State Supreme Court will decide whether homeowners associations can sue on behalf of individual owners

The Nevada Supreme Court will decide whether homeowners associations have the right to sue on behalf of individual homeowners in a case that could have a major impact on the number of construction defect cases filed in the state.

The court heard oral arguments Monday in fives cases involving HOAs. The court could take up to four months before issuing a decision, according to one attorney.

Many potential onlookers were turned away as a standing room-only crowd packed the Regional Justice Center courtroom to hear developers question the legal authority of HOAs to file lawsuits alleging faulty construction. The builders, including D.R. Horton, Richmond American Homes and Johnson Communities of Nevada, said HOAs should only be allowed to sue for construction defects in common areas, and not for individual unit owners.

Developers asked the full panel of justices for the right to challenge the associations’ ability to bring defect lawsuits, and to deny their authority to sue for individual unit owners.

“The developers point of view is simple on this,” Jack Juan, an attorney who represents D.R. Horton, said after the hearing. “The individual homeowner should decide what he or she should or should not do with their property — not board members, not associations.”

The lawyer expected a ruling in the developers’ favor to bring down builders’ liability premiums. “That’s why there were insurance people in there (in the courtroom),” he said.

Nevada law now allows “common-interest” ownership associations to file lawsuits on behalf of two or more owners. Attorneys for the developers argue that the term “common-interest” refers only to an actual ownership interest in the allegedly defective property, which would limit HOA lawsuits to common areas. Courtyards or pools are typical examples of common areas.

Plaintiffs’ lawyers decried the developers’ efforts as an attempt to stop homeowners from seeking the monetary damages and repairs due them.

George Bochanis, of the Nevada Justice Association, said many residents don’t have the financial means to file construction defect lawsuits on their own. Further, individual cases might not be worth a lawyer’s time, he said.

The Nevada Justice Association, formerly the Nevada Trial Lawyers Association, filed a court brief on the side of the HOAs.

“Our interest in this is that it is a crucial issue that affects every homeowner in Nevada and how their concerns are addressed,” Bochanis said before the hearing.

The number of construction defect claims could actually jump, as more residents filed individually, if the state Supreme Court stripped associations of their right to sue in many instances, said Bruce Mayfield, an attorney representing Monarch Estates Homeowners Association.

A district court decision held that Monarch lacked the standing to sue Johnson Communities and Richmond American over alleged defects in a Monarch Estates wall because each individual unit owner owned the part of the wall that abutted their property.

Of the five cases being consolidated — Monarch Estates, First Light Homeowners Association vs. D.R. Horton, Court at Aliante Homeowners Association vs. D.R. Horton, Dorrell Square vs. D.R.Horton and High Noon at Arlington Ranch Homeowners Association vs. D.R Horton — the lower courts had only ruled in favor of one HOA, First Light.

Damage to individual units in a community is a matter of common interest to its HOA, argued Mayfield.

“If you have a water leak in homes and you have mold, and people are leaving, the association has an interest because the property values and the livability of the development will go down,” he said.

Contact reporter Valerie Miller at vmiller@ lvbusinesspress.com or 702-387-5286.