MINUTES OF THE ASSEMBLY COMMITTEE ON JUDICIARY Sixty-eighth Session February 14, 1995 The Committee on Judiciary was called to order at 1:06 p.m., on Tuesday, February 14, 1995, Chairman Sandoval presiding in Room 4401 of the Grant Sawyer State Building, Nevada Legislature, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Bernie Anderson, Chairman Ms. Barbara E. Buckley, Vice Chairman Mr. Brian Sandoval, Vice Chairman Mr. Thomas Batten Mr. John C. Carpenter Mr. David Goldwater Mr. Mark Manendo Mrs. Jan Monaghan Ms. Genie Ohrenschall Mr. Richard Perkins Mr. Michael A. (Mike) Schneider Mrs. Dianne Steel Ms. Jeannine Stroth COMMITTEE MEMBERS ABSENT: Mr. David E. Humke, Chairman (excused) GUEST LEGISLATORS PRESENT: Assemblyman Douglas Bache STAFF MEMBERS PRESENT: Dennis Neilander, Research Analyst Patty Hicks, Committee Secretary Barbara Moss, Committee Secretary OTHERS PRESENT: Judy Jacoboni, Victim Advocate, Mothers Against Drunk Driving Laurel Stadler, Legislative Liasion, Mothers Against Drunk Driving Mark Smith, Las Vegas Chamber of Commerce Vicki Brennan, private citizen James Mastrino, private citizen Judi Root, private citizen Jean Georges, private citizen and mediator Michael Mack, private citizen Allen Duke, private citizen Jim Banner, private citizen and former legislator Andy Maline, Vice-President, Community Association Institute John Leach, President, Community Association Institute Eleissa Lavelle, Legislative Action Chair, Community Association Institute John Delmazzo, private citizen Kate Davis, private citizen Ken Way, private citizen ASSEMBLY CONCURRENT RESOLUTION 2 - Urges peace officers to identify and arrest, and courts to impose prompt, meaningful and consistent sanctions upon, juveniles who violate laws related to alcohol and drugs. Judy Jacoboni, Lyon County Chapter President, Mothers Against Drunk Driving (MADD) spoke in support of Assembly Concurrent Resolution (A.C.R.) 2. Ms. Jacoboni stated A.C.R. 2 goes hand in hand with the other bills currently before the legislature this session regarding the laws affecting juveniles drinking. MADD feels currently law enforcement officers will not expend the time and energy to pursue arrests for juvenile consumption since they know virtually nothing will be done to that juvenile. A.C.R. 2 urges police officers to pursue arrests of juvenile alcohol offenders. A.C.R. 2 urges follow-through from the police officer's arrest, to the prosecutors, through the judge's conviction. She believes passage of A.C.R. 2 will send a message to law enforcement and courts that crimes involving minors possessing, purchasing, or consuming alcohol or drugs will not be tolerated. Ms. Jacoboni's prepared testimony is attached hereto as (Exhibit C). Laurel Stadler, Legislative Liaison, Mothers Against Drunk Driving, echoed Ms. Jacoboni's comments and added that someone needs to take a leadership role in the issue surrounding juvenile alcohol offenders. The legislators have been called upon to become that leadership role. Both Ms. Jacoboni and Ms. Stadler referred the committee to previous testimony made before the committee in recent weeks regarding the treatment programs, mandatory license revocation, and possession arrests. Ms. Stadler feels addressing youth alcohol offenders early on will hopefully eliminate the problem of alcohol in the lives of those youth as they become adults. The committee adjourned for a break at 1:16 p.m. and reconvened at 1:55 p.m. ASSEMBLY BILL 152 - Requires arbitration of certain claims relating to residential property. Chairman Sandoval acknowledged the large number of persons wishing to testify and informed everyone that the meeting would adjourn at 3:15 p.m. He hoped to accommodate as many people as possible within the time frame available to them. He asked all those wishing to testify to form a line and limit their testimony to three minutes each. Mr. Schneider, the prime sponsor of A.B. 152, stated it is a form of dispute resolution which developed as a result of his working closely with property management associations. Over the past year he has been privy to problems arising in the associations developed for the homeowners, by the homeowners. The associations have developed their own "constitutions" which are referred to as covenants, conditions, and restrictions (CC&R's). Although these associations have flourished and existed with encouragement, there are personality problems and management problems between the board and the residents. As a result, many lawsuits are being filed which could be resolved in some sort of dispute resolution such as arbitration. Diispute resolution may bring about results in 30 to 45 days rather than the years it takes a lawsuit to proceed through District Court. Mr. Schneider stated there are some amendments already prepared on A.B. 152 which are contained in the folders of each committee member. Mr. Schneider also stated that 60% of the people in Clark County now live under some form of association and all the new housing projects in Clark County will be under an association. Mr. Anderson asked if these "associations" wished to no longer be an association, how would they dissolve the association? Mr. Schneider stated property, street management, or whatever else was affected, would probably fall back to the city or county. Mr. Anderson clarified that should