted that the appropriate super lien priority period was the nine months from November 2, 2010 until the lender's foreclosure sale on August 2, 2011, then Attorney Kern still overbilled the Claimant.  Attorney Kern's position is that she is entitled to include her fees from April of 2010 as part of the Super Priority Lien.  The April, 2010, attorney's fees for the first Notice of Delinquent Assessment occurred five months prior to the nine month period that Attorney Kern believes is the correct period, and her work performed in September of 2010 was also prior to the nine month period proposed by Attorney Kern.

No matter which Party's interpretation of the nine month period is utilized, the Claimant was over charged. 

The most disputed word in the super priority lien statute is “extent.” The Synonyms listed in Burton's Legal Thesaurus for extent include “amount, area, dimensions, distance, length, limit, limitation, magnitude, measure, quantity, size, span and width.”

The word “extent” was clearly intended to have a mathematical or numerical meaning when used in NRS 116.3116(2).  The word is not ambiguous.   In McKay v. Board of Supervisors, both the Appellant and the Respondent argued that the plain meaning of the words in a statute, NRS 241.030(1), supported their position.  The definition of “consider” was debated.  Both Parties presented plausible, but different definitions of the word “consider.”  Attorney Kern has not presented any plausible definition of “extent” to support her position that the word has only a temporal meaning. 

In the Order for the Wingbrook Capital vs. Peppertree Homeowners case, Judge Elizabeth Gonzalez made the correct interpretation.  She explained the wording of the law in her crystal clear Order, “The words 'to the extent of' contained in NRS 116.3116(2) mean 'no more than,'” (Page 4, Line 3.)

An association's super priority lien can be “no more than” nine months of assessments.

For the readers who needed further clarification Judge Gonzalez wrote, “ … in no event can the Assessment Cap Figure exceed an amount equaling 9 times the homeowners' association's monthly assessment amount…” (Page 4, Line 14.)

Clark County District Judge Mark Denton reached the same conclusion in the Ikon Holdings v. Horizon at Seven Hills HOA Case (Page 4, Line 13.):

The base assessment figure used in the calculation of the Super Priority Lien is the unit's un-accelerated monthly assessment figure for association common expenses which is wholly determined by the homeowners association's “periodic budget,” as adopted by the association, and not determined by any other document or statute.  Thus, the phrase contained in NRS116.3116(2) which states, “to the extent of the assessments for common expenses based on the periodic budget adopted by the association pursuant to NRS 116.3115 which would have become due in the absence of acceleration during the 9 months immediately preceding institution of an action to enforce the lien..” means a maximum figure equaling 9 times the association's regular monthly (not annual) assessments.  If assessments are paid quarterly, then 3 quarters of assessments (i.e. 9 months) would equal the Super Priority Lien…”

If a Court accepts Judge Denton's numerical limitation, then the debate about the definition of “institution” becomes a minor issue. Judge Denton understands the spirit of the law. He has concluded that the words in the Super Priority Lien statute are plain words that create a numerical nine month limitation which is consistent with the spirit of the law.

Any claims the Respondent makes that most lenders and financial institutions have generally rejected the conclusion that the super priority lien has numerical limitations are inaccurate.  Any claims that lenders have generally accepted the opinion that a super priority lien has no limitations for attorney's fees are inaccurate.  In 2009, Wells Fargo filed a claim against a Washoe County Association claiming there was a numerical limitation to the Association's super priority liens.  The Claim was ADR Control No. 10-49.  Wells Fargo prevailed.  In 2011, a division of Bank of America filed a well-publicized complaint against dozens of associations in Clark County claiming there were numerical limitations to the association's super priority liens that were being violated.  The proceeding is ongoing.  In 2012, the United States Government filed a complaint in Federal Court under the False Claims Act claiming there were numerical limits to many association super priority liens that were being violated.  Over 500 Nevada homeowners' associations were named as defendants. The Government is claiming millions of dollars in damages to the agencies commonly known as Fannie Mae and Freddie Mac.  

The Claimant respectfully requests that the Arbitrator provide an Order instructing the Respondent to revise the billing of the Claimant, limiting the demand for a super priority lien to nine months of assessments at twenty dollars per month, refunding the overcharges to the Claimant, and providing relief to the Claimant for arbitration costs, filing fees and other costs.

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