Frequently Asked Questions: Living in a Common-Interest Community (HOA)
When should an association’s board of directors be obtaining bids?
NRS 116.31086; NRS 116.3103(1); NAC 116.405(8)(d)
If an association solicits bids for a new association project (i.e. a project that involves the maintenance, repair, replacement or restoration of any part of the common elements or which involves the provision of professional services to the association, including, without limitation, accounting, engineering and legal services):
(a) The association MUST, whenever reasonably possible, solicit at least three bids if the association project is expected to cost:
(1) In a common-interest community that consists of less than 1,000 units, 3 percent or more of the annual budget of the association; or
(2) In a common-interest community that consists of 1,000 or more units, 1 percent or more of the annual budget of the association; and
(b) The bids MUST be opened and read aloud during a regular meeting of the executive board.
As the provision above begins with the word “if,” we understand that there are certain circumstances which may make it impracticable to obtain bids. Pursuant to NRS 116.3103(1), however, in the performance of their duties, officers and members of the executive board are fiduciaries and shall act on an informed basis, in good faith and in the honest belief that their actions are in the best interest of the association.
Officers and members of the executive board:
(a) Are required to exercise the ordinary and reasonable care of officers and directors of a nonprofit corporation, subject to the business-judgment rule; and
(b) Are subject to conflict of interest rules governing the officers and directors of a nonprofit corporation organized under the law of this State.
Additionally, pursuant to NAC 116.405(8)(d), in determining whether members of the executive board have performed their duties, the Commission may consider whether board members caused the association to obtain at least three bids from reputable service providers who possess the proper licensing before purchasing any such service for use by the association.
The Division expects that at least three bids will be solicited for each association project unless it is not reasonably possible to do so.
What is considered an acceptable “electronic signature?”
NRS 116.31153(4) allows electronic signatures to withdraw money from the operating account provided certain provisions are met. The use of “signature on file” means the bank’s requirements were met, but does not verify that the requirements of NRS 116.31153 are being met. While an electronic signature may not be the actual signature of the person authorizing the check, it must be clear and verifiable who is authorizing the check to be issued to determine if that person is legally authorized to do so. Absent such evidence from the check, this procedure indicates a lack of proper internal accounting controls are being met. The Division does not find that placing “signature on file” on an association check complies with NRS 116.31153.
How many signatures are required on checks written by the association for withdrawal of funds?
Money in the RESERVE ACCOUNT may not be withdrawn without the signatures of at least TWO directors of the board, or one director AND one officer.
Money in the OPERATING ACCOUNT may not be withdrawn without TWO signatures; one director or officer, and another: director, officer or community manager.
How is “quorum” defined when conducting a meeting of the executive board?
Unless the governing documents specify a larger number [unanimous], a quorum of the executive board is present only if individuals entitled to cast a majority of the votes on that board are present at the time a vote is taken. Those entitled to vote are those who are currently serving, excluding any vacancies. So if the association’s governing documents state that the executive board shall have 7 members, but the board is currently only comprised of 5 board members, a quorum of the board would be at least 3 members, not 4, because at the time of the vote the board consists of 5 votes, not 7. Of course, the board should be trying to fill any vacancies in its membership as quickly as possible.
If an association is meeting to hold a budget ratification meeting and a quorum of the unit owners has not been met, does the meeting still proceed?
NRS 116.31151(3); NRS 116.3108(6)
Yes. Pursuant to NRS 116.31151(3), “within 60 days after adoption of any proposed budget for the common-interest community, the executive board shall provide a summary of the proposed budget to each unit’s owner and shall set a date for a meeting of the units’ owners to consider ratification of the proposed budget not less than 14 days or more than 30 days after the mailing of the summaries. Unless at that meeting a majority of all units’ owners, or any larger vote specified in the declaration, reject the proposed budget, the proposed budget is ratified, whether or not a quorum is present.”
In order to meet the definition of having held a meeting of the units’ owners, the statutory requirements of NRS 116.3108 must be met: notice must be provided, including a copy of the agenda, and minutes must be taken to include, pursuant to NRS 116.3108(6):
(a) The date, time and place of the meeting;
(b) The substance of all matters proposed, discussed or decided at the meeting; and
(c) The substance of remarks made by any unit’s owner at the meeting if the unit’s owner requests that the minutes reflect his or her remarks or, if the unit’s owner has prepared written remarks, a copy of his or her prepared remarks if the unit’s owner submits a copy for inclusion.
