Question No. 1 on the November election ballot authorizes the creation of an intermediate appeals court in the State of Nevada. The attorneys of Incline Law Group, LLP, would like you to join us in voting YES on Question 1.
Nevada is one of only a few states that has no intermediate appellate court. Our Supreme Court consists of seven justices. Despite a range of efficiencies and case reduction strategies, the seven justices and the whole staff of the Nevada Supreme Court are overwhelmed with new cases. The court is burdened, at the same time, with both complex cases the outcome of which affect all Nevadans, as well as routine appeals in a wide variety of much less important cases.
If Question No. 1 is passed, an intermediate appellate court consisting of three judges would be created. This Court of Appeals would be positioned to more quickly facilitate routine appeals, freeing up the Supreme Court to focus on the state’s most important cases.
We have had cases during the past few years where our clients have waited with uncertainty over their rights while the Nevada Supreme Court was reviewing new legislation. For example, Nevada’s 2011 AB273 was under the Supreme Court’s review for nearly two years before the Sandpointe decision came down in late 2013. AB273 is a critically important anti-deficiency law that protects borrowers and guarantors from personal liability after a foreclosure sale. Thousands of foreclosed homeowners’ liability hung in the balance while the case was under review. As a result of this delay, an entire legislative session was missed in 2013 during which AB273 might have been clarified had the Supreme Court’s decision in Sandpointe come sooner.
A few weeks ago, the Nevada Supreme Court issued another decision which likewise underscores the need for a YES vote on Question 1. In a 4 to 3 decision, the Supreme Court decided a significant homeowners’ association (HOA) super-priority lien case (SFR Investments Pool 1 v. US Bank). The Supreme Court ruled that a non-judicial foreclosure of an HOA lien for unpaid assessments wipes out a first mortgage holder. The end result is that a buyer at an HOA foreclosure sale may acquire the property free and clear of prior first loans.
This is an economic windfall for investors who purchase property at HOA lien sales and pay a modest sum (perhaps as low as a few thousand dollars) at the HOA sale. It is a huge defeat for lenders – in this case US Bank’s first loan of almost $900,000 was entirely wiped out by the HOA sale. This raises the question of whether lenders will be willing to lend on HOA properties in Nevada given this uncertainty. SFR Investments could lead to a requirement that HOA dues must be impounded like taxes and insurance or to a change in practice where a lender will pay off the HOA and never allow such a lien to go to sale. We expect that this will be a significant issue when the legislature meets again in 2015. The inequity of this result could be corrected by changing only a few words in the statute that creates the super-priority HOA lien.
In the SFR Investments case just described, the appeal was first filed in April, 2013 — seventeen months before it was eventually decided, during the 2013 legislative session. The case is of extreme importance to thousands of owners of units located in Nevada HOAs and their lenders. If Nevada had an intermediate appellate court to handle the routine appeals, this is a case that the Supreme Court might have decided much sooner, which would have provided greater clarity to all interested parties much earlier.
Allowing our state Supreme Court to focus on these extremely significant appellate cases in a more expeditious manner is a strong reason to vote YES on Question 1 in the upcoming election. We hope you will join us in doing so.