Sky Las Vegas Is Sued for civil racketeering, negligence and breach of fiduciary duty, among other assertions., Robert Paisola Reports

A group of disgruntled investors has hit Southern Nevada homeowner associations with a class action lawsuit.

The lawsuit accuses the associations of everything from charging excessive lien amounts and enriching themselves unjustly to slander and intentional misrepresentation. The valley's biggest association management firms are named as defendants, including Nevada Association Services, RMI Management and Home Association Services, among others.

"Plaintiffs are real estate investment companies that purchase homes at foreclosure auctions with the intent of quickly selling or flipping it for a profit," Chris Yergensen, general counsel for Red Rock Financial Services, a unit of RMI Management, said in a statement. "(We) believe this lawsuit to be without merit and will strongly defend (it) in court. This legal attack is a direct threat to the financial integrity of all HOAs."

Bank of Nevada
On Jan. 27, Las Vegas-based Adams Law Group filed a 13-page complaint in Clark County District Court on behalf of nine investment entities, including Higher Ground LLC, Southern Nevada Acquisitions LLC, Triple Braided Cord LLC, Equisource LLC, Mega LLC, and Appleton Properties LLC. Public records identify Ryan Welch, Sara Ferradino, Mickey Fouts, Greg Bohannon, John Gubler, Patrick and Phillip Ziade, and Andy Chu as individuals affiliated with the aforementioned entities. Calls to plaintiffs' attorney James Adams were not returned by press time.

"Speculators taking advantage of a depressed real estate market are unhappy when they have to pay charges that they may have or not have anticipated," Nevada Association Services President David Stone said. "Every penny they don't have to spend is money in their pockets. The industry is going to be fighting back. These claims are baseless."

New legislation went into effect last summer giving homeowners associations more teeth to pursue neglected residences. It was meant to address the growing number of bank-owned foreclosed homes. More than 12 percent of Southern Nevada homes received a foreclosure notice in 2009 -- more than five times the national average, Irvine, Calif.-based RealtyTrac reported. But the new laws have inadvertently affected investors looking to snatch up distressed properties for a quick buck.

Assembly Bill 361 enables associations to keep up homes that have fallen into disrepair. Poorly kept residences can create neighborhood blight that depresses surrounding property values. Dead or overgrown landscaping is a common problem as is unattended pools ripe with algae.

Assembly Bill 204 extends the superpriority lien ability for associations, enabling nine months collection of unpaid dues, up from six months. Homebuyers, in other words, must pay association dues in full before gaining ownership title in full.

The complaint levels charges of excessive lien amounts and claims that the associations have engaged in "racketeering activity," with acts of intimidation through threats of clouding property title and thwarting any potential sale. The lawsuit also states that the associations have "unjustly enriched (themselves) at the expense of the plaintiffs."

The lawsuit seeks an injunction against further homeowners association-related fees and actions, and requests more than $10,000 in general damages. A court date has not been set.

"They are claiming to have been injured by 126 HOAs. They are casting a huge net trying to get something to stick," Stone said. "The (plaintiffs) don't want to put one penny into these properties; they do not want to pay monthly assessments; they want to wait until it sells. They're not trying to right a wrong, they are trying to hurt the industry as a whole -- it's strictly dollars and cents."

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Depending on who is doing the talking, investors buying foreclosed homes in the Las Vegas area are either being gouged by greedy homeowners associations or are contributing to neighborhood decay by failing to maintain their newly purchased properties.

Those charges flew Wednesday as news circulated that investment groups had filed class action lawsuits in Las Vegas claiming they are being overcharged by hundreds of homeowners associations and collection agencies for assessments, fines, interest and collection costs that typically accumulate while homes sit vacant during foreclosure proceedings.

The lawsuits, filed by Adams Law Group Ltd., said the associations and their collection agencies charge investors more than what the law allows.

That past-due amounts are capped by law at the equivalent of nine months of association assessments and can include a combination of regular assessments, fines and other charges. After acquiring properties, investors must pay monthly assessments as well as fines like everyone else.

One lawsuit seeking class action status was filed Friday in District Court in Clark County against about 125 homeowners associations, claiming civil racketeering, negligence and breach of fiduciary duty, among other assertions.

