Darcy Spears nails it about abusive HOA foreclosures

Click on photo for 4-minute Darcy Spears video. Slide right of bell for sound.

Lucky buyer got a half million dollar house for $30,000…
but he’s getting an even bigger windfall

  • He won’t make a mortgage payment – an HOA sale extinguishes the bank’s right to foreclose according to the Nevada Supreme Court
  • He may not pay property taxes. The bank will probably keep paying them property taxes while the case winds its way through the courts over the next few (or not so few) years
  • He didn’t pay Real Property Transfer Tax (RPTT) on the full market value because the Recorder’s office didn’t notice that he claimed the market value was  $30,000

Nice deal if you can get it

…but just exactly how did that guy, Frank Komorowski from Williamsville New York, even know about the auction.

The homeowner and her real estate agent didn’t know it was going to auction and neither did the potential buyer who had an offer on the table.

The sale was advertised in the Nevada Legal News, but that seems to be a hard way for a guy off the street to find out about how to take advantage of such a spectacular windfall.

Frank is a Super Shopper indeed

I’m not saying Frank Komorowski is a straw buyer, but he’s gotten some really great deals in 2018 besides the one in Darcy’s story:

  • Red Rock Financial sold him a condo in Gowan Cliff Shadows for $5,000 on 2/13/18 at an unknown sale location
  • National Default Servicing sold him a place in Monteverdi HOA  for $30,000
  • Hampton & Hampton gouged him out of $6,541 to buy unit 221, 5751 Hacienda Ave., $0.50 more than the unpaid debt, without even bothering with the pretense of an auction

Who was notified about the sale?

That’s a very good question, and, now my curiosity is piqued. So, to find out, I’m doing a little more public records research.

If random guy can make a killing at these mysterious HOA sales, who’s on the losing end of the deal?

Just about everybody else

  1. It’s not just the homeowner that loses.
  2. Taxpayers subsidized the sale by his shorting the county on the property transfer tax (Frank paid $153 on each $30,000 sale and  instead of the $2,200 that he would have had to pay if he had declared the fair market value.
  3. According to Nevada Realtors Association, the property value of each house in an HOA is diminished 1.7% for each foreclosure, but since there are two HOAs mentioned on the foreclosure deed, it’s not clear which homeowners.
  4. The homeowners in Summerlin West will pick up the tab for all the attorneys fees while the bank sues Frank and the homeowner sues Frank, and the debt collectors will ride off into the sunset with the $30,000 Frank paid less the nine months of assessments plus interest that the HOA gets.
  5. The real estate agent who worked hard on the short sale will be paid zero because the sale was snatched out from under him as well.
  6. The bank loses big (unless it’s a bank that’s contributing to the problem by recording false affidavits on titles (but that’s another story for another time).

That can’t be right!

Well, it’s certainly not morally right for HOAs to allow their agents to engage in abusive debt collection practices.

Doesn’t the law limit collection fees?

Yes. It’s definitely not legal to keep money that’s not yours. NRS 116.31164 says exactly how the proceeds of an HOA sale are to be distributed. The debt collectors just don’t do it.

Keeping all the money (except nine months of assessments to the HOA plus interest) is just about all they distribute because they have been getting away with it.

Moral hazard

No big surprise.

When there is so much money to be made by cutting corners and playing fast and loose with the rules, lots of people who are supposed to be fiduciaries go to the dark side.

What about at SCA?

SCA is no better. SCA has been ripped off by EVERY ONE OF ITS DEBT COLLECTORS, to a greater or lessor degree, since 2014 (that I know of, for sure).

For example, in April, 2015, SCA hired some very crooked attorneys, Alessi & Koenig, LLC, as debt collectors, after SCA dumped Red Rock Financial Services (who was really SCA managing agent FSR in disguise).

A & K filed for chapter 7 bankruptcy in January, 2017, allegedly because A & K was named in over 500 lawsuits out of the 800+ HOA foreclosures they did between 2011-2015, not to mention a $640,000 judgment against them for bid rigging and racketeering in the Melinda Ellis case. (You’re right. They stiffed her.)

