Nevada's HOA conflict of interest rules are flawed - reform needed
- Mike Kosor
- Sep 10
- 5 min read
Updated: Sep 21
Nevada’s HOA statutes impose fiduciary duties on all directors, whether elected by owners or appointed by the declarant (developer). (NRS 116.3103)
That’s the fiduciary ideal — but the reality is far different.
HOA conflicts of interest (COI) rules are riddled with contradictions and carve-outs.
Changes are needed.
Problem #1 — Declarant Appointees
During the declarant’s control period, the law provides that a board member:
“shall not, solely by reason of being an employee or affiliate of the declarant, be deemed to gain any personal profit or compensation of any kind from a matter before the board.” (NRS 116.31084(3)(a))
On its face, this seems modest: employment alone doesn’t automatically count as a disqualifying profit. If a declarant-appointed director’s bonus or job security is directly tied to a board decision, the exemption doesn’t apply; disclosure and abstention are still required.
This carve-out narrows the application of conflict-of-interest rules, but it also tacitly recognizes that such affiliations ordinarily present a presumptive conflict — hence the need to expressly exempt them.
But in practice, enforcement is greatly handicapped. Most declarants are privately held LLCs, and owners have no way to examine employee bonus structures or internal profit-sharing. Assessing whether a potential link exists, absent an independent body with authority to access information, is effectively impossible outside of costly litigation. That means there is little real deterrence. Declarant employees may participate in decisions that affect their employer, while owners lack any practical mechanism to test whether fiduciary standards are being met.
The duty remains on paper, but its enforcement is largely illusory.
Problem #2 — Contradictory Disqualification Rules
In 2015, Senate Bill 174 added some unfortunate language:
“A person may not be a candidate for or member of the executive board or an officer of the association if… the person stands to gain any personal profit or compensation of any kind from a matter before the executive board.” (NRS 116.31034(10)(a)(2))
The contradiction is glaring:
NRS 116.31084 says directors should disclose and abstain if they stand to gain.
NRS 116.31034(10)(a)(2) says if they stand to gain, they are ineligible to serve at all.
Taken together, a director who properly recuses under .31084 has just proven their own ineligibility under .31034(10).
Critique of the 2015 Change
The precursor to the 2015 amendment was not a lack of conflict-of-interest laws. Fiduciary duties existed and already required disclosure and recusal. The problem was enforcement.
Without an independent body able to access information and issue binding determinations, the laws, as with most conflict-of-interest laws, were difficult to apply in practice.
If the Legislature’s intent in 2015 was truly to shield owners from any conflict-of-interest exposure, the statute it adopted makes little sense.
Why retain recusal as an option under NRS 116.31084 if any conflict automatically disqualifies a director under NRS 116.31034? Why continue to allow conflicts for declarant appointees, while barring them for owners? Why leave key terms like “stands to gain,” “personal profit,” and “compensation” undefined? And importantly, why provide no clear due process for deciding eligibility disputes?
This was a bad law - and according to the record, many of those testifying acknowledged as much at the time.
Problem #3 — No Neutral Arbiter
Even if the law were clear, who decides?
In public life, officials can seek advance rulings from ethics commissions; corporations use independent directors and shareholder oversight. HOAs have neither.
Nevada law leaves directors, candidates, and associations with no neutral arbiter of conflicts.
The Impact
Fiduciary Clarity
HOA directors must owe undivided loyalty to the association -- not to their employer.
Fiduciary law prohibits divided loyalty. It is not about good intentions; it is about avoiding situations that compromise independence, even if no harm occurs.
When a declarant appoints its own employee, contractor, or agent to the HOA board, that person’s income, job security, or advancement may depend on aligning with the declarant’s interests. Even without a direct financial gain in a specific vote, the structural dependence violates the fiduciary norm of disinterestedness.
Governance Integrity
Even during declarant control, board decisions shape association budgets, reserves, and long-term obligations. If conflicted appointees prioritize the developer’s short-term interests, owners inherit the long-term costs.
Transparency and Legitimacy
Independent directors, even if appointed by the declarant, create greater legitimacy and help deter self-dealing or litigation risk. Allowing affiliated appointees erodes confidence from the outset.
Viewpoint Discrimination in Ethical Governance
The statutory scheme creates a two-class system:
Homeowner-elected directors may be disqualified entirely if they are perceived to benefit from board decisions.
Declarant appointees, by contrast, are expressly permitted to serve and vote despite clear affiliations.
Because the declarant may appoint a majority of the board until turnover, there is no internal check on conflicts. Decisions can reflect the developer’s business interests rather than the community’s long-term health.
Conflict in Enforcing Eligibility
When eligibility disputes arise, the incumbent board — often aligned with management and counsel — becomes the arbiter of whether challengers may serve. This is inherently self-interested, especially in contested elections. The lack of neutrality undermines confidence in fair governance.
Ambiguity of Key Terms
“Profit” and “compensation” are not defined in Chapter 116.
This invites overbroad or inconsistent interpretations, including non-monetary benefits. In the absence of clear standards, boards may wield ambiguity to exclude dissenters or rivals.
Example: a homeowner sues the association seeking equitable relief. The board or its counsel then claims the lawsuit creates personal profit or compensation, disqualifying the homeowner from running. That decision blocks reform through the ballot box.
This issue is currently before the Nevada Supreme Court in Kosor v. Southern Highlands Community Association (Case No. 89439).
Reform Agenda
To restore integrity to HOA governance, Nevada must:
Ban declarant-affiliated directors. Developers may appoint directors, but not their own employees, contractors, or family. Require independent professionals instead.
Fix the statutory contradiction. Reconcile NRS 116.31084 and NRS 116.31034 so disclosure/recusal does not equal ineligibility. Apply rules evenly to all directors, not just owners.
Create a neutral arbiter. Empower NRED, the Commission, or a designated ethics panel to issue binding conflict rulings before disputes escalate.
Clarify key terms. Define "stand to gain," “personal profit,” and “compensation” (even if only pointing to NRS 281A) to prevent arbitrary or abusive interpretations.
Conclusion
Nevada’s statutes impose fiduciary duties in theory but undercut them in practice.
The 2009 carve-out for declarant appointees hides structural conflicts; the 2015 disqualification rule punishes homeowner directors for disclosing conflicts; and the absence of any neutral arbiter leaves both boards and owners without recourse.
Without these guardrails, Nevada HOAs remain governed by a framework where disclosure is punished, silence is incentivized, and loyalty to owners is optional
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This post is part of the NVHOAReform.com series exploring how Nevada’s HOA system drifts further from public accountability — and how it can be fixed.
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For a complete list of our posts go here.
Go here for NVHOAReoform's current list of HOA Law Changes – Remedies for Consideration.
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