Federal Lawsuit Filed Against HOAs for Overcharges

  It is not unusual to hear complaints about how HOA charges and assessments are too high.  It is unusual to see a lawsuit filed against literally hundreds of homeowners associations that includes lenders, loan servicers and collection companies as defendants.  The plaintiffs in the case allege that the defendants:

made false, improper, inaccurate and excessive claims … for homeowners’ association liens, assessments, collection fees and costs which defendants had no right to claim, any such right having been either extinguished by law, extinguished by the recorded overs or improper under [federal and state laws]

The lawsuit says HOAs (through collection companies or other agents):

• violated Nevada state law by charging more than 9 months worth of maintenance fees (which is the limit of Nevada’s super-priority lien as of October 2009);
• violated Nevada state law and federal law by improperly charging collection fees and costs to owners when the associations didn’t incur those costs; and
• filed fraudulent liens.

The HOA demands included late fees, collection fees, interest, filing fees, recording fees, title search fees, bankruptcy search fees and other charges – all expenses that may not be problematic or improper.  However, the HOA contracts with the collection companies did not require the HOA to pay these fees.  Instead, the contracts said the collection company will charge these fees and costs directly to the non-paying owner. Thus, these charges weren’t simply “pass-through” charges or reimbursement of HOA expenses. The plaintiffs in this lawsuit contend that HOAs can only bill and collect for fees and charges they actually incurred. The homeowners’ associations may be ultimately liable for all of these claimed overcharges, even though the money that was paid by banks or subsequent title holders went to the collection companies instead of the associations’ bank accounts.   One of the attorneys for the plaintiffs said HOAs could be liable for up to $50 million in damages! WKLAS-TV ran a full story on the lawsuit.