What's New In Nevada Real Property Law

The session is over, the dust is settling, and our citizen legislators are now back in the real world. Following this year's legislative session was quite an experience for veterans and novices alike. Though not as packed with real estate bills as the 1997 session was, 1999 brought some major changes to various real property laws.

For those of us that "do" real estate and property management law, approximately 25 bills were passed effecting some area of land use, water, landlord/tenant, common-interest communities (homeowner associations), real estate agency, and mortgage law. What follows highlights some of the more important bills that may affect your legal practice.

SB 32 — Construction defects

This was probably one of the most hotly debated bills in the session. If you do any construction defect litigation, either in representing or defending owners, homeowner's associations, master builders, spec home developers, or remodeling contractors, you must be familiar with this new legislation.

Some of the major areas addressed are defect-notice time frames, pre-complaint procedures, and new rules as to which defendants may be brought into the complaint process and when. There are requirements for a claimant's attorney to notify the claimant in writing of specific provisions in the bill. 1

SB 32 modifies and adds to NRS 40.600 et seq., which contains the procedural guidelines for actions resulting from construction defects. This bill is a major overhaul of that section. Also modified is NRS ch. 113, "Sales of Real Property," to require that sellers/developers provide additional disclosures to new home initial purchasers. 2 Chapter 11, "Limitations of Actions," is slightly modified. This law went into effect July 1, 1999.

SB 452 — Commercial broker's claim against seller's proceeds

Fee chasing is no one's favorite pastime. SB 452 provides for commercial real estate brokers to have a pre-judgment claim against a seller's proceeds in commercial real estate transactions. The new law is placed in NRS ch. 645, the real estate licensing statutes, and not in NRS ch. 108, statutory liens. Claim format and time frames are prescribed.

A commercial real estate broker may record a claim against the seller's proceeds if the seller disputes the commission as laid out in a written brokerage agreement. The claim must be recorded before the close of escrow. If a seller disputes the claim, the seller may file a complaint with the district court for a show cause hearing.

The purpose of the bill was to halt the ever-growing "commissionectomy" 3 and provide a control on the disputed funds before they disappeared with the seller at the close of escrow. The law takes effect October 1, 1999. 4

SB 323 — Manufactured homes as single-family dwellings

When is a house not a house? When it's a manufactured home. Well, not anymore. SB 323 requires government entities in any ordinance relating to zoning to include manufactured housing in their definition of single-family residences. This is based on the idea that "stick-built" housing is too expensive for many people and that manufactured houses provide affordable, decent housing. Manufactured homes will now be allowed on any lot if the home falls within the statute's guidelines.

Manufactured homes may be excluded by a subdivision's CC&Rs. 5 This law will not abrogate those recorded covenants. Look to various homeowner's associations reviewing and updating their CC&Rs. This act will become effective January 1, 2000.

Senate Bill 451 — New homeowner's association requirements

Any real estate lawyer who has been in business in Nevada in the last five years has been questioned about some aspect of homeowner's associations. Under Nevada law, HOAs are known as common-interest communities whose laws are codified in NRS ch. 116. Chapter 116 is a relatively new chapter, first introduced into Nevada law in 1991. Since then every legislative session has seen additions, modifications, and deletions to it. This year's legislation in SB 451 is a major rewrite.

SB 451 changes many of the administrative requirements of association boards. It establishes time frames, voting procedures, accounting requirements for association funds, meeting rules, and restrictions. It limits the terms of association officers and requires certain votes upon the filing of a civil action by the association. The bill extends subpoena power to the office of the ombudsman. It also increases the number of communities that are subject to NRS ch. 116. Various provisions of the bill have various effective dates.

AB 287 — Eminent domain

Eventually, real estate lawyers wind up facing the Department of Transportation, an airport authority board or some other public entity that wants your client's real property, and an eminent domain action is filed. Eminent domain actions are fought in both federal and state courts. Nevada law has a chapter devoted to it, NRS ch. 37.

This bill establishes eminent domain cases as having precedence in the court system over all other causes of actions not involving the public interest. In most eminent domain cases, the main bone of contention is the value of the property. Since so many of these cases seem to take forever getting to the courts, this bill modifies the date of valuation of the property so that property valuation is not based on years-old appraisals. This law becomes effective October 1, 1999.