an association wish to dissolve their association, the landscaping and street maintenance that is currently taken care of by the association would then fall to the city or county which would result in an overall tax burden. Mr. Schneider agreed. Chairman Sandoval acknowledged the presence of Kathy Letterman, Sue Miller, Deanna Royder, Hans Hansen, and Joy Bolice, employees from the Las Vegas Chamber of Commerce. He also acknowledged the presence of John Gibbons, State of Nevada Real Estate Division, and Larry Struve, Nevada Department of Business and Industry, in Carson City. Chairman Sandoval again stressed the importance of the witnesses wishing to testify to keep their testimony brief and if there was a group of individuals perhaps they could identify one spokesperson to speak on their behalf. Mark Smith, a private citizen living at 3163 Predara Avenue, Las Vegas, candidly stated he was unable to interpret much of the language in A.B. 152; however, he supports the bill in that he has had much personal experience in associations stemming back some ten years ago. In fact, he was once sued by a "dictatorial" board. The lawsuit was erroneous and in fact, that lawsuit precipitated him running as President for the Association and he was in that position for several years. These lawsuits would cost the association a lot of money. He feels that there should be a mechanism in place to avoid the lawsuits and keep the issues out of court allowing settlement on a more reasonable basis and therefore supports passage of A.B. 152. Vicki Jean Brennan stated her understanding of the by-laws states there is an annual meeting every year however in her unit homeowners cannot go to those board meetings unless specifically invited. She further stated there was a parking problem in the covered parking areas. If someone is in your covered parking area, you are not allowed to call to have them towed away. Lastly, Ms. Brennan expressed her dismay that her complex did not have a children's playground. Chairman Sandoval asked if Ms. Brennan was testifying in support of A.B. 152 and Ms. Brennan stated she was in support of the bill. James Mastrino testified he lives in west Las Vegas, across from Spanish Trails. Mr. Mastrino explained his experience of being attacked on the common ground of his complex near the swimming pool. He went on to state the board of his association is doing nothing about it and he feels he has no equal rights and the CC&R's are not being fulfilled. Judi Root, private citizen and resident at Quail Estates, Las Vegas, stated she presently has a lawsuit against her board, not against the association but against the board because of the acts they carried out. She feels she has had her first amendment rights taken away because the board does not allow freedom of speech at the board meetings. Ms. Root also addressed the fact that whenever there is a problem everyone tells you to "read your CC&R's". She understands such things as maintaining your property in a good manner comes under the CC&R's, by-laws, and/or rules and regulations. However, the problem is the rules are written by the developer who does not even live on the premises. Yet, the only way to change the rules or bylaws is to rewrite them and a 75% passage is required. Ms. Root expressed her dismay in the association, board members, and the residents, because they are all acting like kindergartners rather than adults. The management company and their secretary are paid by the residents yet they will not act in any fashion without first checking with the board. She feels the passage of this bill is extremely important. Ms. Root thanked Mark Sawyer and Channel 13 for announcing today's meeting. Jean Georges, a private citizen residing at 701 Rancho Circle, Las Vegas, testified that he was a member of the Community Association Institute Legislative Action Committee; however, today he was testifying as a homeowner and as a private mediator. He feels the passage of A.B. 152 is extremely important because it represents choices and options for both homeowners and boards for a faster, less expensive, time consuming, traumatic resolution. He hears horror stories every day as a private mediator. In most cases, none of the participants wish to take the case to court. He felt the bill provides a two-fold purpose. First, it provides an alternative for boards and homeowners to resolve their dispute; and secondly, by directing the disputes to mediation or arbitration, the communities become aware that these dispute resolutions are available. Mr. Georges also expressed his concern with the way mediators would be paid and felt the method of payment should be consistent with how arbitrators are paid. He also feels that if arbitration is binding it should remain so and all the outs for appealing to the courts should not apply. Mr. Schneider asked if Mr. Georges would enlighten the committee on what happens when there is a lawsuit pending before an association. Mr. Georges stated, of course, any litigation is stressful. Further, the entire area is turned into a battleground involving the children as well as the adults. It eliminates any sense of peace and quiet that property owners have. A dispute over the building of a fence erupts into secondary disputes and both sides become angry. Mr. Schneider also commented that during litigation