Commentary

Why the fuzz about the lawsuit ?

Someone may say: The DVLA Board just paid $5000 to the developer and claims that this amount would be the DVLA's maximum financial exposure in this case. No harm done. But is that really true? 
It cannot be verified yet, since the final indemnification text hasn't been released so far. Besides this, who would call it a good deal to be involved in a lawsuit and pay thousands of dollars?

However, there is one crucial issue nobody wants you to know:  Disclosure of a pending lawsuit

This matter presents an issue of real estate disclosure. In a property sale, the seller has a duty to disclose facts about the property. A title company may also inquire basic information from the Association and boards have a general duty to disclose facts that materially affect the rights and interests of members. Realtors always have their common law duty to disclose material facts about the property. A fact is "material" if it has any effect upon the "desireability" or "value" of the property and the buyer's decision to proceed with the sale. Failure to do so, causing damage, would give rise to a cause of action for the failure to disclose.

Any lawsuit that directly or indirectly affects the Property, e.g. if the Association is named, is such a material fact and may impact a sale.

Even if seller and buyer would believe a statement like the above ('no harm done'), the real question is, are there lenders who will give a mortgage to the buyer while a lawsuit is in progress?  If not, only cash buyers can buy and they will drive a hard bargain on the price. Seller's won't like that! This example shows the multilayered effect an association can have on a personal property.

Some people may downplay this issue and even suggest, not to disclose any of that. Be aware, if you don't disclose issues to buyers someone in the neighborhood will likely spill the beans as soon as they meet the new home owner.

So, in short: Not only the liability of the actions or ommisions of an association board can cause serious financial burden for the association and each member, but also the disclosure requirement may impact property sales withing the community.

One more thing. This pending lawsuit may impact the members for quite some time and more cases may already be under way. But wait ... there is hope and a solution .....
For this, please examine carefully the other facts in our 'Quick Facts' section.