With several dozen Las Vegas Homeowner Associations mired in the muck of a federal corruption investigation, members of one association have learned they may be targeted by huge IRS assessments and fines.
Sun City Summerlin Community Association is not one of the Nevada HOAs where investigators have found corrupt cops and judges and lawyers. But this HOA’s accounting practices are attracting lots of federal attention.
The HOA operates several commercial golf courses and restaurants. So in addition to HOA dues, there’s a chunk of money coming into the coffers of the HOA from outside sources. Theoretically, taxes should be paid on that income. But Sun City Summerlin Association has been deferring millions of dollars on its annual tax forms. Homeowners don’t seem to be aware that their snowbird homes may end up as tax magnets instead of tax shelters.
Sun City Summerlin is a not-for-profit organization, so theoretically homeowners should have been given some rather large refunds. Instead, each homeowner may be given some rather large surprise tax assessments.
Other Homeowners Associations across the country area are closely watching what happens in Las Vegas. Elderly homeowners may suddenly discover a downside to investing their life savings in a retirement home in the Sun Belt.
Neighbors At War: The Creepy Case Against Your Homeowners Association
The purpose of a corporation is to protect an individual investor’s personal assets from the debts and liabilities of the corporation.
But an HOA corporation is a defective product. Unlike a typical corporation, homeowners are personally responsible for any debts and liabilities created by their HOA corporation. And that obligation is secured by the homeowners’ personal assets, including the equity in their homes.
If you purchase a home in an HOA, your house will forever be collateral to the HOA corporation and its creditors, even after you have paid off the mortgage.
HOA attorney Tyler Berding explained it two years ago in “Why There’s No Protection For Members When Community Associations Go Broke” . FYI, the industry professionals call HOAs “community associations”:
It would be interesting to conduct a survey of homeowners in HOAs to find out how many of them know that they “agreed” to this (even if said “agreement” to some document called a “contract” was nothing more than a legal fiction that can used against them in court), and ask them why they thought it was a good idea to make their homes forever collateral to an unaccountable corporation.
The Sun City Anthem Voice reports,
If the corporate directors of the Summerlin Community Association can not be held personally responsible and are not held personally responsible for the $1.3 million in taxes and penalties, then the cost of that liability will be passed on to the homeowners.
It would be nice to believe that law enforcement and the courts will do the right thing for the homeowners. I’m not going to hold my breath waiting for that to happen.