Do You Smell Something Rotting in the Air of Las Vegas?

With several dozen Las Vegas Homeowner Associations mired in the muck of a federal corruption investigation, members of one association have learned they may be targeted by huge IRS assessments and fines.

Sun City Summerlin Community Association is not one of the Nevada HOAs where investigators have found corrupt cops and judges and lawyers. But this HOA’s accounting practices are attracting lots of federal attention.

The HOA operates several commercial golf courses and restaurants. So in addition to HOA dues, there’s a chunk of money coming into the coffers of the HOA from outside sources. Theoretically, taxes should be paid on that income. But Sun City Summerlin Association has been deferring millions of dollars on its annual tax forms. Homeowners don’t seem to be aware that their snowbird homes may end up as tax magnets instead of tax shelters.

Sun City Summerlin is a not-for-profit organization, so theoretically homeowners should have been given some rather large refunds. Instead, each homeowner may be given some rather large surprise tax assessments.

Other Homeowners Associations across the country area are closely watching what happens in Las Vegas. Elderly homeowners may suddenly discover a downside to investing their life savings in a retirement home in the Sun Belt.

Ward Lucas
Author of
Neighbors At War: The Creepy Case Against Your Homeowners Association

Advertisements

2 Comments

Filed under HOA, HOA Horror Stories, Homeowners Association, Las Vegas HOA

2 responses to “Do You Smell Something Rotting in the Air of Las Vegas?

  1. The purpose of a corporation is to protect an individual investor’s personal assets from the debts and liabilities of the corporation.

    But an HOA corporation is a defective product. Unlike a typical corporation, homeowners are personally responsible for any debts and liabilities created by their HOA corporation. And that obligation is secured by the homeowners’ personal assets, including the equity in their homes.

    If you purchase a home in an HOA, your house will forever be collateral to the HOA corporation and its creditors, even after you have paid off the mortgage.

    HOA attorney Tyler Berding explained it two years ago in “Why There’s No Protection For Members When Community Associations Go Broke” . FYI, the industry professionals call HOAs “community associations”:

    But bankruptcies don’t typically occur with community associations for a big legal reason ― owners are essentially liable for the association’s debts. “What?” you say. Community associations are corporations, and aren’t shareholders protected from corporate obligations? Isn’t that the whole point of a corporation?

    Yes, most community associations are corporations ― non profit mutual benefit corporations. But there is a major difference between a community association and the typical business corporation. With a typical corporation the investors’ (shareholders’) liability is limited to the amount of their individual investment. Community associations usually have something more ―lien rights to an individual owner’s separate interest, either a lot or a unit, and the personal obligation of an individual owner for his or her share of assessments.
    . . .
    A corporate bankruptcy filing essentially tells the world that the assets of the company are insufficient to meet its obligations to creditors. But, where the value of all of the real estate interests within the community can be accessed through the lien process to pay assessments, where assessments are backed by the personal assets of all owners, and where the association has a statutory obligation to assess, the property and personal assets of the owners essentially become the “assets of the company.” Collectively, these are likely to be more than adequate to pay any creditors.

    (emphasis added)

    It would be interesting to conduct a survey of homeowners in HOAs to find out how many of them know that they “agreed” to this (even if said “agreement” to some document called a “contract” was nothing more than a legal fiction that can used against them in court), and ask them why they thought it was a good idea to make their homes forever collateral to an unaccountable corporation.

  2. The Sun City Anthem Voice reports,

    by hiding behind the “so-called” Business Judgement Rule (BJR), HOA directors are told they can get away with almost anything (short of flagrant embezzlement) and not be held personally accountable.

    So say association attorneys John Leach & Ed Song, auditor/tax preparer Gary Lein, community management company contractor RMI (headed by CEO Kevin Wallace), Nevada Real Estate Division Administrator Gail Anderson, and the NV Commission for Common Interest Communities and Condominiums (7 members appointed by the Governor from the HOA trade association (CAI) including 3 with obvious Sun City Anthem board conflicts of interest–auditor Gary Lein, Del Webb/Pulte executive Randolph Watkins and 6-year SCA Board Treasurer/President Favil West).
    . . .
    It is clear that if the evidence showed a director used a lethal weapon (such as a gun or knife) to threaten one or more SCA members to give up hundreds of their dollars, such a director could be charged and convicted under felony crimes for armed robbery and theft.

    But, if the same director exploited HOA rules and hid behind the BJR to force members to pay exorbitant annual dues so the money could be wasted on untrustworthy sub-contractors where board members might receive hidden benefits or kickbacks for themselves, could they not also be held accountable by law enforcement agencies for what seems to be similar felony crimes?

    If the corporate directors of the Summerlin Community Association can not be held personally responsible and are not held personally responsible for the $1.3 million in taxes and penalties, then the cost of that liability will be passed on to the homeowners.

    It would be nice to believe that law enforcement and the courts will do the right thing for the homeowners. I’m not going to hold my breath waiting for that to happen.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s