Article IV — Assessments

Section 4.01 — Assessments Generally

(a) Covenant Obligating Owners to Pay Assessments. The Declarant, for each Lot owned by the Declarant within the Development, and each Owner of a Lot by acceptance of a deed therefor (whether or not it shall be so expressed in such deed), covenants and agrees to pay to the Master Association: (i) Regular Assessments; (ii) Special Assessments; (iii) Special Individual Assessments; and (iv) Emergency Assessments. Each such Assessment shall be established and collected as hereinafter provided.

(b) Extent of Owner’s Personal Obligation for Assessments. All Assessments, together with late charges, interest, and reasonable costs (including reasonable attorneys’ fees) for the collection thereof, shall be a debt and a personal obligation of the person who is the Owner of the Lot or Separate Interest at the time the Assessment is levied. Each Owner who acquires title to a Lot or a Separate Interest (whether by conventional conveyance, at a judicial sale, trustee’s sale or otherwise) shall be personally liable only for Assessments attributable to the Lot/Separate Interest which become due and payable after the date that the person acquires title. Accordingly, when a person acquires title to a Lot or a Separate Interest, he or she shall not be personally liable for delinquent Assessments of prior Owners unless the new Owner expressly assumes the personal liability.

(c) No Avoidance of Assessment Obligations. No Owner may exempt himself/herself or the Owner’s Lot or Separate Interest from liability or charge for the Owner’s share of any Assessment made against the Owner or his or her share of any Regular or Special Assessment made against the Owner’s Lot or Separate Interest by waiving or relinquishing, or offering to waive or relinquish, the Owner’s right to use and enjoy all or any portion of the Development or by the abandonment or non-use of the Owner’s Lot or Separate Interest.

Section 4.02 — Regular Assessments

(a) Preparation of Annual Budget; Establishment of Regular Assessments. Not less than thirty (30) days nor more than ninety (90) days prior to the beginning of the Master Association’s fiscal year, the Board shall estimate the total amount required to fund the Master Association’s anticipated Common Expenses for the next succeeding fiscal year (including additions to any Reserve Fund established to defray the costs of future repairs, replacement or additions to the preparing and distributing to all Members a budget satisfying the requirements of Section 12.05 of the Master Association Bylaws). If the Board fails to distribute the budget for any fiscal year within the time period specified in the first sentence of this section, the Board shall not be permitted to increase the Master Association’s Regular Assessment for that fiscal year unless the Board first obtains the approval of the requisite percentage of the Members in accordance with Section 4.08, below.

(b) Establishment of Regular Assessment; Member Approval Requirements for Certain Assessment Increases.

The total Common Expenses estimated in the Master Association’s budget (less projected income from sources other than Assessments) shall become the aggregate Regular Assessment for the next succeeding fiscal year; provided, however, that except as provided in Section 4.05, below (relating to “Emergency Assessments”), the Board of Directors may not impose a Regular Assessment that is more than twenty percent (20%) greater than the Regular Assessment for the Master Association’s immediately preceding fiscal year without the Members’ prior approval in accordance with Section 4.08, below.

(c) Commencement Date for Regular Assessments. Regular Assessments shall commence as to each Lot within a Phase upon the earlier to occur of (i) the date specified in a Notice of Commencement of Regular Assessments that is recorded by Declarant with respect to the Phase (which date shall be after the date of Recordation of this Master Declaration); or (ii) to the first day of the first month following the month in which the first Close of Escrow occurs for the sale of a Lot in the Phase to a person other than the Declarant. Each Lot in the subject Phase shall thereafter be subject to its payment of an equal share of the aggregate annual Regular Assessment. The first annual Regular Assessment shall be prorated, if necessary, according to the number of months remaining in the fiscal year established in the Master Association’s Bylaws.

(d) Allocation of Regular Assessments.

(i) Association Common Expenses. Except as otherwise provided in subparagraph (d)(ii), below, the total estimated Common Expenses determined in accordance with subparagraph (a), above, shall be allocated among, assessed against, and charged to each Owner according to the ratio of the number of Lots or Separate Interests within the Development owned by the assessed Owner to the total number of Lots and Separate Interests subject to Assessment so that each Lot and Separate Interest bears an equal share of the total Regular Assessment.

