Lawsuits and Virginia HOAs

Started by SamanthaB3 • 5 replies • 767 views

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SamanthaB3 (Virginia)
Posts: 2

Posted:

Hello.

This question pertains to HOAs in Virginia. At what point does the HOA have an obligation to notify homeowners that there was a major lawsuit settlement? Or do they not have an obligation? Do they have to let the homeowners know that there is pending litigation but if they pay out, do they have to let the homeowners know that? When does a lawsuit have to be disclosed in the Disclosure packet?

Thanks.
Sam

AugustinD
Posts: 5,144

Posted:

-- Did the insurer pay the settlement?

-- Regarding a settlement that occurred: A good resource might be a CPA. Start by googling on {GAAP lawsuit settlement disclosure corporation}. My understanding is the financial statements usually or always must reflect any settlement. Hopefully the CPA can respond to situations where there is a non-disclosure agreement.

-- Virginia statute requires HOAs to disclose, on behalf of sellers, "A statement of the nature and status of any pending suit or unpaid judgment to which the association is a party and that either could or would have a material impact on the association or its members or that relates to the lot being purchased." See https://law.lis.virginia.gov/vacode/title55/chapter26/section55-509.5/ .

-- If I recall correctly, usually a "pending suit" only exists when a party has been properly served papers filed in a court. The phrase is not to be taken colloquially. Whether a "pending suit" exists is a question for a well-qualified HOA attorney.

SheliaH (Indiana)
Posts: 6,964

Posted:

What AugustineD said.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

PaulJ6
Posts: 990

Posted:

Quote:

Posted By SamanthaB3 on 07/31/2019 7:54 AM
Hello.

This question pertains to HOAs in Virginia. At what point does the HOA have an obligation to notify homeowners that there was a major lawsuit settlement? Or do they not have an obligation? Do they have to let the homeowners know that there is pending litigation but if they pay out, do they have to let the homeowners know that? When does a lawsuit have to be disclosed in the Disclosure packet?

Thanks.
Sam

Settlements are often confidential. Thus the HOA might be prohibited from disclosing a settlement, by the terms of the settlement (even if it's the HOA that required a confidentiality provision in the settlement agreement).

HOAs may have to provide information to home sellers about ongoing or pending litigation so that sellers can comply with disclosure requirements to home buyers. But not necessarily.

I don't have knowledge about this that is specific to Virginia, though.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Hi Samantha,

The Board should, but is not required, to inform the membership about any legal action that is happening or the actual outcome of any legal case.

The board is required, per statute, to inform a buyer via the disclosure statement, if there is currently any legal action happening (actual cases that have been filed with the court and have not been resolved, not pending or threats of cases).

Have you tried asking the Board?

If your financials show legal fees as a separate line item, any costs within that category should be questioned by the membership (in my opinion).

Hope this helps,

Tim

SamanthaB3 (Virginia)
Posts: 2

Posted:

Thank you everyone for the replies! I thought Virginia required this information in the Disclosures but it is good to have backup.

S

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