in an association, virtually all property sales come to a halt. You cannot sell your property because no title company will insure property with title insurance with a full blown lawsuit underway. It also affects the property value. Michael Mack, 4800 Merlin Parkway, Las Vegas, a private citizen, testified he was in favor of A.B. 152; however, although he feels the bill will do a lot of good, it does not go quite far enough. He further stated that most of the condominium associations in Las Vegas are operating under CC&R's from 20 years ago and the law being applied in Nevada is federal law since the state law lacks details. Mr. Mack stated he owns three condominiums in three different states: Nevada, Hawaii, and Utah. He believes Hawaii's state law is very clear and effective as relates to associations in that Hawaii's legislature meets every year to redefine association laws. Mr. Mack provided a copy of one-fifth of the laws that the State of Hawaii has adopted, most particularly involving condominium management which is attached hereto as (Exhibit D). Mr. Mack would like to see Nevada pattern their laws regarding condominium associations to that of the State of Hawaii. Mr. Mack went on to provide the committee with examples of how effective Hawaii laws were in relation to specific problems such as liens, funding of the reserve account, and obtaining copies of minutes. He also stated the State of Florida, since they have so many condominiums, has some good laws on the books that perhaps Nevada could pattern their laws from. Allen Duke, Paradise Spa, brand new condominium resident in Las Vegas, testified that when he moved into his condominium he learned the bylaws had been amended six times since 1986. Although he realized he had to pay $75 per month for association fees he was not aware of a 10% increase in those fees and yet another 10% increase and a $17 assessment. He stated these assessments go back to 1986 and he should not have to pay for them since he did not reside in the condominium at that time. Mr. Duke is a disabled veteran of World War II and this is his first real estate purchase. Ms. Ohrenschall addressed Mr. Mack's previous testimony and asked him why Spanish Oaks had no reserve funding. Mr. Mack stated it was because of very poor management and the managers absconded with many funds. Chairman Sandoval closed the testimony on A.B. 152 and opened testimony on a companion bill, Assembly Bill 74, sponsored by Assemblyman Bache. ASSEMBLY BILL 74 - Revises provisions governing use of units in common-interest community. Douglas Bache, District 11 Assemblyman, Las Vegas stated A.B. 74 had been previously heard in Carson City and then introduced Jim Banner. Jim Banner, private citizen residing at 2533 Lotis Hill Drive, Las Vegas, and former legislator, spoke in favor of A.B. 74 and further stated he believes the CC&R's in Las Vegas are scattered all over the town with different descriptions for each--nobody knows what is going on and who to talk to when a problem arises. Mr. Banner stated he had read the CC&R's and had them reviewed by other people with more knowledge of CC&R's than himself, and at that point he was happy with the contents of the CC&R's. Mr. Banner further stated that soon after moving into his new residence a tenant filed suit against him and in his opinion this suit was filed to personally annoy and harass him. Mr. Banner stated that due to this annoyance and harassment he was hospitalized with heart problems, and the association's ruling was made as if nothing had happened, but Mr. Banner stated again that he was hospitalized with heart problems due to the annoyance and harassment made by this suit. Mr. Banner still feels changes need to occur in the laws because if someone wants to file a lawsuit they can do so but the moving party is the name of the association rather than the individual so you don't really know who is suing you. Mr. Banner stated he would like to see some amendments in A.B. 74 which would include no retroactivity or no ex post facto, whatever language is preferred by the LCB. Mr. Banner further stated he would like to be invited to be on any subcommittees relating to A.B. 74 or Mr. Schneider's bill, A.B. 152 as long as there were no conflicts between the two bills. Chairman Sandoval stated there would be subcommittees formed in relation to A.B. 74 and A.B. 152 and thanked Mr. Banner for his testimony. Andy Maline, Vice President of the Southern Nevada Chapter of Community Association Institute of Southern Nevada, spoke in opposition to A.B. 74 stressing that it would be disastrous to gridlock the process of amending bylaws. Ms. Buckley stated her understanding of A.B. 74 affects youth, occupancy, and alienation only. The testimony the committee heard on Mr. Banner's case had to do with him using a saw mill in his garage after he had moved in. Mr. Maline, referring to Mr. Banner's situation, stated he believes occasional use of your garage to build a bookcase would be okay but if it is constant, you have to consider the neighbors, the noise level, and whether it is for gain, employment or business. Mr. Maline thinks the democratic process should prevail and he does not see how A.B. 74 would work at all. Mr. Anderson asked if Mr. Maline had reviewed the laws from Hawaii that were presented to this committee. Mr. Maline