Attorney James Adams said he was filing a second class action lawsuit Wednesday against eight collection agencies that work for the associations, claiming they, too, have wrongly collected excessive funds from the investors.
Adams said in a typical deal, an investor may buy a vacant property, paint it, fix it up and then resell it, all to the benefit of the community.

But at the closing of the sale, the investor may get hit with invoices for assessments, fines, interest and collection costs for which the investor may not be responsible, he said. These overcharges can vary widely and typically amount to a few thousand dollars, he said.

“The investors feel they are being ripped off,” Adams said, adding overcharges may have totaled millions of dollars in recent years.

None of the defendants has responded to the lawsuits, but two executives at association management companies Wednesday disputed the assertion that associations are deliberately trying to overcharge investors.
The managers said collection agencies and title companies may be informing investors of the total amount of liens piled up against properties, but that’s a far cry from requiring the investors to pay more than what’s legally obligated.

Besides, the managers said, some banks are being good citizens and paying all of the lien amounts — not just what’s due under the nine-month rule.

The bigger issue for the managers is that while homes sit vacant awaiting foreclosure, regular monthly assessments and fines pile up — and most of that amount has to be written off as bad debt.
The situation is extreme in Las Vegas, which led the nation in foreclosures in 2009, according to RealtyTrac statistics Wednesday.

The associations frequently have to shell out money to contractors to work on rundown properties, deal with stagnant and toxic swimming pools and to water lawns and vegetation. If that money can’t be recovered from previous or new owners, it hits association budgets, jeopardizing their maintenance programs.

Although there are some responsible investors, many fail to maintain their newly acquired homes and don’t pay association assessments on time — repeating the problems experienced when the homes were in foreclosure, managers say.

“Everyone wants a good deal,” said Jamie McCafferty, president of Excellence Community Management, which works with about 125 associations. “But not everyone wants to step up to the plate to maintain the property to community standards.”

At Terra West Property Management, which serves more than 170 homeowners associations, spokeswoman Wendy Linow agreed with Adams on one point: The Legislature and state regulatory agencies may need to get involved to help resolve disputes over which expenses investors are responsible for.

Linow said lawmakers may also need to clarify when the nine-month cap begins and ends.

In the meantime, Linow defended the present system in which investors apparently are being asked in some cases to pay off fines and past-due assessments they are not legally responsible for.

“The collection industry in any industry will ask for the full balance due and in many cases the foreclosing entity will pay it all off,” she said.

The plaintiffs in the Jan. 22 lawsuit are Higher Ground LLC, RRR Homes LLC, Triple Braided Cord LLC, Equisource LLC, Equisource Holdings LLC, Appleton Properties LLC, CBRIS LLC, Mega LLC and Southern Nevada Acquisitions LLC.

The approximately 125 associations sued include the Aliante Master Association, Desert Shores Community Association, Elkhorn Community Association, Estates at Seven Hills Owners Association and Seven Hills Master Community Association, Estates at Stallion Mountain Homeowners Association and the Stallion Mountain Community Association; and the Green Valley Ranch Community Association.
Also among those sued were the Mountains Edge Master Association, Panorama Towers Condominium Unit Owners Association, Peccole Ranch Community Association, Platinum Unit Owners Association, Rhodes Ranch Association, Sky Las Vegas Condominum Unit Owners Association, Southern Highlands Community Association, Summerlin South Community Association, Sun City Anthem Community Association, Sun City Macdonald Ranch Association, Sun City Summerlin Community Association and Sundridge at Macdonald Ranch Community Association.

The collection agencies to be sued Wednesday were Nevada Association Services Inc., RMI Management Inc. dba Red Rock Financial Services; Homeowner Association Services Inc., Alessi & Koenig, Hampton & Hampton, Angius & Terry Collections LLC, Eugene Burger Management Corp. and Silver State Trustee Services LLC.

David Stone, president of collection company Nevada Association Services, denied Thursday that his company tries to collect money beyond what is allowed by law -- and claimed the investors are trying to strong-arm homeowner associations into reducing fees so the investors make more money.
"These are not sympathetic plaintiffs," he said. "They are real estate speculators taking advantage of foreclosures and people losing their homes. Every dollar saved is a dollar in their pocket."

Another peding suit against Sky Las Vegas is Case No. A-09-599065-C entitled:
Maro Burnsuzyan, Plaintiff(s) vs. Sky Las Vegas Condominiums Unit Owners Association, Defendant(s)
We will be following this case closely and will report all information received.


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