For those lawyers that represent clients in landlord/tenant law or with fair housing issues, this legislative session saw two bills of importance:

AB 397 — Tenant's defense in summary eviction proceedings

This bill adds language to NRS ch. 118A, Nevada's landlord/tenant laws. A tenant has a defense in a summary eviction proceeding if the landlord's attempt to terminate the tenancy is a violation of either Nevada's fair housing 6 or federal fair housing 7 laws, as in the case of a landlord who attempted to evict a Caucasian tenant under a no-cause eviction 8 because she became involved with a man of a different race. The rights granted to a tenant under this section do not arise unless the tenant's rent is current.

The bill also provides that if the landlord is in breach of the habitability statute, 9 the landlord cannot force the tenant to correct the problem due to the landlord's refusal to correct it. If the tenant withholds rent because the problem is not fixed, the landlord may not charge late fees, notice fees, or other charges until the landlord has attempted in good faith to restore the essential service. The bill is effective October 1, 1999.

AB 462 — Acceptance of late rent

Until now, tenants that tendered late rent could not be sure of staying an eviction if the landlord demanded fees and costs above and beyond the rent, such as the landlord's attorney's fees. This bill requires a landlord to accept tendered rent even if the rent does not include the landlord's attorney's fees, collection fees or costs other than rent. Rent is redefined as all periodic payment including late fees. 10 The bill is effective October 1, 1999.

When you're on the strip in Las Vegas or at Wingfield Park in Reno, it is easy to forget we live in a desert. Yet one of the earliest and most important areas of real property law in Nevada is water rights law. This session, five bills were passed 11 concerning some aspect of water law. I review only two of the bills below:

AB 408 — Granting the state engineer the right to revoke certain water permits

A person's home may be his or her castle, but in Nevada it can be a dry castle if the state engineer closes down the family well. This bill amends NRS ch. 445A, the "Water Controls" chapter, and provides that the state engineer may issue and revoke temporary water permits. It grants the engineer the authority to require an owner to close up the owner's well and hook up to the local water district. Portions of the bill take effect October 1, 1999, while other portions take effect July 1, 1999, but expire July 1, 2005.

AB 252 — Water liens

NRS ch. 539 is the chapter that deals with irrigation districts — big business in rural agricultural Nevada. NRS ch. 539 authorizes local irrigation districts to levy assessments on property owners serviced by the district. By statute, those assessments are a lien upon such properties. Under the new law, those liens stay with the property whether or not the ownership right for the use of the water is severed from the land, until the lien is transferred to the new property benefited by the water right. This bill takes effect October 1, 1999.

Peripheral to real property law are those laws and regulations concerning mortgage and escrow companies. This session saw a major bill passed relating to financial transactions and revising the provisions relating to loans secured by real property as well as the state licensing of certain mortgage companies and brokers. A new chapter was created in Title 54, "Professions, Occupations and Businesses."

AB 64 — Creation of a mortgage company licensed by the state

Those attorneys that practice in legal entity formation will be busy the next several years. It is unlawful for any person to provide the services of a mortgage company without first obtaining a license. 12 A mortgage company is any entity that, directly or indirectly, buys or sells notes secured by liens on real property; or negotiates or originates mortgage loans as an agent for an institutional investor. 13

The bill gives all the particulars for licensing, exemptions (attorneys are exempt), fees, and penalties for violations.

Section 57 of the bill defines a "mortgage broker." Also in that section, modifications of NRS ch. 645B, "Mortgage Companies," are presented.

ENDNOTES

1 SB 32, § 6(2).
2 SB 32, § 19.
3 "Commissionectomy" was coined by Charlie Mack, a commercial real estate broker in Las Vegas for those situations when a seller forces a lower commission on a broker at the close of escrow.
4 NVAR proposed the legislation. I will be happy to speak with anyone regarding this bill.
5 SB 323, § 3(4).
6 NRS ch. 118, NRS 111.237 and NRS 233.010.
7 42 U.S.C. §§3601 et seq.
8 NRS 40.251.
9 NRS 118A.290.
10 NRS 118A.150.
11 AB 252, AB 380, AB 408, AB 574, SB 291.
12 AB 64, § 36.
13 13 AB 64, § 8.