How Could an Ongoing Lawsuit Affect the Operations of a Building?

July 23, 2015 — The financial impact of a lawsuit needs to be evaluated carefully by the board with its attorney and managing agent. It is better if a settlement can be achieved without suing. Drawn-out lawsuits can drain a building's budget, causing financial hardship, which could outweigh the benefits of any positive outcome. So choosing your battles wisely is extremely important.

That said, it is essential that the board, with the advice of its attorney and managing agent, enforce the rules and regulations. They should not allow adverse precedents to be set. Unresolved lawsuits can deter potential purchasers and lenders. Ongoing lawsuits can also pit neighbor against neighbor causing an uncomfortable environment.

Lawsuits against contractors can ultimately lead to positive results and, if provided in the contract, the recovery of legal fees. Again, the board should weigh the risk versus reward factor carefully and settle these disputes as quickly as possible. The success of this type of action is often dependent on having a good contract with your lawyer. Establishing a solid contract will save legal fees if work does not go according to plan and legal intervention is needed later.

Some lawsuits against a building cannot be prevented but can be covered by insurance: trip and fall (liability coverage), property damage (property coverage), discrimination (directors' and officers' coverage), and flood (flood coverage) where applicable. It is important that insurance coverage is maintained so that the potential financial impact is negligible.

Don Einsidler is president of Einsidler Management.