(e) Assessment Roll. That portion of the estimated Common Expenses assessed against and charged to each Owner shall be set forth and recorded in an assessment roll which shall be maintained and available with the records of the Master Association and shall be open for inspection at all reasonable times by each Owner or his or her authorized representative for any purpose reasonably related to the Owner’s interest as a property Owner or as a Member of the Master Association. The assessment roll shall show, for each Lot, the name and address of the Owner of Record, all Regular, Special and Special Individual Assessments levied against each Owner and his or her Lot, and the amount of such Assessments which have been paid or remain unpaid. The delinquency statement required by Section 2.03(a)(iii), above, shall be conclusive upon the Master Association and the Owner of such Lot as to the amount of such indebtedness appearing on the Master Association’s assessment roll as of the date of such statement, in favor of all persons who rely thereon in good faith.

(f) Mailing of the Notice of Assessments to Owners. Not less than forty-five (45) days nor more than sixty (60) days prior to the beginning of the Master Association’s fiscal year the Board of Directors of the Master Association shall mail to each Owner (including Declarant with respect to any unsold or retained Lots or Separate Interests), at the street address of the Owner’s Lot, or at such other address as the Owner may from time to time designate in writing to the Master Association, a statement of the amount of the Regular Assessment for the next succeeding fiscal year, disclosed in both the aggregate amount of the Regular Assessment for all Lots or Separate Interests that are subject to Assessment and the allocable share of the total Regular Assessment payable by each Lot that is subject to assessment.

(g) Failure to Make Estimate. If, for any reason, the Board of Directors fails to make an estimate of the Common Expenses for any fiscal year (thereby failing to adjust the amount of the Regular Assessment for the next succeeding fiscal year), then the Regular Assessment imposed for the preceding fiscal year, together with any Special Assessment made pursuant to Section 4.03(a)(i), below, for that year, shall be assessed against each Owner and his or her Lot on account of the then current fiscal year, and installment payments (as hereinafter provided) based upon such automatic Regular Assessment shall be payable on the regular payment dates established by the Board pursuant to subparagraph (h), below.

(h) Installment Payment. The Regular Assessment made against each Owner shall be due and payable in advance to the Master Association in equal monthly installments on the first day of each month or on such other date or dates as may be established from time to time by the Master Association’s Board of Directors. Installments of Regular Assessments shall be delinquent if not paid within fifteen (15) days of the due date as established by the Board.

Section 4.03 — Special Assessments

(a) Purposes for Which Special Assessments May Be Levied. Subject to the membership approval requirements set forth in subparagraph (b), below, the Board of Directors shall have the authority to levy Special Assessments against the Owners and their Lots or Separate Interests for the following purposes:

(i) Regular Assessment Insufficient in Amount. If, at any time, the Regular Assessment for any fiscal year is insufficient in amount due to extraordinary expenses not contemplated in the budget prepared for said fiscal year, then the Board of Directors shall levy and collect a Special Assessment, applicable to the remainder of such year only, for the purpose of defraying, in whole or in part, any deficit which the Master Association may incur in the performance of its duties and the discharge of its obligations hereunder.

(b) Special Assessments Requiring Membership Approval. The following Special Assessments require prior membership approval in accordance with Section 4.08, below: (i) any Special Assessments which, in the aggregate, exceed five percent (5%) of the Master Association’s budgeted gross expenses for the fiscal year in which the Special Assessment(s) is/are levied; and (ii) any Special Assessments imposed pursuant to subparagraph (a)(i) of this section when the Board has failed to distribute a budget to the Members within the time specified in Section 4.02(a), above. The foregoing Member approval requirements shall not apply, however, to any Special Assessment imposed to address any “emergency situation” as defined in Section 4.05, below.

(c) Allocation and Payment of Special Assessments. When levied by the Board or approved by the Members as provided above, the Special Assessment shall be divided among, assessed against and charged to each Owner and his or her Lot (including the Declarant as to any unsold or retained Lots or Separate Interests) in the same manner prescribed for the allocation of Regular Assessments pursuant to Section 4.02(d), above. The Special Assessment so levied shall be recorded on the Master Association’s Assessment roll and notice thereof shall be mailed to each Owner.

