Nevada's AB 396 Took Effect July 1, 2026: Backyard Homes and a Reset of Association Powers

Assembly Bill 396 of the 2025 Nevada Legislature, enacted as Chapter 365 of the Statutes of Nevada 2025 and approved on June 6, 2025, became effective for substantive purposes on July 1, 2026. It does two things that look unrelated but landed on the same day: it requires Nevada's largest counties and cities to authorize accessory dwelling units on residential property, and it rewrites several provisions of Chapter 116 of NRS governing common-interest communities.

The accessory dwelling unit piece carries an unusual enforcement mechanism. If a covered local government did not adopt a conforming ordinance before July 1, 2026, the statute provides that accessory dwelling units are authorized on any parcel zoned for residential use without restriction. That is a default that flips in the property owner's direction, and it makes the status of each jurisdiction's ordinance a question worth answering precisely rather than approximately. Both halves of the bill sit squarely in real estate practice.

This page describes what the statute says, who it covers, and what to check now. It is general information about a public legislative change, not advice about any specific property, association, or dispute.

What AB 396 Actually Did

The bill's title describes an act relating to housing. In practice it splits into two tracks.

The first track adds a new section to Chapter 278 of NRS, the planning and zoning chapter. It requires the governing body of each county whose population is 100,000 or more, and each city whose population is 60,000 or more, to adopt an ordinance authorizing the development and use of an accessory dwelling unit on residential property. The Legislative Counsel's Digest identifies the covered jurisdictions as Clark and Washoe counties, and the cities of Las Vegas, Henderson, North Las Vegas, Reno, and Sparks. The bill also limits what such an ordinance may contain, including by barring certain conditions on approval, and it carries an exception where an interstate-compact regional planning agency's regional plan calls for the regulation of housing.

The second track amends Chapter 116 of NRS, the Common-Interest Ownership Act. Those amendments touch declaration amendments, community termination, rental restrictions, the resale package a seller must hand a buyer, and the administrative fine the state commission may impose. Each is discussed below.

Sections 1 through 12 of the act became effective on July 1, 2026 for all substantive purposes, with earlier effect only for adopting regulations and performing preparatory administrative tasks.

The Accessory Dwelling Unit Mandate and the July 1, 2026 Trigger

An accessory dwelling unit is a secondary, self-contained dwelling on a lot that already has a primary residence. Casita, guest house, garage conversion, and backyard cottage all describe the same general idea. The policy argument in the bill is stated openly: a legislative declaration in the act says access to affordable housing is essential for Nevada residents and that accessory dwelling units are vital to increasing the supply.

The mechanism is the part that deserves attention. The act provides that if a covered county or city adopted a conforming ordinance before July 1, 2026, it is not required to adopt another one. If it did not, accessory dwelling units are authorized on any parcel zoned for residential use without restriction.

Two cautions follow. First, whether a given jurisdiction adopted a conforming ordinance, and whether the ordinance it adopted is in fact consistent with the statute, are separate questions, and the second one is where disputes tend to live. Second, the act applies the existing judicial review window in NRS 278.0235 to the new section, which requires an action or proceeding seeking review of a final action, decision, or order of a county or city governing body to be commenced within 25 days after the notice of that final action is filed with the clerk or secretary. Twenty-five days is short. Anyone considering a challenge to a local decision on this subject should treat that clock as the governing constraint.

Property owners should also remember that a zoning authorization is not the whole story. A recorded declaration, a building permit process, utility capacity, setbacks, and lot coverage all remain live issues even where zoning permits the unit.

The Association Changes Owners and Boards Will Notice First

Three of the Chapter 116 amendments have immediate, concrete effects.

Resale packages now require proof of insurance. NRS 116.4109 requires a unit's owner, at the owner's expense, to furnish a purchaser a resale package containing a specified list of documents. AB 396 added a new item: proof of the insurance policies the association is required to carry under NRS 116.3113. Because the purchaser's five-calendar-day cancellation right under NRS 116.4109 runs from receipt of the resale package, an incomplete package is not a technicality. It can bear on when the cancellation window started.

The state commission's fine ceiling rose fivefold. NRS 116.785 authorizes the Commission for Common-Interest Communities and Condominium Hotels, or a hearing panel, to impose an administrative fine after notice and hearing when it finds a violation. AB 396 raised the maximum from $1,000 per violation to $5,000 per violation. Note that a separate provision of NRS 116.785 provides that where the respondent is a member of an executive board or an officer of an association and has not knowingly and willfully committed a violation, the association is liable for the fines and costs and the individual is not personally liable.

Rental restrictions were re-framed. AB 396 revised the provisions on prohibiting or restricting an owner from renting or leasing a unit, moving the analysis toward what the declaration authorizes and addressing rules an association may adopt where the declaration establishes a maximum number or percentage of rented units. Because the operative language is now tied to declaration text, two communities on the same street can end up with genuinely different answers.

