Diana Gruber of:

University Crest HOA

Paradise Spa Only One Symptom of a Larger Problem

By Diana Gruber

Paradise Spa was once a posh community on the south end of the Strip. Now it is a wreck. Buildings have fallen into disrepair, and the HOA treasurer has allegedly absconded with the funds. On April 7, 2011, the Nevada Attorney General’s office raided the offices of the Paradise Spa homeowners association. They were responding to complaints about missing insurance money that should have been used to repair burned-out units.

The question is, does the situation at Paradise Spa amount to a one-time misfortune, or is it representative of the pervasive HOA problems that exit in our city?

According to Paul Terry, what happened at the Paradise Spa doesn’t indicate anything about the HOA industry in general. Paul Terry is the president-elect of the Community Association Institute (CAI), an organization that provides education and services to HOA boards and their management companies. He is also an attorney who specializes in construction defect cases. So Paul Terry is a person deeply concerned with HOA issues. I am a homeowner and landlord in Las Vegas, and I disagree with Paul Terry. I think the problems at Paradise Spa are the same problems homeowners are experiencing with their HOAs all over the Las Vegas valley.

For example, consider the request for financial records. Paradise Spa residents tried to get financial information from their HOA without success. Other valley residents have experienced similar problems. A homeowner in the Red Hills community requested financial records from her HOA. Her efforts resulted in months of frustration, as the records were shuffled between the HOA office and the Nevada Real Estate Division, and then ended up in attorney John Leach’s office. The homeowner was eventually presented with a bill from the attorney for $8119.63 for being a nuisance.

Another problem at Paradise Spa is the mishandling finances.  That is another problem a lot of homeowners have seen in their local communities. In fact it has happened more often than anybody should be comfortable with. For example, in Sun City Anthem, reserve money was not returned to homeowners in a timely manner, and now Anthem residents are on the hook to the IRS for $1.3 million in taxes. The tax expense could have been avoided, if the management company, accountant, and executive board had handled the finances properly.

At Paradise Spa, an elderly resident lost her home. Elderly homeowners suffering from by poor treatment by HOAs is nothing new in Las Vegas. Witness Doris, who at age 81 was forced into a prolonged battle with her HOA over a wall that was approved twice, and then, cited it as a violation. Her battle has stretched on for years, but she is determined to outlast her bully board.

The Paradise spa case took a very long time to resolve. Justice delayed can very well become justice denied when the victim is elderly. It is not uncommon for HOA problems to be stalled in NRED. Some cases stretch out for years. One homeowner filed a complaint against the Summerlin HOA over two years ago. A year ago, NRED sent him a letter a year ago saying they were looking into it. Since then he has heard.

Nothing happened at Paradise Spa until lawyers got involved. That is another common problem. Homeowners in Southern Nevada can expect their HOA complaints to be completely ignored if they do not hire a lawyer. The hero of the Paradise Spa story is former state senator Bill O’Donnell, who hired a lawyer. Hiring lawyers is very expensive, especially in HOA cases, which tend to drag on for years because of NRED stalling tactics. Justice is expensive, if not impossible, for Nevada homeowners.

The Paradise Spa residents who paid HOA dues expected their HOA to use the money to maintain the community. Those funds were not used to clean up the grounds and keep the community nice. Paradise Spa, once a lovely, picturesque community, now looks like a dump. That, unfortunately, is also not an unusual situation. For example, homeowners in the River Landing community have a similar problem. They complain that a former meth lab in the neighborhood is an eyesore. The HOA has done very little to address the problem. Residents are wondering where all their money goes, since it is apparently not going towards fixing up the neighborhood.

Aaron Yashoufar, the board member who allegedly mishandled the insurance funds, apparently owns a majority of units in Paradise Spa. There is no way the other homeowners can organize and vote him off the board because he holds a majority of the votes. Because of cumulative voting, he can simply elect himself to any position he chooses. Apparently he chose to make himself the treasurer. Apparently he preferred to be the person who handled the money. This is not unusual. Cumulative voting is common in HOA communities throughout the valley, and an investor with multiple units can vote himself into a board position even if there is no support from the rest of the community. If the other homeowners don’t like it, there nothing they can do about it.

Finally, the most striking similarity between Paradise Spa and other HOA communities in Las Vegas is the sad quality of the investment. Our Las Vegas real estate market needs investors. Investors prefer to invest in markets where there is low risk. HOA communities carry a huge risk to investors. Besides the obvious risk of financial misbehavior by your neighbors, there is the more insidious risk of bully-board harassment. You can’t torment investor and expect them to keep investing. HOA bully boards drive away tenants, and turning over rentals is expensive. Smart investors will avoid this kind of situation. So in this way, the HOA situation is bad for business in Nevada.

Paul Terry’s assertion that the Paradise Spa situation doesn’t indicate anything about the HOA industry is wrong and misleading. Obviously the problems at Paradise Spa are problems in many other places too. Nevada homeowners, investors, seniors, and renters are all suffering from HOA practices, and something needs to be done about it. Citizens need to be protected from the excesses of the HOA industry. Current laws are not doing enough to protect homeowners, and the industry is doing a terrible job of policing itself. We Nevadans should not be subject to the whims of our neighbors when it comes to our most important and cherished investments, our homes. We have suffered enough from the rampant corruption and abuse. It is time to take the power away from the HOA industry, and put it back in the hands of the homeowners.