The meeting must be called to order, and the lack of a quorum/lack of a majority of unit owners present to reject the budget, and subsequent ratification, documented as part of the minutes.
If the units in a common-interest community are restricted to residential use, is transient commercial use automatically prohibited?
“Transient commercial use” means the use of a unit for payment as a hostel, hotel, inn, motel, resort, vacation rental or other form of transient lodging for less than 30 consecutive calendar days.
Units within a planned community that are restricted to residential use by the declaration MAY be used for transient commercial use only if:
- the governing documents of the association and any master association do not prohibit such use;
- the executive board of the association and any master association approve the transient commercial use of the unit, except that such approval is not required if the planned community and one or more hotels are subject to the governing documents of a master association and those governing documents do not prohibit such use; AND
- the unit is properly zoned for the transient commercial use, and any license required by the local government for the transient commercial use is obtained.
The association may establish requirements regarding this use, including the payment of additional fees necessary to cover costs of allowing the use.
If I live in a condominium or townhouse, does the association’s insurance cover the interior of my unit as well as the exterior?
In the case of a building that contains units divided by horizontal boundaries described in the declaration, or vertical boundaries that comprise common walls between units, the property insurance maintained by the association must include damage to the unit itself [excluding any personal property of the unit owner], but need not include any improvements and betterments that were made to the original construction of the unit by units’ owners over time.
What restrictions are placed on a homeowner when altering a single-family home?
A unit owner may not change the exterior appearance of a unit without permission of the association if the declaration so provides. However, an association may not unreasonably restrict, prohibit or withhold approval for a unit owner to add to a unit:
- ramps, railings or elevators necessary for access for any occupant who has a disability;
- locks or shutters to improve the security of the unit or to reduce costs of energy; or
- a system that uses wind energy if the boundaries of the unit encompass 2 acres or more and unless the unit’s owner first obtains the written consent of each owner within 300 feet.
Any alteration that is visible from the street must be added in accordance with the procedures set forth in the governing documents of the association and must be selected or designed to the maximum extent feasible to be compatible with the style of the common-interest community.
What authority does the board have regarding a homeowner’s trash cans?
An association may adopt rules that reasonably restrict the manner in which containers are stored when not in the collection area, including location. Rules adopted by the association must allow for storage of these containers outside of the unit owner’s garage, but may require that the containers still be screened from view. Rules can recommend the size, location, color and material of any device, structure, or item used to screen the containers.
Can the association interrupt a homeowner’s utilities?
An association may not interrupt any utility service, except for the nonpayment of utility charges when due. The association shall in every case send a written notice of its intent to interrupt the utility service to the unit owner or tenant at least 10 days prior to interruption and comply with all laws relating to the interruption of any utility.
Can the association prohibit a homeowner from renting or leasing their unit?
Unless at the time a unit owner purchased his or her unit, the declaration prohibited renting or leasing, the association may not prohibit it for that owner. The same applies to an owner having to secure or obtain approval from the association in order to rent or lease. If a declaration establishes a maximum number or percentage of units which may be rented or leased, that provision may not be amended to decrease that maximum number or percentage in a way that impacts current unit owners. If a unit owner is prohibited from renting or leasing a unit because the maximum number or percentage of rental units allowed has already been reached, the unit owner may seek a waiver from the executive board based upon a showing of economic hardship.
How long does the board have to ADOPT the results of the reserve study?
Associations are required to have reserve studies performed every five years. The clock starts five years from the date that the previous reserve study was conducted, commencing on the date on which an on-site inspection of major components is performed (NAC 116.427). The board must adopt the reserve study and provide a summary to the Division, using reserve study summary Form 609, no later than 210 days after the board receives the first draft of the reserve study. If the board adopts the reserve study earlier, a summary of the study must be provided to the Division within 45 days of adoption [NRS 116.31152(4)].
Can the association charge a unit owner for meeting minutes and audio recordings?
Within 30 days after a meeting of the association, a copy of the audio recording and the minutes or a draft summary of the minutes of the meeting must be provided to a unit owner upon request. Executive sessions must not be audio recorded. These records must be
provided in electronic format at no charge, or, if the association is unable to provide the copy or summary in electronic format, it must be provided in a format provided at a cost not to exceed 25 cents per page for the first 10 pages, and 10 cents per page thereafter. If the copy is provided on a disc, the cost must not exceed the cost of the disc itself.
What if a board member has a conflict of interest?