stated he had read those laws and has worked for the past year on the committee that designed A.B. 152. He felt the committee needed to look at NRS 116 which has adopted and applied the Uniform Common Interest Ownership Act. This act develops uniformity across the states and the associations can apply the uniform act or choose not to. He discussed the quorum requirements of the uniform act and the proposed legislation. John Leach, Attorney at Law and President of the Community Association Institute of Southern Nevada, stated he was going to testify in favor of A.B. 152 but after listening to Mr. Maline's concerns he changed his mind and stated he was very much opposed to this legislation. Mr. Leach's concerns were that of section 1, "subject to provisions of the declaration" and the requirement for somewhere 100% of the vote for CC&R's. Mr. Leach also stated that subsection 3 discusses bylaws. He informed the committee that a bylaw is a document that discusses procedures within the association, not restrictions on youths, occupancy, or alienation. Those items would be governed by the declaration not the bylaws. The bylaws make up the annual meetings, special meetings, elections, definitions, etc. He reminded the committee that the developers make these documents before any homeowners are residing there and within time the homeowners need to amend them so they have the ability to adapt and adjust within those prepared documents. By imposing a 100% agreement by the homeowners you create enormous difficulties. He stated that 75% agreement is currently too high and unrealistic. Mr. Anderson stated the common interest statutes in this state have only been on the books since 1991 and were amended in 1992 and wondered if Mr. Leach provided testimony at that time. Mr. Leach stated that a law partner of his, Michael Buckley, participated in those discussions but he personally was not involved at that time. Mr. Anderson asked if he was familiar with the Hawaii legislation discussed earlier. Mr. Leach stated he was familiar with some portions of it because they do try to keep informed of what other jurisdictions are doing to learn from their experiences. Mr. Anderson asked Mr. Leach if he felt there were major problems in existence regarding the current system for addressing common interest ownership problems. Mr. Leach stated that under the current laws, NRS Chapter 116, he did not consider there to be major problems. He does not feel that, like Mr. Mack, we need to change everything to the way Hawaii has their laws set up. Mr. Anderson asked how the legislature could change the apparent "dictatorial power" that currently exists in the associations. Mr. Leach did not feel there was a way, through the legislature, to change one person's power or control. He stated there are over 600 homeowner associations in the valley and many are run by honorable upstanding people but there is no way to legislate the dictatorial individual. In addition, there are procedures within each associations' declarations to remove board members. There is a mechanism in place for this if necessary. Perhaps the homeowners are not exercising their rights under the CC&R's to accomplish this. Mr. Perkins stated he understood that having an unanimous vote is restrictive if not prohibitive in the amendment process but he was troubled with someone coming before the committee to oppose a bill and not offering them an alternative. He asked Mr. Leach what alternative he may have to protect the rights of the individual who buys a home based on existing CC&R's, spends money to create a workshop in his garage because it is allowed, and then is later threatened by homeowners that he will no longer be able to keep his workshop. Mr. Leach discussed the grandfathering-in clause that is usually used in enacting amendments and in fact he counsels his clients that they cannot pass one rule and then later on take it back. Before you could change the way someone uses their garage the way he was originally allowed to use it, the association's members have to adopt and amend the CC&R's by 75% to 90%. This is very difficult to do. He conveyed to the committee that amendments, because of the high percentage of quorum required, do not pass regularly. Eleissa Lavelle, Attorney at Law, Crockett & Myers, Las Vegas, stated she has been an attorney for 18 years and currently the majority of her law practice is representation of homeowners associations, individual homeowners, and developers. She is also chairman of the Legislative Action Committee of Community Associations Institute and has been working closely with A.B. 152. She is a strong supporter of A.B. 152 "with some changes". They recognize the concerns of various members of the community and are addressing those concerns specifically in two areas to make amendments to A.B. 152. One area is primarily the great length of time it takes these cases to go through litigation and that usually litigation exacerbates the problem rather than fixing it. The other area of concern is that the bill does not cover certain properties that do not necessarily fit with the associations. She believes arbitration would create a forum composed of people that homeowners and associations could trust- -their peers. She stated they are working within the community to address the concerns everyone