NV Supreme Court finds HOAs have no obligation to uphold Constitutional property rights

By Deborah Goonan, Independent American Communities

Property does not have rights People do


The court has ruled that the HOA is not a state actor


Property owners in Association Governed Communities face another assault on their rights in the form of the HOA priority lien.

According to a recent report in the Review Journal, the Nevada Supreme Court issued a ruling affirming their previous decision that the HOA priority lien extinguishes a first mortgage. The investors who have acquired homes through nonjudicial HOA foreclosures can indeed own those properties free and clear of the original mortgage.

Nevada Supreme Court rejected the lower court argument that the lender’s and homeowner’s due process rights had been violated, by allowing a condominium unit to sell for less than $7,000, wiping out an $82,000 mortgage in the process. That created a windfall for the investor.

Thousands of such unconscionable HOA foreclosure sales have occurred in Nevada following the real estate meltdown.

Nevada Supreme Court’s ruling conflicts with a contrary ruling by the 9th circuit Court of Appeals, in which the court panel rule 2-1 that allowing HOA Priority Liens to wipe out existing first mortgage loans is unconstitutional. So this issue is far from settled.

But in the meantime, thousands of individual property owners (and their lenders) have become sacrificial lambs in a high stakes gamble on real estate in the state of Nevada.

Owners remain at risk for losing their homes at HOA foreclosure for pennies on the dollar. And opportunistic investors who took a financial risk, hoping to cash in on a windfall, are now unable to sell those homes with a clear title.

But more importantly, the eventual reconciliation of contradictory rulings on HOA priority liens will address fundamental Constitutional principles with regard to property rights.


Nevada Supreme Court ruling upholds nonjudicial foreclosure process

Review Journal, Posted January 26, 2017 – 9:40am Updated January 26, 2017 – 6:16pm



CARSON CITY — The Nevada Supreme Court ruled Thursday that a nonjudicial foreclosure process used by investors and speculators to acquire HOA properties at bargain basement prices during the great recession does not violate the constitutional protections of original mortgage holders.

The court found that the process does not violate the Takings Clauses of the U.S. and Nevada constitutions. It also found that due process rights were not violated because the foreclosure process does not constitute a state action.

The ruling is significant for thousands of individuals and groups in Las Vegas that acquired foreclosed homes at a fraction of their value by paying off the super-priority liens held by homeowners associations.

The Nevada Supreme Court had previously ruled that paying off the superpriority lien held by an HOA extinguished all other pre-existing liens, including the original mortgage. The unanimous ruling issued Thursday affirms that prior decision.

The Nevada Supreme Court decision is at odds with a recent ruling by the 9th Circuit Court of Appeals in a different Nevada case that found in a 2-1 ruling that the state process does violate constitutional protections.

The different decisions will now have to be reconciled.

The dispute over the foreclosure sales dates to the foreclosure crisis that began in 2008. The law was changed by the Nevada Legislature in 2015 going forward to resolve the notice issue and other concerns.

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2 thoughts on “NV Supreme Court finds HOAs have no obligation to uphold Constitutional property rights

  1. Oh boy, this just might not go over that well with the mortgage companies, if they keep getting the bad end of the deal these mortgage companies just might stop loaning any money to home buyers in a HOA.

  2. I don’t understand super priority liens. I am not sure how that could possibly be upheld by the courts that the first mortgage is wiped out.

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