NRS 116.31034(10) (as amended by SB195 )
Unless a person is appointed by the declarant, a person MAY NOT be a candidate for or member of the executive board, or an officer of the association, if: the person stands to gain any personal profit or compensation of any kind from a matter before the executive board; the person is related to or resides with another board member (exception found in NRS 116.31034(12)(b)); or the person or relative is the association’s manager.
NRS 116.31034(13) (as amended by SB195 )
If a person is not eligible to be on the board per the provision above, the association must prohibit the person from serving as a board member or an officer.
A member of an executive board who has a member of his or her household or a relative who stands to gain any personal profit or compensation of any kind from a matter before the executive board shall disclose the matter to the executive board before voting on any such matter.
In most circumstances, personal profit or compensation to a spouse of a board member is personal profit or compensation to the board member. Such a conflict must be disclosed and the board member must abstain from voting, NRS 116.31084(1), and the association must prohibit the person from serving on the board or as an officer.
Must an association’s schedule of fines list out each potential violation and a corresponding fine amount?
If the association adopts a policy imposing fines for any violations of the governing documents of the association, the secretary or other officer specified in the bylaws shall prepare and cause to be hand-delivered, or sent prepaid by U.S. mail to the designated address of each unit, a schedule of the fines that may be imposed for those violations. It is not sufficient for the association to list generally “all violations” as a sole and single category and then prescribe one fine amount for all possible violations. Instead, the schedule must list out categories of fines for each potential type of violation and prescribe a corresponding fine amount.
If the violation poses an imminent threat of causing a substantial adverse effect on the health, safety or welfare of the units’ owners or residents of the common-interest community, the amount of the fine must be commensurate with the severity of the violation and must be determined by the executive board in accordance with the governing documents. If the violation does not pose an imminent threat of causing a substantial adverse effect on the health, safety or welfare of the units’ owners or residents of the common-interest community, the amount of the fine must be commensurate with the severity of the violation and must be determined by the executive board in accordance with the governing documents, but the amount of the fine, as listed in the fine schedule, must not exceed $100 for each violation.
Can the association charge a fine exceeding $1,000 for a violation of the governing documents?
NRS 116.31031(1)(b)(2); NRS 116.31031(7)
The amount of a fine must not exceed $100 for each violation or a total amount of $1,000, whichever is less. The $1,000 cap is on the amount that can be charged for violations cited at one hearing. Once violations become continuing, however, meaning that they have not been cured within at least 14 days, there is no cap on the fine amount. Thereafter, the executive board may impose an additional fine for each 7-day period or portion thereof that the violation is not cured.
If a violation has been cured but occurs again, the board cannot call the violation a continuing violation because it was in fact already cured.
Can family members serve on an association’s executive board together?
A person, other than a person appointed by the declarant, may be a candidate for or member of the executive board and reside in a unit with, be married to, be domestic partners with, or be related by blood, adoption or marriage within the third degree of consanguinity or affinity to another person who is also a member of the executive board or is an officer of the association, IF the number of candidates nominated for membership on the executive board during an election period is less than or equal to the number of vacancies. At that point, if the governing documents allow, the relatives will be ‘duly elected’ onto the board. A relative of another board member currently serving cannot be appointed onto the board.
Can members of the board participate in meetings via Skype, etc.?
Unless otherwise restricted by the articles or bylaws, members of the board of directors may participate in a meeting through electronic communications, videoconferencing, teleconferencing or other available technology. Participating in a meeting pursuant to this subsection constitutes presence in person at the meeting.
When can a board take action without a meeting?
An executive board must hold meetings frequently enough to properly and efficiently address the affairs of the association. A regular meeting of the executive board must be held at least once every quarter, and not less than once every 100 days, with unit owners being noticed not less than 10 days prior to the meeting. The agenda must reflect any actions that can be taken.
If an occurrence arises that: could not have been reasonably foreseen, affects the health, welfare and safety of residents, requires immediate action by the board, and makes it impracticable to provide sufficient notice and agenda, an emergency meeting can be held.
If any matter affecting the community cannot wait to be discussed at the next regularly scheduled board meeting, but does not meet the criteria for an “emergency” as stated above, a special meeting can be called by the president or majority of the executive board, with notice and agenda requirements remaining the same as for a regular meeting.
Action can be taken without a meeting under NRS 82.271 subject to the association’s governing documents. Written consent in lieu of a meeting must be signed and kept in the records of the association. The board should disclose to unit owners any action taken by written consent at its next regular meeting. The Division discourages repeated use of action by consent in lieu of a meeting, but when necessary, this action can be used to conduct day to day business such as calling a service provider to immediately correct an issue.
