SB339 - Revises provisions relating to common-interest communities. (BDR 10-639)

S.B. 339 - *SB339* SENATE BILL NO. 339–SENATOR BUCK MARCH 12, 2025 ____________ Referred to Committee on Judiciary SUMMARY—Revises provisions relating to common-interest communities. (BDR 10-639) FISCAL NOTE: Effect on Local Government: No. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to common-interest communities; requiring the Real Estate Division of the Department of Business and Industry to audit the financial accounts of unit-owners’ associations of common-interest communities under certain circumstances; requiring background investigations for candidates nominated for membership on executive boards of associations; revising provisions relating to reserve accounts; providing that certain actions related to common-interest communities are not subject to mandatory alternative dispute resolution processes and must be adjudicated as small claims; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law requires the executive board of the unit-owners’ association of a 1 common-interest community to cause the annual review or audit of the financial 2 statements of the association. (NRS 116.31144) Section 2 of this bill requires the 3 Real Estate Division of the Department of Business and Industry to investigate and 4 audit all financial accounts related to an association if the Division has reasonable 5 cause to believe that the accounts or records of the association have not been 6 maintained and that the investigation and audit is reasonably necessary to 7 administer or enforce certain laws under the jurisdiction of the Division. 8 Existing law establishes procedures related to the election or appointment of a 9 member of the executive board. (NRS 116.31034) Section 3 of this bill requires 10 candidates for membership on the executive board to undergo a background 11 investigation conducted by the Division. Section 6 of this bill requires the 12 candidate to submit a copy of the background investigation to the association for 13 distribution to the units’ owners during the election process or in a subsequent 14 mailing under certain circumstances. 15 – 2 – - *SB339* Section 4 of this bill requires the Division to establish a training program for 16 members of executive boards and requires members to take the training within 6 17 months after their election or appointment. 18 Existing law requires the association to establish adequate reserves for the 19 repair, replacement and restoration of the major components of the common 20 elements and any other portion of the common-interest community that the 21 association is obligated to maintain, repair, replace or restore. (NRS 116.3115) 22 Existing law requires the executive board to: (1) cause a study of the reserves to be 23 conducted every 5 years; (2) annually review the results of the study; and (3) make 24 adjustments to the funding plan of the association. (NRS 116.31152) Section 7 of 25 this bill requires the study to be conducted every year and establishes the standards 26 for determining the sufficiency of funds in the reserves of the association. 27 Existing law provides that before commencing a civil action relating to the 28 interpretation, application or enforcement of any covenants, conditions or 29 restrictions applicable to residential property or any bylaws, rules or regulations 30 adopted by an association or the procedures used for increasing, decreasing or 31 imposing additional assessments upon residential property, a dispute must first be 32 submitted to mediation or, if the parties agree, referred to a program established by 33 the Division for resolution of the dispute. (NRS 38.310) Section 9 of this bill 34 exempts actions brought for damages from a failure or refusal to comply with 35 certain provisions of law related to common-interest communities or the 36 declarations or bylaws of an association from such mandatory mediation or such a 37 program for resolution. Instead, sections 8 and 10 of this bill require such actions 38 to be commenced in justice court and adjudicated as small claims. 39 Section 5 of this bill makes a conforming change related to the applicability of 40 certain provisions to sections 2-4. 41 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Chapter 116 of NRS is hereby amended by adding 1 thereto the provisions set forth as sections 2, 3 and 4 of this act. 2 Sec. 2. The Division shall investigate and audit all financial 3 accounts related to an association if the Division has reasonable 4 cause to believe that the accounts or records of the association 5 have not been properly maintained and the Division determines 6 that the investigation and audit are reasonably necessary to assist 7 the Division in administering or enforcing the provisions of this 8 chapter and any other statute that the Division is charged with 9 administering or enforcing. 10 Sec. 3. 1. The Division shall prepare a report on the 11 background of a candidate nominated for membership to an 12 executive board pursuant to NRS 116.31034. 13 2. A candidate shall submit an application to the Division for 14 the preparation of the report not later than 3 days after the 15 nomination of the candidate. 16 3. The application must be made on a form prescribed by the 17 Division. 18 – 3 – - *SB339* 4. The Division shall provide to the candidate a certified copy 1 of the report on the background of a candidate. 2 Sec. 4. 1. The Division shall by regulation establish a 3 training and orientation program for members of executive 4 boards, which must include, without limitation, information 5 concerning the powers and duties of the members. 6 2. Each member of an executive board shall, not later than 6 7 months after election or appointment, complete the training and 8 orientation program described in subsection 1. 9 Sec. 5. NRS 116.1203 is hereby amended to read as follows: 10 116.1203 1. Except as otherwise provided in subsections 2 11 and 3, if a planned community contains no more than 12 units and is 12 not subject to any developmental rights, it is subject only to NRS 13 116.1106 and 116.1107 unless the declaration provides that this 14 entire chapter is applicable. 15 2. The provisions of NRS 116.12065 and the definitions set 16 forth in NRS 116.005 to 116.095, inclusive, to the extent that the 17 definitions are necessary to construe any of those provisions, apply 18 to a residential planned community containing more than 6 units. 19 3. Except for NRS 116.3104, 116.31043, 116.31046 and 20 116.31138, the provisions of NRS 116.3101 to 116.350, inclusive, 21 and sections 2, 3 and 4 of this act, and the definitions set forth in 22 NRS 116.005 to 116.095, inclusive, to the extent that such 23 definitions are necessary in construing any of those provisions, 24 apply to a residential planned community containing more than 6 25 units. 