What Is a Notice of Settlement?

A notice of settlement signifies an end to a legal dispute.

A notice of settlement signifies an end to a legal dispute.

In most cases, once a notice of settlement is prepared you can breathe a huge sigh of relief, as it usually signifies an end to what could be an expensive and stressful proceeding. The notice is a legal agreement between parties involved in a transaction declaring a satisfactory resolution. The exception is for real estate transactions, in which case it declares that the property is to be “settled” through a purchase.

Types of Disputes

A settlement applies to most legal situations, from divorce, to workman’s compensation. You may even receive a settlement offer from a creditor for a lesser amount owed, but those are usually agreed upon between you and the bank or finance company without court involvement, so no notice needs to be filed.

What the Notice Contains

The notice describes for the judge the dispute between the parties and the terms to which you have agreed -- or on which you have “settled.” In some states this may have a legal term other than "notice of settlement." In Texas, for example, when a settlement is reached, a mutual dismissal filed with the court ends the legal dispute.

Final Approval

The judge can still nix the terms outlined in the notice of settlement if he feels they are unacceptable. If he agrees, though, it is a legal and binding agreement and is filed with the court. The lawsuit that embroiled you in this situation is than dismissed, but you must stick to the terms. In some cases, such as a divorce, a partial settlement is reached on some terms, but the litigation remains in effect on others.

Real Estate Transactions

If you live in a state that requires a notice of settlement in a real estate transaction, such as New Jersey, this means that if you are buying property, your lawyer files a notice with the registrar’s office stating you intend to get a mortgage to buy a piece of property, which is described in the notice. The history of this process is steeped in preventing sellers from re-selling the property before a deed is recorded. Sometimes the sales contract is included with the filing.

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About the Author

Based in Central Texas, Karen S. Johnson is a marketing professional with more than 30 years' experience and specializes in business and equestrian topics. Her articles have appeared in several trade and business publications such as the Houston Chronicle. Johnson also co-authored a series of communications publications for the U.S. Agency for International Development. She holds a Bachelor of Science in speech from UT-Austin.

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