Can I, as a unit owner, ask to see who else has been receiving violation notices in my community?
The executive board of an association shall maintain and allow a unit owner to review, upon written request, a general record concerning each violation of the governing documents, other than a violation involving failure to pay an assessment. The general record must contain a general description of the nature of the violation and the type of sanction imposed. If the sanction imposed was a fine or construction penalty, the general record must specify the amount. This record must not contain the name or address of the person against whom the sanction was imposed or any other personal information which may be used to identify the person or location of the unit associated with the violation.
What can the board discuss in executive session?
An executive board may not meet in executive session to open or consider bids for an association project, or to enter into, renew, modify, terminate or take any other action regarding a contract.
An executive board may meet in executive session ONLY to:
(a) Consult with the attorney for the association on matters relating to proposed or pending litigation if the contents of the discussion would otherwise be governed by the privilege set forth in NRS 49.035 to 49.115, inclusive.
(b) Discuss the character, alleged misconduct, professional competence, or physical or mental health of a community manager or an employee of the association.
(c) Discuss a violation of the governing documents, including, without limitation, the failure to pay an assessment.
(d) Discuss the alleged failure of a unit’s owner to adhere to a schedule required pursuant to NRS 116.310305 if the alleged failure may subject the unit’s owner to a construction penalty.
Any matter discussed by the executive board when it meets in executive session must be generally noted in the minutes of the next meeting of the executive board. Unless directly invited, a unit’s owner is not entitled to attend or speak at a meeting of the executive board held in executive session.
How can I have a board member removed from the board?
Notwithstanding any provision of the declaration or bylaws to the contrary, any member of the executive board, other than a member appointed by the declarant, may be removed from the executive board, with or without cause. A removal election may be called by units’ owners constituting at least 10 percent, or any lower percentage specified in the bylaws, of the total number of voting members of the association, submitting a written petition, mailed, return receipt requested, or served by a process server, to the executive board or the community manager for the association. A removal election is held and conducted in the same manner as a general election. For the removal to take place, the number of votes cast IN FAVOR of removal must constitute at least 35 percent of the total number of voting members of the association and must also constitute at least a majority of all votes cast.
Can I, as a board member, enter a unit that is not my own in order to cure a violation?
NRS 116.310312 (as amended by SB239 )
If a unit is “vacant” and the association has provided the unit’s owner with notice of the hazardous violation, an opportunity for a hearing, and a notice of the intent to maintain the EXTERIOR of the unit or abate the public nuisance, the association may enter the GROUNDS of the unit to abate the hazard.
A unit is “vacant” if it reasonably appears to be unoccupied, the owner has failed to maintain the exterior to the standards set forth in the governing documents of the association, and the owner has failed to pay assessments for more than 60 days.
With regards to a condominium or townhouse that is “vacant” and requires abatement of a hazard, the INTERIOR of the unit may ONLY be entered to abate a water or sewage leak and remove any water or sewage that is causing damage or may cause damage to the common elements or another unit. After providing notice to the owner, but prior to a hearing, if the owner fails or refuses to remediate water or mold damage, the association may remove furniture, fixtures, components and appliances reasonably necessary to protect the health or safety of residents, and the use and enjoyment of nearby units.
Outside of the provisions of law pertaining to a resale package, can an association charge a unit owner for a copy of the governing documents?
Such records must be provided in electronic format at no charge to the unit’s owner whenever possible, or, if the association is unable to provide the records in electronic format, the executive board may charge a fee to cover the actual costs of preparing a copy, but the fee may not exceed 25 cents per page for the first 10 pages, and 10 cents per page thereafter.
When NRS 116 talks about providing records at no cost in “electronic format,” what is included in this definition?
NRS 116.3108; NRS 116.31083; NRS 116.31175
While email is a method of providing information in electronic format, it is not the only way. Included are websites, compact discs, USBs/flash drives, etc. If records are provided by electronic means other than by email or posting on a website, the charge to unit owners can only be the cost of the device itself, i.e. the cost of the disc, etc., assuming the requester did not provide the device.
Can a majority of the board present at a meeting with an established quorum remove another board member without a vote from the unit owners?
NRS 116.31036; NRS 116.3106(1)(c)
While NRS 116.31036 describes the process by which unit owners may remove members of the executive board, the law is silent regarding whether or not a majority of the board can remove another board member. NRS 116.3106(1)(c) does state, however, that the bylaws of the association are required to specify the manner of removing members of the executive board. As such, an association should look to its bylaws when answering this question.