The crippled Las Vegas housing market has triggered a legal battle pitting investors buying foreclosed homes against homeowners associations, with millions of dollars at stake.
The key issue — and what will probably be dragged out all the way to the state Supreme Court — is collection companies tacking on their fees to the delinquent HOA dues they have been trying to collect, in many cases for longer than a year. If associations lose and can’t get past-due fees, assessments on paying homeowners will probably increase.
That additional charge for collections has run several thousand dollars in some cases and exceeded what the investors sometimes had to pay in delinquent HOA dues. With collection costs averaging about $2,000 per foreclosed home, investors said the amount owed could easily surpass $50 million.
When local government privatizes, so does the task of collecting property assessments. Private local government collection costs are just too doggone high, claim investors who are being hit up for past due HOA assessments on thousands of Las Vegas REO properties. The community association collection industry counters with dark warnings that HOAs will go into receivership and assessments will increase if the assessment collectors don't get their due.
This is one of the drawbacks of privatizing local government. The tax collectors aren't paid by the taxpayers but rather via private contracts to act as the HOA's proxy. As this Las Vegas Sun story illustrates, that can lead to some nasty litigation.