Horizons at Seven Hills Homeowners Ass'n v. Ikon Holdings, LLC

• Decision Date: 28 April 2016
• Docket Number: No. 63178.,63178.
• Citation: 132 Nev. Adv. Op. 35,373 P.3d 66
• Parties: HORIZONS AT SEVEN HILLS HOMEOWNERS ASSOCIATION, Appellant, v. IKON HOLDINGS, LLC, a Nevada Limited Liability Company, Respondent.
• Court: Nevada Supreme Court

373 P.3d 66

132 Nev. Adv. Op. 35

HORIZONS AT SEVEN HILLS HOMEOWNERS ASSOCIATION, Appellant

v.IKON HOLDINGS, LLC, a Nevada Limited Liability Company, Respondent.

No. 63178.

Supreme Court of Nevada.

April 28, 2016.

Holland & Hart, LLP, and Patrick J. Reilly and Nicole E. Lovelock, Las Vegas; Alverson, Taylor, Mortensen & Sanders and Kurt R. Bonds, Las Vegas, for Appellant.

Adams Law Group and James R. Adams, Las Vegas; Puoy K. Premsrirut, Inc., and Puoy K. Premsrirut, Las Vegas, for Respondent.

Adam Paul Laxalt, Attorney General, and Michelle D. Briggs, Senior Deputy Attorney General, Carson City, for Amicus Curiae State, Department of Business and Industry.

Kemp, Jones & Coulthard, LLP, and J. Randall Jones, Carol L. Harris, and Nathanael R. Rulis, Las Vegas, for Amicus Curiae Community Association Management Executive Officers, Inc.

Before the Court En Banc.¹

OPINION

By the Court, HARDESTY

, J.:

In this appeal, we determine whether a superpriority lien for common expense assessments pursuant to NRS 116.3116(2)²

includes collection fees and foreclosure costs incurred by a homeowners' association (HOA). We conclude that it does not. Additionally, we consider whether an HOA's covenants, conditions, and restrictions (CC & Rs) that purport to create a superpriority lien covering certain fees and costs over six months preceding foreclosure are superseded by the terms of the superpriority lien created by NRS 116.3116(2)

. We conclude that the superpriority lien in the CC & Rs is superseded by NRS 116.3116(2), thus affirming in part and reversing in part the district court's decision.

FACTS AND PROCEDURAL HISTORY

The property at issue in this case is located in Horizons at Seven Hills Ranch, a common-interest community as defined in NRS Chapter 116, operated and managed by appellant Horizons at Seven Hills Homeowners Association (Horizons). As a common-interest community, Horizons has the ability to collect and charge assessments, and administer and enforce the CC & Rs upon the unit owners, for the purpose of benefiting the community. See NRS 116.3115

.

Horizons recorded its Declaration of CC & Rs in July 2005. Later that year, Hawley McIntosh purchased a home located within the common-interest community. In June 2009, McIntosh became delinquent on his first mortgage payments, and his first mortgage lender, OneWest Bank FSB, recorded a notice of default that same month. In August 2009, Horizons recorded a notice of default against McIntosh for nonpayment of association assessments and other costs in the amount of roughly $4,300. Before Horizons could foreclose, OneWest foreclosed on McIntosh's home in June 2010, holding a foreclosure auction on the same day, at which Scott Ludwig purchased the property. Ludwig transferred the property by quitclaim deed to respondent Ikon Holdings, LLC (Ikon) later that year.

Horizons contacted Ikon and explained that Ikon acquired the property subject to Horizon's unextinguished superpriority lien. Horizons demanded roughly $6,000 to extinguish the lien, which, in addition to unpaid assessments, included roughly $2,700 in collection fees and foreclosure costs. In response, Ikon acknowledged that it acquired the property subject to Horizon's superpriority lien, but it disagreed that the lien included nine months rather than six months of unpaid assessments or the collection fees and foreclosure costs that Horizons was seeking to recoup.

When the parties were unable to resolve the matter, Ikon filed the underlying declaratory relief action. In particular, Ikon sought a ruling that, under NRS 116.3116(2)

, the superpriority portion of an HOA's lien consists of nine months' (or alternatively six months' based on the CC & Rs) worth of assessments and does not include collection fees and foreclosure costs. Horizons opposed the motion, arguing that NRS 116.3116(2)'s superpriority provision necessarily includes nine months of assessments and collection fees and foreclosure costs. The district court granted Ikon partial declaratory relief, reasoning that Horizons' CC & Rs limited its superpriority lien to an amount equal to six months of assessments, which did not offend NRS 116.3116(2)'s superpriority provision providing for nine months of assessments. Horizons now appeals.

On appeal, Horizons contends it is owed nine months of unpaid assessments totaling $1,657.50 and $1,592 in collection fees and foreclosure costs.³ Although Ikon does not dispute that it owes six months of unpaid HOA dues owed at the time of the foreclosure sale, it does dispute whether Horizons is entitled to an additional three months of HOA dues or the collection fees and foreclosure costs.