When the A & K bankruptcy was dismissed, and the creditors were told to pound salt, it looks like the attorney/debt collectors had kept $2.6 million out of $2.9 million they admitted receiving in HOA sales proceeds.

And there’s a multi-million dollar mansion in David Alessi’s sister’s trust’s name in Malibu (unless he’s picked a new place to hide  assets from creditors).

Retained quite a bit over the legal limit, I’d say.

Next time

More to come about the exciting ways HOA agents make the big bucks for a few lucky winner while the HOA homeowners foot the bill.

If they had only known – Part 4

What’s the big deal about GM pay?

Excessive executive compensation is a huge trigger for lots of SCA owners. Unfortunately, the Board and GM have taken the tact that they can do whatever they want and they don’t have to answer to anyone.

And, worse for owners, our money is being used to pay an attorney who will say that

  • there are no limits on the Board’s power to decide what to pay for management,
  • that management has privacy rights so pay should be kept secret and
  • it’s okay to threaten owners with legal action if the pay is disclosed to third parties.

These problems could have been avoided if the Board had only known that

It just ain’t so.

What training should the Board have taken?

If the Board had taken the NRED training, Responsibilities of the Manager,they might have learned that they should have, at least, had a written agreement defining ALL the terms and conditions for the GM’s employment, including compensation, as required by NAC 116A.325 and by her Community Association Manager (CAM) license.

Verbal deals aren’t good enough

Why no GM management agreement?

Probably because NRS 116.31085(2) PROHIBITS the Board from adopting or amending ANY contract in secret.

Or maybe because the Board “work group” who negotiated the GM’s terms and conditions of employment didn’t have the right expertise.

In 2014 SCA had a fine management agreement with FSR. It is a mystery why the 2015-16 Board would think they could just “wing it” with a handshake deal the first time SCA was flying without a management company’s net.

Isn’t a written agreement required just when contracting with a management company?

No. A written agreement is needed whenever an association pays a licensed community association manager (CAM) for management services.

Whenever management services are paid, the manager must be licensed. The only exception is when the association is small, and the board is able to manage the property by itself without paying a licensed professional manager.

A little common sense please

Besides, how can owners be protected if a community manager licensee does not have to meet the requirements of the CAM license just because he or she is an employee of an association as opposed to being the employee of a management company or being an independent contractor?

How does NRED exercise its authority over HOA managers?

NRED regulates ALL community association managers in Nevada through “licensure, registration, education, and enforcement”.

NRED states there is no legal prohibition against an association handling its own affairs if it does not need to hire/contract with a professional, licensed manager. Any HOA board can control its business directly without paying a licensed managing agent.

The law ONLY requires that the manager must be a licensed CAM, and subject to all the regulations of the community association manager license, if the manager is COMPENSATED.

Which duties don’t require a CAM license?

NRED has published a list of the specific duties that can be performed by UNLICENSED employees.

This means that it is unlawful to COMPENSATE any individual manager, or any management company, to perform the higher level CAM duties unless all the requirements of a CAM license are met.

SCA must be managed by a licensed CAM

The duties performed by the SCA GM require a community association manager license. The CAM license is required unless those duties are performed by a volunteer who receives NO compensation.

SCA bylaws are also controlling

SCA bylaws 3.13, 3.18, and 3.20 define, and limit, the Board’s authority to employ and compensate a LICENSED CAM to manage the association.

Section 3.20 gives the Board the authority to provide compensation to a manager, and specifies limits on what the Board can delegate to the manager.

Section 3.13 (f) says compensation to a community manager must be under the terms of a management agreement.

3.13 (a) prohibits compensation that creates an appearance of undue influence or a conflict of interest.

What conflict of interest?

Doesn’t it seem that paying the GM double the market rate, as well as paying a second licensed CAM the full market rate, created a huge,  ACTUAL conflict of interest? 

Who is protecting owners?

Ultimately, it is the Board’s job to protect owners from being taken advantage of by licensed professional agents.