has and focus on the proper division each concern may address for instance, consumer problems or real estate problems, and they want to find the best place for the process because she feels it is an important process. Ms. Lavelle stated there are two separate distinctions between the Hawaii law versus what is currently proposed in Nevada: 1) arbitration is by choice in Hawaii rather than mandatory; 2) the difference here is the confusion as to whether there is a trial including the introduction of findings of fact and conclusions of law. Ms. Lavelle concluded that she would like to be invited to subcommittees on these bills when so formed. John J. Delmazza, Las Vegas resident, stated he supported the passage of A.B.152 and further informed the committee that he sat on the board of directors for his association for approximately three years. However, on October 23, 1994, the developer/declarant president fired four board members. Currently, within his association there is an injunction in place, bankruptcy proceedings, and temporary restraining orders. The interim board immediately amended the CC&R's which has increased power. He feels they are in violation of NRS 116 and also his rights have been violated. He further discussed the developer going bankrupt and therefore has not performed the terms and conditions promised to the homeowners relating to common areas and improvements within the complex. As homeowners, they cannot get 75% of the homeowners to amend the newly amended CC&R's. He stated the current association is practically a dictatorship now. Mr. Manendo commented on his unpleasant experience dealing with a homeowner association relating to a problem of one of his constituents. Mr. Delmazzo concluded that some of the CC&R's and rules and regulations are good, but there are some that are bad and these are not protecting the homeowners but rather are providing more power to the board. Kathleen Mary Davis, a Las Vegas resident, testified that about a year ago she was violently assaulted and threatened with severe bodily injury by an officer on the board of directors of her homeowners association which resulted in a lawsuit in District Court. She stated she was in favor of the bill but felt more protection for those who have invested in homes in Las Vegas needed to be added. She has been threatened, fined, and attempts have been made to foreclose upon the condominium she has owned for four years because she has a washer and dryer in her condomium. The money for such lawsuits is coming out of the insurance company for the director's liability clause. Her association has no reserve fund and there are other serious issues going on in her association. Ms. Davis further expressed that the laws currently in effect do not happen in reality concerning associations. She resides at Casa Vegas condominiums and would hope to be included in the subcommittees designed to address these bills. Chairman Sandoval stated there will be subcommittees forming and Assemblyman Schneider would be chairing those subcommittees. Ken Way, 2120 Los Altos, Las Vegas, stated he opposed "the bill" because it does not address the problems they are having. He feels the committee should go away from today's hearing knowing there are a lot of troubles outstanding with the governing bodies in these associations. He reiterated past testimony of how difficult it is already to obtain a large majority to make any changes in the bylaws. He shared his personal experiences of owning a condominium in Las Vegas for the past four years and how the funds from the "treasury" were absconded. The city of Las Vegas did not take the property back into the city at all. Mr. Way relayed several other problems that exist in his homeowner's association. Additionally, some of the problems were as a result of having CPA's and attorneys on the board so he did not feel these professions would be useful on any "committee." Mr. Way feels this legislation is intended to address certain problems and force into arbitration some resolution of issues in dispute but people here are talking about myriads of problems that are not going to be resolved by this bill alone. As long as the legislators are going to deal with the problem of homeowners associations, he would really like them to make a serious attempt to address the kinds of problems that everyone has been voicing here today at large. If it is not binding arbitration, then you are forced to go back into the legal system anyway. His view is simply that the bill does not go far enough. Mr. Schneider commented that the law does not have to do only with associations. This law pertains to all property that has covenants over it so it pertains to single family residences where there are covenants but you are not in an association. So, this is a very broad bill that is going to require a lot of work. Chairman Sandoval stated once the subcommittee has been formed anyone interested should stay in touch with Mr. Schneider. There being no further business before the committee the meeting was adjourned at 3:25 p.m. RESPECTFULLY SUBMITTED: Joi Davis, Committee Secretary APPROVED BY: ________________________________________ Assemblyman Bernie Anderson, Chairman ________________________________________ Assemblyman David E. Humke, Chairman Assembly Committee on Judiciary February 14, 1995 Page