26 Sec. 6. NRS 116.31034 is hereby amended to read as follows: 27 116.31034 1. Except as otherwise provided in subsection 5 of 28 NRS 116.212, not later than the termination of any period of 29 declarant’s control, the units’ owners shall elect an executive board 30 of at least three members, all of whom must be units’ owners. The 31 executive board shall elect the officers of the association. Unless 32 the governing documents provide otherwise, the officers of the 33 association are not required to be units’ owners. The members of the 34 executive board and the officers of the association shall take office 35 upon election. 36 2. The term of office of a member of the executive board may 37 not exceed 3 years, except for members who are appointed by the 38 declarant. Unless the governing documents provide otherwise, there 39 is no limitation on the number of terms that a person may serve as a 40 member of the executive board. 41 3. The governing documents of the association must provide 42 for terms of office that are staggered in such a manner that, to the 43 extent possible, an equal number of members of the executive board 44 – 4 – - *SB339* are elected at each election. The provisions of this subsection do not 1 apply to: 2 (a) Members of the executive board who are appointed by the 3 declarant; and 4 (b) Members of the executive board who serve a term of 1 year 5 or less. 6 4. Not less than 30 days before the preparation of a ballot for 7 the election of members of the executive board, the secretary or 8 other officer specified in the bylaws of the association shall cause 9 notice to be given to each unit’s owner of the unit’s owner’s 10 eligibility to serve as a member of the executive board. Each unit’s 11 owner who is qualified to serve as a member of the executive board 12 may have his or her name placed on the ballot along with the names 13 of the nominees selected by the members of the executive board or a 14 nominating committee established by the association. 15 5. Before the secretary or other officer specified in the bylaws 16 of the association causes notice to be given to each unit’s owner of 17 his or her eligibility to serve as a member of the executive board 18 pursuant to subsection 4, the executive board may determine that if, 19 at the closing of the prescribed period for nominations for 20 membership on the executive board, the number of candidates 21 nominated for membership on the executive board is equal to or less 22 than the number of members to be elected to the executive board at 23 the election, then: 24 (a) The association will not prepare or provide any ballots to 25 units’ owners pursuant to this section; and 26 (b) The nominated candidates shall be deemed to be duly elected 27 to the executive board at the meeting of the units’ owners at which 28 the ballots would have been counted pursuant to paragraph (e) of 29 subsection 15. 30 6. If the executive board makes the determination set forth in 31 subsection 5, the secretary or other officer specified in the bylaws of 32 the association shall disclose the determination and the provisions of 33 subsection 5 with the notice given pursuant to subsection 4. 34 7. If, at the closing of the prescribed period for nominations for 35 membership on the executive board, the number of candidates 36 nominated for membership on the executive board is less than 37 the number of members to be elected to the executive board at the 38 election, the executive board may fill the remaining vacancies on the 39 executive board by appointment of the executive board at a meeting 40 of the executive board held after the candidates are elected pursuant 41 to subsection 5. Any such person appointed to the executive board 42 shall serve as a member of the executive board until the next 43 regularly scheduled election of members of the executive board. An 44 executive board member elected to a previously appointed position 45 – 5 – - *SB339* which was temporarily filled by board appointment pursuant to this 1 subsection may only be elected to fulfill the remainder of that term. 2 8. If, at the closing of the prescribed period for nominations for 3 membership on the executive board described in subsection 5, the 4 number of candidates nominated for membership on the executive 5 board is greater than the number of members to be elected to the 6 executive board, then the association shall: 7 (a) Prepare and provide ballots to the units’ owners pursuant to 8 this section; and 9 (b) Conduct an election for membership on the executive board 10 pursuant to this section. 11 9. Each person who is nominated as a candidate for 12 membership on the executive board pursuant to subsection 4 must: 13 (a) Make a good faith effort to disclose any financial, business, 14 professional or personal relationship or interest that would result or 15 would appear to a reasonable person to result in a potential conflict 16 of interest for the candidate if the candidate were to be elected to 17 serve as a member of the executive board; [and] 18 (b) Disclose whether the candidate is a member in good 19 standing. For the purposes of this paragraph, a candidate shall not be 20 deemed to be in “good standing” if the candidate has any unpaid and 21 past due assessments or construction penalties that are required to be 22 paid to the association [.] ; and 23 (c) Provide to the association a certified copy of the report 24 prepared by the Division pursuant to section 3 of this act. 25  The candidate must make all disclosures required pursuant to this 26 subsection in writing to the association with his or her candidacy 27 information. Except as otherwise provided in this subsection, the 28 association shall distribute the disclosures [,] and a copy of the 29 report on behalf of the candidate, to each member of the association 30 with the ballot or, in the event ballots are not prepared and provided 31 pursuant to subsection 5, in the next regular mailing of the 32 association. The association is not obligated to distribute any 33 disclosure pursuant to this subsection if the disclosure contains 34 information that is believed to be defamatory, libelous or profane. 35 10. Except as otherwise provided in subsections 11 and 12, 36 unless a person is appointed by the declarant: 37 (a) A person may not be a candidate for or member of the 38 executive board or an officer of the association if: 39 (1) The person resides in a unit with, is married to, is 40 domestic partners with, or is related by blood, adoption or marriage 41 within the third degree of consanguinity or affinity to another person 42 who is also a member of the executive board or is an officer of the 43 association; 44 – 6 – - *SB339* (2) The person stands to gain any personal profit or 1 compensation of any kind from a matter before the executive board 2 of the association; or 3 (3) The person, the person’s spouse or the person’s parent or 4 child, by blood, marriage or adoption, performs the duties of a 5 community manager for that association. 6 (b) A person may not be a candidate for or member of the 7 executive board of a master association or an officer of that master 8 association if the person, the person’s spouse or the person’s parent 9 or child, by blood, marriage or adoption, performs the duties of a 10 [Text truncated for display. 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