If the Board does not do this critical job, then it is up to NRED to enforce NRS 116 requirements on the Board and the enforce the provisions of the CAM license on the GM.

NRED has no authority over the attorney because the attorney has ZERO decision-making authority over the association despite how it may appear.

Don’t you wonder who Adam Clarkson is representing when he turned a blind eye to the failure of the Board to publicly adopt a management agreement with the GM with the NRS 116A.620 REQUIRED TERMS that would protect the association membership:

There’s more, but you get the idea.

What is the maximum the SCA Board can pay the GM?

Apparently, the sky is the limit

“The Board could pay the GM $1 million/year if they wanted.”  – former SCA CAM Lori Martin (in response to my information requests in November 2016)

This shocking pronouncement shows what SCA owners have faced since SCA began employing all staff directly instead contracting with a management company to run day-to-day operations.

What are they thinking?

The Board is being severely ill-advised, and it is costing owners way more than is necessary. Worse, how executive compensation is set at SCA has failed to conform to professional standards, Nevada law, SCA governing documents, or even common sense.

More than Henderson City Manager

In the R-J today, there was an article publishing that, yesterday, the interim Henderson City Manager was permanently appointed at an annual salary of $235,000, 

Apparently, SCA Board feels the SCA GM’s level of responsibility exceeds that of Henderson’s City Manager, but does it?

  • 390,000 city population vs. 7,144 SCA units
  • 1,933 F/T employees vs 46 F/T SCA employees
  • Operating budget of $244 million vs. SCA $8.5 mil

Click here for City of Henderson fact sheet

I don’t see any justification for it, and determining  employee compensation was one of the things I used to do for a living.

How much is SCA’s GM being paid?

Owners can’t know for sure what the GM is being paid in 2018 despite NRS 116.31175 and SCA bylaws 6.4(a)(i) affirming that owners have a LEGAL right to know what employees are getting paid.

The January 2017 SCA table of employee salaries was provided to another unit owner, before Adam Clarkson, SCA’s legal counsel, began creating an unlawful veil of secrecy, asserting that the GM had some imaginary privacy rights which exceeded owners’ rights to know how our money is being spent.

The GM’s compensation was publicly known over a year and a half ago, and it’s just a waste of everybody’s time, money and energy to try to hide it now.

Sorry, Adam, it’s legally out in the open. You can’t pretend it’s confidential now. You simply can’t unring that bell.

When SCA got rid of the FSR management company, and the GM took over in April, 2016, the GM was paid $250,000.

By January 2017 the SCA GM was paid a base salary of $257,000 plus a $20,000 bonus.

Does the GM now get paid $22,000 more than Henderson’s City Manager?

Yes, and only, assuming that

  • her 2017 base pay of $257,000 stayed flat.
  • she was given no COLA (cost of living increase)
  • her 2017 bonus expired on 12/31/17
  • no bonus is being paid out for 2018
  • no performance increase from the 3% budgeted for employee performance increases

I don’t know what you think, but I think it is pretty unlikely ALL of those assumptions are true. So, her salary could closer to 20% higher than Henderson pays its manager.

Is her pay AT LEAST $42,000/year more than the city’s manager?

My guess is that she is being paid at least $277,000 because…

Inertia

It seems like the Board would let her carry her 2017 annual bonus forward into 2018. I think they would be reluctant to take $20,000 even though that is the way a pay system should work. So, the default position is “let it ride“.

The “Halo Effect”

I also imagine they probably carried her last year bonus forward despite all the myriad complaints against her because

  • they repeatedly and publicly chastising owners for signing a petition for a vote of no confidence against her and because of
  • their adamant refusal to address any of the petitioners’ criticisms on their merits and
  • they didn’t hold her accountable for the failing to meet her deadline on the restaurant or for mediating the FAS-CSG dispute or for failing to de-escalate the community divide

The cone of silence

It would be an egregious sleight of hand, contrary to professional standards, for the Board to authorize rolling a $20,000 bonus into her base pay, but there is ZERO evidence to show that the Board didn’t do just that, and then kept it a secret.

