Opinion ID: 2735505
Heading Depth: 4
Heading Rank: 3

Heading: In a cooperativeS whose unit owners'

Text: interests in the units are personal property (Section 1-105), the association's lien must be foreclosed in like manner as a security interest under [insert reference to Article 9, Uniform Commercial Code.] [(4) In the case of foreclosure under [insert reference to state power of sale statute], the association shall give reasonable notice of its action to all lien holders of the unit whose interest would be affected.] 1982 UCIOA § 3-116(j). If the UCIOA meant institution of an action to enforce the lien in § 3-116(b) to signify that all superpriority II0A lien foreclosures must proceed judicially, § 3-116(j)'s repeated references to the foreclosure of the association's lien by judicial or nonjudicial foreclosure, depending on the enacting state's local laws, is inexplicable. And, indeed, the Joint Editorial Board for Uniform Real Property Acts has confirmed that, in the context of an HOA's superpriority lien specifically, [a] foreclosure sale of the association's lien (whether judicial or noniudici al) is governed by the principles generally applicable to lien foreclosure sales, i.e., a foreclosure sale of a lien entitled to priority extinguishes that lien and any subordinate liens. JEB, The Six-Month 'Limited Priority Lien. at 9 (emphasis added) (footnote omitted). Nevada did not enact subsection (j) of § 3-116. Instead, it enacted a series of separate, consecutively numbered statutes, NRS 116.31162 through NRS 116.31168, each addressing a specific aspect of the nonjudicial foreclosure process NRS 116.31162 authorizes for HOA liens. These statutes use enforce throughout with reference to an HOA's SUPREME COURT OF NEVADA (0) 1947A nonjudicial foreclosure of its lien. See NRS 116.31162(1)(b)(2) (the notice of delinquent assessment must identify the person authorized by the association to enforce the lien by sale); NRS 116.31162(1)(c); NRS 116.31164(2) (discussing costs, fees, and expenses incident to an HOA's nonjudicial enforcement of its lien). Nothing in these statutes suggests that, by adopting them in lieu of the more abbreviated § 3116(j). Nevada was sub silentio rejecting the UCIOA's use of institution of an action to enforce the lien as applying to either judicial or nonjudicial foreclosures— much less distinguishing, though without saying so, between the subpriority piece of an HOA's lien, to which the nonjudicial foreclosure procedures detailed in NRS 116.31162 through NRS 116.31168 would apply, and the superpriority piece of an HOA's lien, which would require a judicial foreclosure proceeding not actually mentioned in Chapter 116. If anything, Nevada's elaborate nonjudicial foreclosure provisions signal the Legislature's•embrace of nonjudicial foreclosure of HOA liens, not the opposite. Recall that, unlike § 3-116(b), which currently limits the superpriority piece of an HOA's lien to six months of unpaid dues, Nevada's superpriority lien covers nine months of dues as well as maintenance and nuisance-abatement charges incurred . . . pursuant to NRS 116.310312. NRS 116.3116(2); see supra note 1. Addressing maintenance and nuisance - abatement charges, NRS 116.310312(4) expressly cross-references Chapter 116's nonjudicial foreclosure provisions, stating that R]he lien may be foreclosed under NRS 116.31162 to 116.31168, inclusive. The maintenance and nuisance-abatement statute borrows the phrase institution of an action to enforce the lien from NRS 116.3116 in explaining that even if federal law requires a SUPREME COURT OF NEVADA 18 (0) 194Th 4)114D49 shorter period of priority, the period of priority of the lien must not be less than the 6 months immediately preceding the institution of an action to enforce the lien. NRS 116.310312(6). This phrasing is underinclusive and beyond confusing unless read to encompass judicial and nonjudicial foreclosures alike, both in NRS 116.310312(6) and in its statute of origin, NRS 116.3116(2). The Nevada Real Estate Division of the Department of Business and Industry (NRED) is charged with administering Chapter 116. NRS 116.615; see State, Dep't of Bus. & Indus. v. Nev. Ass'n Servs., Inc., 128 Nev. , 294 P.3d 1223, 1227-28 (2012). NRS 116.623(1)(a) tasks NRED with issuing advisory opinions as to the applicability or interpretation of ... [a]ny provision of this chapter. On December 12, 2012, NRED issued Advisory Opinion No. 13-01. The opinion addresses, among other questions, whether NRS 116.3116(2) requires a civil action by an HOA to foreclose the superpriority piece of its lien. NRED opines that it does not: The association is not required to institute a civil action in court to trigger the 9 month look back provided in NRS 116.3116(2). 13 - 01 Op. Dep't of Bus. & Indus., Real Estate Div. 18 (2012). Elaborating, the NRED opinion states, NRS 116 does not require an association to take any particular action to enforce its lien, but [only] that it institutes an action, which includes the HOA taking action under NRS 116.31162 to initiate the nonjudicial foreclosure process. Id. at 17-18. NRED's interpretation is persuasive, as it comports with both the statutory text and the JEB's interpretation of the UCIOA. See Int'l Game Tech., Inc. v. Second Judicial Dist. Court, 122 Nev. 132, 157, 127 P.3d 1088, 1106 (2006). SUPREME COURT OF NEVADA 19 (0) 1947A a41filtp> U.S. Bank and the dissent argue that judicial foreclosure should be required as a matter of policy because of the safeguards it offers—notice and an opportunity to be heard, court supervision of the sale, judicial review of the amount of the lien comprising the superpriority piece, and a one-year redemption period. See NRS 40.430-.463; NRS 21.190- .210. But this argument assumes that requiring the superpriority piece of an HOA lien to be judicially foreclosed will actually afford such protections without need of further amendment to Chapter 116, and this is far from clear. To allow nonjudicial foreclosure of the subpriority piece, which is where the dissent would draw the judicial v. nonjudicial foreclosure line, produces the same difficulties for the homeowners and junior lienholders that are cited as policy reasons for requiring judicial foreclosure of the superpriority piece of the lien; the only difference is the benefit that would inure to first security holders under the dissent's interpretation of Chapter 116. Surely, if the Legislature intended such an unusual distinction, it would have said so explicitly, but it did not. We recognize that there has been considerable publicity across the country regarding alleged abuse in the foreclosure process when unit owners fail to pay sums due their HOA, prompting amendments to the UCIOA that propose ] new and considerable restrictions on the foreclosure process as it applies to common interest communities. - Prefatory Note to the 2008 Amendments to the UCIOA, 7 U.L.A.. part IB, at 225 (2009). But the choice of foreclosure method for HOA liens is the Legislature's, and the Nevada Legislature has written NRS Chapter 116 to allow nonjudicial foreclosure of HOA liens, subject to the special notice requirements and protections handcrafted by the Legislature in NRS 116.31162 through NRS 116.31168. Countervailing policy arguments SUPREME COURT OF NEVADA 20 (0) 1947A e exist in favor of allowing nonjudicial foreclosure, including that judicial foreclosure takes longer to accom.plish, thereby delaying the commoninterest community's receipt of needed HOA funds. The consequences of such delays can be devastating to the community and the remaining residents, who must either make up the dues deficiencies, arguably unjustly enriching the delaying lender, or abandon amenities and maintenance, thereby impairing the value of their homes. JEB, The Sir Month Limited Priority Lien, at 4-5. If revisions to the foreclosure methods provided for in NRS Chapter 116 are appropriate, they are for the Legislature to craft, not this court.