Condo board’s ‘secret’ settlement might not be
A: Again, I get another difficult question to answer, but I love getting these challenging questions. Every week, I am amazed at the creativity of unit owners as well as boards of directors.
First, unless a court document is sealed by authority of the court, all court documents are open to the public. So I would go down to the local county court to determine if, in fact, the settlement has been sealed. If it has been, then the board cannot disclose the terms to anyone without getting permission from both the court and the other party to the lawsuit.
However, as to the money, that’s another issue. But here I need more facts. Was an insurance company put on notice of the lawsuit and did they assign an attorney to handle the case? If so, then presumably the insurance company paid the settlement amount. The insurance company will also pay for the attorney fees, but the association has to pay the appropriate deductible.
That amount must be reported on the books and records of the association. Although I am not an accountant, I suspect it will merely state “insurance deductible” and show the amount. This will not give you any information about the nature of the lawsuit or the amount of the settlement.
If the insurance company was not contacted — or if they declined to accept the case — then the amount of the settlement must, in my opinion, be referenced somewhere in the books of the association.
Now, say the settlement was indeed sealed by the authority of the court. In that case, did the court seal the entire settlement agreement, including the amount that was paid to the unit owner? If so, can the board unilaterally disclose that amount?
I think not. The association’s attorney should go back to the court and ask that the amount of the settlement be allowed to become public. There is a strong argument here: The association funds do not belong to the association, but to every unit owner according to his or her percentage interest. Every owner is entitled to know how his or her money is being spent.
It would be a mistake, in my opinion, not to report the settlement amount on the association books. I know this will be controversial and I welcome all comments — pro and con.