Seawall Questions

I've received a few questions from Owners about the putative seawall settlement that was the subject of an email by the Board President on December 20:

What contribution is being made by the insurer under the Club's Directors and Officers Policy?

I have no idea. Perhaps that will be addressed in the information sessions.

Don't the Owners have to approve the settlement?

That depends. First, the governing documents clearly give the Board the right to settle litigation (Section 2.2 of the Declaration). However, that right isn't absolute. To the extent that the settlement requires an assessment or payments of over $385,000 (an amount that increases by at least 7.5% per year) out of the Capital Fund, the better argument is that the Owners must approve the deal. 

Second, no Owner approval is required to spend money out of the Replacement Reserve Fund. So the Board can spend the money out of the Replacement Reserve Fund and when that fund is exhausted, ask for Owner approval to move funds from the Capital Fund to the Replacement Reserve Fund for some other purpose. As of September 30, 2022, there was $3.2 million in the Replacement Reserve Fund and $3.7 million in the Capital Fund. Of course, the Capital Fund is being used to finance the amenities, so it's not clear how much money is available.

But didn't the Board President promise a vote on the settlement?

I seem to recall that promise, as well. The Board President has the power to call a special meeting of the Owners and he can exercise that power to give the Owners the opportunity to vote on the settlement. If the settlement is good for the Owners, getting their approval shouldn't be a tough job.

  

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