These actions are all a big no-no

A bonus is supposed to be earned every year. It is NEVER just moved into base pay without an EXPLICIT public action by the Board.

But there are worse scenarios

  • if the 2017 bonus were rolled into base pay, and then
  • a 2018 $20,000 bonus added on top of that,
  • ending up at a whopping $297,000 salary for 2018.

Even worse…

than paying $297,000 could be giving a 3% increase from the 2018 budgeted 3% pool for employee increases.

I’ll try to stop imagining the worst

I won’t even put that number ($297,000 + 3%) out in the universe because I don’t think it is possible that SCA Board would go that far off track.

And yet, follow the money

If they didn’t increase her pay in 2018, why would they spend so much money and political capital to hide what owners are paying her for what is little more than property management?

I also wonder how the GM and SCA attorney can honestly claim they are acting as fiduciaries, solely and exclusively, acting for the benefit of the SCA membership, when the GM uses the SCA attorney to threaten legal action against owners who exercise their legal rights to KNOW how much owners are paying employees.

At SCA, either you’re “IN” or you’re “OUT”

Why knock them down & then kick them?

The Foundation Assisting Seniors (FAS) does not deserve to be treated as dead to SCA, “rubbed out” after being kicked to the curb.
After many successful years of partnership between FAS and SCA,

What changed…
  • that forced SCA to lose such a valuable amenity?
  • that converted a positive, mutually-beneficial arrangement into the bitter banishment of our partner?

I won’t rehash all the unnecessary escalation by SCA, that culminated in evicting FAS from their 15-year home on the flimsiest of reasons, but some things should never have happened:

  • assigning the GM to “mediate a dispute in which she was an interested party, and then blaming FAS for the failure to resolve the conflict,
  • filing a civil action against FAS without the required owner vote to approve it,
  • racking up $40,000 in unnecessary attorney fees that one of the two non-profits (SCA or FAS) had to pay.

Adding insult to injury

Yet, it has not been enough to force FAS out. SCA management is now refusing to print any article or picture in the Spirit if it says anything positive about FAS.

The recent incident that chapped my hide involved refusing to allow the Women’s Golf Club to report on the 2018 FAS Memorial Day Golf Tournament.

The most significant FAS fundraiser is this annual golf tournament at Revere in which 250+ golfers participate, and probably, 50 or more volunteers organize and put on.

In the past, the Spirit frequently had articles, maybe even a cover story, about the FAS Memorial Day golf tournament.  But not this year
The Women’s Golf Club liaison to the Spirit submitted an article for the August issue that included a reference to the FAS golf tournament.

The Spirit contact was polite and tried to help get, at least, part of the FAS article published.

But SCA GM/Board would not allow it.  Why?
Why must FAS be treated as dead to SCA?

How do SCA owners benefit by this brutal break-up?

The rationale for evicting the Foundation was that FAS was using facilities that belong to the association, and it would be a violation of the Board’s fiduciary duty to let FAS get a free ride.

This is not true. FAS was a free service, an amenity, that many volunteers and donors from across the valley contributed to over the years. By the way, the anonymous donor has extended his offer to match all contributions until the end of July, and I think FAS is only at 2/3 of their $30,000 goal now.

FAS continues to provide 85% of its services to Sun City Anthem despite being evicted and the SCA Board approving $25,000 for the Community Services Group (CSG) to purchase durable medical equipment to duplicate FAS’s service to SCA residents.

According to Favil West,

“The total amount the Foundation has paid as a benefit to SCA has been nearly $200,000.”

Aren’t SCA owners being forced to pay more for less?

How is the GM/Board’s making services to owners more expensive and less convenient meeting their fiduciary obligations?

Compare the actual benefit SCA residents have already received from our long affiliation with the Foundation with the “betting-on-the-come” deal the SCA Board/GM almost cut to bring in a restaurant vendor:

  • Free rent
  • Free utilities
  • Monopoly on catering
  • No share in the profits for SCA until a nearly impossible $1.4 million in annual revenue is reached
That deal fell through, but I’m just saying…

I don’t think owners are well served when the GM/Board offers sweetheart deals to some people who can make a profit off the owners’ backs while other people who have served our community for years, but who are not in the current IN-GROUP, are beaten up like a poor step-child.