DISCUSSION

The superpriority lien under NRS 116.3116(2) does not include fees or collection costs related to foreclosure

Horizons and amicus curiae Community Association Management Executive Officers, Inc., argue that in addition to HOA dues, the superpriority lien⁴ includes an additional amount for collection fees and foreclosure costs incurred during the nine months prior to a foreclosure sale. Horizons contends these collection fees and foreclosure costs encompass fees for collecting past due assessments, such as third-party collection agency charges, and “trustee costs and publication costs in advance of a foreclosure sale.” Horizons further contends that canons of statutory interpretation dictate that the superpriority lien includes these fees and costs, and that NRS 116.3116(2)

must be read in conjunction with NAC 116.470. Ikon, along with amicus curiae Department of Business and Industry, Real Estate Division (NRED), counter that these fees and costs are not collectible under NRS 116.3116(2).

Standard of review

Questions of statutory construction are reviewed de novo. Ransdell v. Clark Cty., 124 Nev. 847, 854, 192 P.3d 756, 761 (2008)

. When interpreting an ambiguous statute, this court attempts to ascertain the Legislature's intent. Chanos v. Nev. Tax Common, 124 Nev. 232, 240, 181 P.3d 675, 681 (2008). To determine the Legislature's intent, we look to “legislative history, reason, and considerations of public policy.” Id.

NRS 116.3116

NRS 116.3116(1)

confers to an HOA a lien on a homeowner's unit for unpaid assessments, construction penalties, and fines levied against the unit. NRS 116.3116(2) establishes the priority of that lien, splitting the lien into two pieces—“a superpriority piece and a subpriority piece.” SFR Invs. Pool 1 v. U.S. Bank, N.A., 130 Nev. ––––, ––––, 334 P.3d 408, 411 (2014). The superpriority lien

is ... prior to all security interests ... to the extent of any charges incurred by the association on a unit pursuant to NRS 116.310312

and to the extent of the assessments for common expenses based on the periodic budget adopted by the association pursuant to NRS 116.3115 which would have become due in the absence of acceleration during the 9 months immediately preceding institution of an action to enforce the lien.

NRS 116.3116(2)

. SFR characterized the superpriority piece as including “the last nine months of unpaid HOA dues and maintenance and nuisance-abatement charges.”⁵ 130 Nev. at ––––, 334 P.3d at 411.

Horizons argues that based on persuasive caselaw and on rules of statutory construction, NRS 116.3116(2)

provides for a look-back provision, designed to place it in the same position it would have been over the previous nine months, but for the default. We are not persuaded by this argument.

To support its position, Horizons argues that this court should adopt the holding in Hudson House Condominium Ass'n, Inc. v. Brooks, 223 Conn. 610, 611 A.2d 862 (1992)

. In Hudson House, a condominium association was “foreclos[ing] a statutory lien for delinquent common expense assessments due on a condominium unit owned by the named defendant.” Id. at 864. The association asserted that pursuant to the superpriority lien,⁶ it was owed an amount equal to the common expense assessments, as well as interest, collection costs, and attorney fees. Id. at 864, 866. The court concluded that the superpriority lien included interest, collection costs, and attorney fees. It reasoned that a Connecticut statute stating that “a judgment or decree in any action brought under this section shall include costs and reasonable attorney[ ] fees for the prevailing party” authorized these fees and costs to be within the superpriority lien because the court believed this to be the only “reasonable and rational result.” Id. at 866

(internal quotations omitted).

We disagree with Hudson House 's holding for three reasons. First, the court did not conduct a statutory analysis of the superpriority lien language. Neither NRS 116.3116(2)

nor the Connecticut statute creating the superpriority lien mention collection fees and foreclosure costs, and the statutes specifically provide that the superpriority lien is limited to “the extent of the assessments for common expenses.” NRS 116.3116(2) ; see also

Hudson House, 611 A.2d at 863 n. 1 (quoting the Connecticut statute: “to the extent of the common expense assessments”).

Second, Hudson House relied on the policy concern that because common expense assessments are often small, and the prioritized portion of the lien is typically the only collectible portion for an HOA, “it seems highly unlikely that the legislature would have authorized such foreclosure proceedings without including the costs of collection in the sum entitled to a priority.” Id. at 866

. Horizons makes similar arguments: that limiting the superpriority lien to only nine months of unpaid assessments leads to absurd results and renders the statute meaningless because foreclosure will often be economically unfeasible for HOAs. We are not persuaded by this line of reasoning. While we recognize that collection fees and costs may be incurred in a foreclosure, the Legislature has the authority to determine the definition of a superpriority lien and may provide for the recovery of collection fees and costs under different provisions of the statutory scheme. See,...