Amending a Declaration and Terminating a Community

Two structural amendments matter most to boards, developers, and lenders.

On declaration amendments, the act authorizes an association to amend a declaration to restrict the leasing of residential units to the extent the restriction is reasonably designed to meet the underwriting requirements of institutional lenders that regularly make or purchase loans secured by first mortgages on units, or of insurance companies that issue policies to associations or unit owners. That is a narrow and purposeful lane. It ties an association's leasing restriction to lending and insurance underwriting rather than to general preference, which cuts both ways: it supplies a defensible basis for some restrictions and undercuts restrictions that cannot point to such a basis. The act also removed an exception that had excluded amendments relocating boundaries between adjoining units from the indexing requirement, so those amendments must now be indexed like others.

On termination, NRS 116.2118 previously allowed termination by agreement of owners holding at least 80 percent of the votes, or any larger percentage the declaration specified. As amended, termination requires agreement of owners holding at least 80 percent of the votes in the association, including at least 80 percent of the votes allocated to units not owned by the declarant, plus any other approvals the declaration requires. The declaration may require a larger percentage of total votes, but termination still requires at least 80 percent of non-declarant votes; a smaller percentage may be specified only if all units are restricted exclusively to nonresidential uses. The practical effect is that a declarant holding a large block of votes can no longer supply the supermajority alone.

Who Is Affected and What to Do Now

The bill reaches homeowners considering a casita, sellers and buyers of units in a common-interest community, association boards and community managers, developers and declarants still controlling votes, and lenders whose underwriting depends on rental caps and insurance documentation.

A sensible sequence:

1. Confirm the local ordinance status. Ask the county or city planning department directly whether an ordinance consistent with the new section was adopted before July 1, 2026, and get the answer in writing. A website that has not been updated is not a reliable substitute.
2. Read the declaration before the code. Zoning permission does not override a recorded covenant. Pull the declaration, the bylaws, and the architectural rules.
3. Rebuild the resale package template. Sellers and managers should confirm the package now includes proof of the NRS 116.3113 insurance policies, because the buyer's cancellation clock depends on it.
4. Re-price the compliance risk. Boards operating on the assumption of a $1,000 exposure ceiling should update that number to $5,000 per violation.
5. Know the dispute path. Under NRS 38.310, a civil action based on a claim relating to the interpretation, application, or enforcement of covenants, conditions, or restrictions applicable to residential property, or to the procedures for imposing or changing assessments, generally may not be commenced in any Nevada court unless the claim has first been submitted to mediation under NRS 38.300 to 38.360, and applicable association administrative procedures have been exhausted. A court is directed to dismiss an action commenced in violation of that requirement. The claim is filed with the Real Estate Division with a $50 filing fee under NRS 38.320.

Where Real Estate and Litigation Counsel Fits

Most of what AB 396 changed is document work before it is courtroom work. Whether a leasing restriction is reasonably designed to meet lender or insurer underwriting requirements, whether a resale package was complete enough to start the cancellation clock, whether a declarant's votes still carry a termination, and whether a local ordinance is consistent with the statute are all questions answered by reading recorded instruments and statutory text side by side.

O'Reilly Law Group handles real estate and real estate transactions matters from its Las Vegas office, and where a disagreement hardens into a claim, litigation and business litigation counsel handles the contested stage, including the NRS 38.310 prerequisites that precede filing.

This page does not evaluate any particular property, declaration, ordinance, or dispute, and no result is promised or implied. The firm is located at 325 South Maryland Parkway in the Nevada Professional Center, Las Vegas, Nevada 89101, and can be reached at 702-382-2500.

Terms you may hear

Accessory dwelling unit

A secondary, self-contained dwelling located on a lot that already contains a primary residence. Commonly built as a casita, garage conversion, or detached cottage. AB 396 requires Nevada's larger counties and cities to authorize them by ordinance on residential property.

Declaration

The recorded instrument that creates a common-interest community and sets out the covenants, conditions, and restrictions binding the units. Several AB 396 changes turn on what the declaration says, which is why two neighboring communities can reach different results under the same statute.

Resale package

The set of documents a unit's owner must furnish to a purchaser under NRS 116.4109 at the owner's expense. AB 396 added proof of the association's required insurance policies. The purchaser's five-calendar-day cancellation right runs from receipt of the package.

Declarant

The person or entity that created the common-interest community and reserved development rights, typically the original developer. Under the amended NRS 116.2118, votes allocated to declarant-owned units no longer count toward the separate 80 percent non-declarant threshold required to terminate.

Commission for Common-Interest Communities and Condominium Hotels

The Nevada body that, with its hearing panels, may impose administrative fines and other remedial or disciplinary action after notice and hearing when it finds a violation of Chapter 116 of NRS.