Collateral damage: the Coffee Corner

Really, why use volunteers when paid staff will do?

Another chance to balance the SCA Board

Who should fill the surprise vacancy on the SCA Board?

Bob Burch abruptly resigned last week,

…for reasons which will not be revealed, Rex Weddle announced to owners, or at least, to the 850 owners who have opted-in to receive SCA eblasts.

Rex also said that the Board would be appointing someone to fill Bob’s seat until the next election (May 2019).

Surprisingly, Rex then invited owners to submit their names for consideration by next Friday, July 13 @ 5 PM to the GM at Sandy.Seddon@scacai.com.

If you are interested in being considered by the Board of Directors for appointment to a position on the Board, please be sure to place your written request to General Manager, Sandy Seddon, no later than end of business on Friday, July 13, 2018.  Click Sandy Seddon to submit via email.  This correspondence should include your name, phone number and a brief statement as to why you feel you should be considered to serve on the Sun City Anthem Board of Directors.

Once the Board votes on this appointment, they will also vote on the re-organization of the Board and select its officers.

Please consider volunteering to serve on the Board
SCA Board needs a better balance of perspectives

It should come as no surprise that, although the SCA governance and Board elections are structured to be completely non-partisan, there is a clear demarcation between factions in our community that might be identified as:

  1. Berman Believers
  2. Followers of Other Bloggers
  3. Everybody Else

If there is any hope in healing this community’s divide, there needs to be a shift in the representation on the Board to include voices from all three groups.

Otherwise, the currently-entrenched group-think  will continue to dominate our public discourse and distort governance so all residents are not equally well served.

I, for one, do not think this dynamic is healthy for the community. At a minimum, it has reduced my own joie de vivre, and I don’t think it is a stretch to say that I speak for others.

If you feel that you have a perspective that would assist the Board to be more effective at representing the entire community rather than just the segment whose voices are now heard, please step up.

Why was the request for owners to self nominate a surprise?

Because that’s not the way they did it last time. Jim Coleman was appointed last September by a secret process that

  • did not include notifying owners that the Board intended to fill my seat without an owner election (which was required at that time)
  • did not allow owners to submit their names for consideration
  • did not include any public deliberations by the Board of the selection criteria

The Board kept secret how Jim Coleman had been recruited and what competitive process, if any, had been employed. They were also silent as to where the Board got the authority to fill the seat of a director who had been removed when the NRS and the bylaws required a membership vote.

What’s wrong with the Board meeting in secret?

And, what’s happening now?

One has to wonder what motivated this 180-degree turn to a more open, competitive process to fill a vacated Board seat.

And, I’m sure, the more cynical among us, will question how open this current process really will be.

One might ask

  • Will the names and qualifications of the people who self-nominate be kept a secret?
  • Will the GM deem anyone”disqualified”  and not turn those names over to the Board?
  • Will they use the required candidate disclosure form from the NRED website or use the Clarkson  “I-make-up-my-own-laws” version, or will they not require disclosures from Board appointees?
  • Will the attorney usurp the authority of the Board and, at owner expense, issue an order, rather than an opinion, to block any applicant?
Let’s hope not.
I, for one, will give them one more chance.

 

“Heads will roll if lips aren’t sealed about GM pay”

Or, anyway, that was the threat, before…

Contact13’s Darcy Spears highlighted Sun City Anthem’s excessive executive compensation on the “HOA Hall of Shame” on Channel 13 action news last Thursday.

Living in Las Vegas can cost more when your home is in an HOA, but where does all the money go? Contact 13 looks at who’s getting a big slice of the pie in one of the largest communities in Southern Nevada. Click on photo to watch 3 1/2-minute video.

Threatened with legal action? Really?

Did you catch that report at the end of the video?

Neither the GM or the Board would even answer KTNV’s call to explain how the SCA Board justified such big payouts.

“Instead, they had an attorney respond who claimed State law prohibited the HOA from discussing anything about salaries and we learned the HOA threatened legal action against some owners after Contact13 started asking questions about manager pay rates.”

Is any of that true?

It is 100% true that the GM has used OUR attorney to threaten legal action to try to keep her pay a secret.
  • against me personally,
  • against other owners,
  • against the association itself, and
  • in this case, against a TV station,

But, it is 100% legally and morally wrong to use our SCA attorney to unlawfully hide from owners how much of OUR money is going into her pocket.

Are any SCA employee salaries/ benefits confidential by nevada law?
Short answer:       No.

Per NRS 116.31175, most personnel records are confidential, but not compensation.

…4(a) The personnel records of the employees of the association (are confidential), except for those records relating to the number of hours worked and the salaries and benefits of those employees;

Why would the SCA attorney say employee compensation is confidential when the law clearly says the opposite?

In my view, he is simply representing the wrong client.

As the SCA association attorney, he is being paid by the owners to act as OUR agent, not to be the GM’s agent.

In fact, there is a law specifically prohibiting him from representing the GM because it is a conflict of interest. See NRS 116A.640(6). He is duty bound by law to act, solely and exclusively, in the best interests of the association membership as a whole.

But, is he?

I certainly don’t see it. I see the GM approving tons of unnecessary attorney fees that owners pay to protect her imaginary privacy rights.

And like Ricky Ricardo, I think Adam Clarkson has some ‘splainin’ to do.
Why did I get a threatening letter because of this story?

I was told this story was taped, after the fact, last October, but then nothing happened, and I forgot about it.

On 12/22/17, I submitted a written request for SCA to update the 2017 employee compensation table that had been given to another resident on 1/31/17. The budget was ratified in November, and I suspected the Board had given the GM another bonus in secret despite the petition for a vote of no confidence signed by 825 owners and her failure to meet the 12/31/17 target about the restaurant.

When CAM Elyssa Rammos emailed me around 1/15/18 that the 2018 salary table was ready to pick up at the front desk, I was in Mexico and asked for it electronically.

When I got no response, I asked Ruby Leong to pick it up and email it to me before the MLK 3-day weekend. They gave her the run around.

“It’s not ready.
We gave it to someone else.
We have to make changes.”

None of which was true.

The reason for the stonewalling was exactly what Darcy Spears said. Between the time Elyssa Rammos had notified me that the 2018 employee compensation chart was ready, and Ruby Leong could drive a few blocks to pick it up, Sandy Seddon had gotten a call from someone at KTNV.

Quick as a flash, Adam Clarkson manufactured an absolutely false legal interpretation out of thin air that the 2018 version of the previously-released 2017 table was now confidential because Contact13 was doing a story.

Wow. It’s magic.
Documents become invisible, and our money disappears.

SCA’s $325/hour attorney blocked the release of the 2018 update of the 2017 SCA employee compensation table that was already in the public domain. SCA homeowners had to foot the bill for Clarkson to write “legal letters”, in SCA’s name, in January to threaten legal action against me if I told KTNV what the GM’s pay was (even though they already knew) and against KTNV if they ran the story.

There was no Board action authorizing this threat of legal action – unless, of course, they took the action in a secret meeting.

And, by the way, NRS 116.31088 requires a VOTE of the membership, before SCA can file a civil action. But no big deal.

This is a provision of the law that Adam Clarkson made disappear when the SCA Board filed a civil action to evict the Foundation Assisting Seniors. I’m sure Adam Clarkson’s convoluted reading of the law will come up with some magical way that allows the GM to use him to threaten litigation, against anybody or everybody, in SCA’s name, and on SCA owners’ dime.

What did I do about this “legal letter”?

I filed an affidavit under penalty of perjury on 1/31/18 with NRED.  I requested that this complaint be incorporated with the ongoing investigation into the harassment and retaliation complaint which precipitated my unlawful removal from the Board on 8/24/17.

It is my understanding that these complaints will be heard by the CIC Commission on November 6, 2018.

More to come.

The next few blogs will discuss the magnitude of the GM’s misuse of the association attorney to act as her personal fixer.