Special Assessments for purposes described in subparagraph (a)(i) of this Section 4.03, above, shall be due as a separate debt of the Owner and shall be payable to the Master Association in equal monthly installments during the remainder of the then current fiscal year. Special Assessments for purposes described in subparagraph (a)(ii) of this Section 4.03 shall be due as a separate debt of the Owner and shall be payable in full to the Master Association within thirty (30) days after the mailing of such notice or within such extended period as the Board shall determine to be appropriate under the circumstances giving rise to the Special Assessment.

Section 4.04 — Special Individual Assessments

(a) Circumstances Giving Rise to Special Individual Assessments. In addition to the Special Assessments levied against all Owners in accordance with Section 4.03, above, the Board of Directors may impose Special Individual Assessments against an Owner in any of the circumstances described in subparagraphs (i) through (iii) below; provided, however, that no Special Individual Assessments may be imposed against an Owner pursuant to this Section 4.04 until the Owner has been afforded the notice and hearing rights to which the Owner is entitled pursuant to Section 12.06, below, and, if appropriate, has been given a reasonable opportunity to comply voluntarily with the Governing Documents. Subject to the foregoing, the facts and circumstances giving rise to liability for Special Individual Assessments include the following:

(i) Expenses Incurred in Gaining Member Compliance. In the event that the Master Association incurs any costs or expenses to: (A) accomplish the payment of delinquent Assessments; (B) perform any repair, maintenance or replacement to any portion of the Development that the Owner is responsible to maintain under the Governing Documents but has failed to undertake or complete in a timely fashion; or (C) otherwise bring the Owner and/or his or her Lot into compliance with any provision of the Governing Documents, the amount incurred by the Master Association (including reasonable fines and penalties duly imposed hereunder, title company fees, accounting fees, court costs and reasonable attorneys’ fees) shall be assessed and charged solely to and against such Owner as a Special Individual Assessment.

(ii) Required Maintenance of Lots or Separate Interests. If any Lot or Separate Interest is maintained so as to become a nuisance, fire or safety hazard for any reason, the Master Association shall have the right to enter said Lot, correct the condition and recover the cost of such action through imposition of a Special Individual Assessment against the offending Owner. Any entry on the property of any Owner by the Master Association shall be affected in accordance with Section 3.07(b), above.

(b) Levy of Special Individual Assessment and Payment. Once a Special Individual Assessment has been levied against an Owner for any reason described, and subject to the conditions imposed, in subparagraph (a) of this Section, such Special Individual Assessment shall be recorded on the Master Association’s Assessment roll and notice thereof shall be mailed to the affected Owner. The Special Individual Assessment shall thereafter be due as a separate debt of the Owner payable in full to the Master Association within thirty (30) days after the mailing of notice of the Assessment.

Section 4.05 — Assessments to Address Emergency Situations

The requirement of a membership vote to approve: (a) Regular Assessment increases in excess of twenty percent (20%) of the previous year’s Regular Assessment; or (b) Special Assessments which, in the aggregate, exceed five percent (5%) of the Master Association’s budgeted gross expenses for the fiscal year in which the Special Assessment(s) is/are levied, shall not apply to Assessments necessary to address emergency situations. For purposes of this Section, an emergency situation is any of the following: an extraordinary expense required by an order of a court.

Section 4.06 — Purpose and Reasonableness of Assessments

Each Assessment made in accordance with the provisions of this Master Declaration is hereby declared and agreed to be for use exclusively: (a) to promote the recreation, health, safety and welfare of individuals residing within the Development; and (b) to promote the enjoyment and use of the Development by the Owners and their families, tenants, invitees, licensees, guests and employees.

Each and every Assessment levied hereunder is further declared and agreed to be a reasonable Assessment, and to constitute a separate, distinct and personal obligation of the Owner of the Lot against which the Assessment is imposed that shall be binding on the Owner’s heirs, successors and assigns; provided, however, that the personal obligation of each Owner for delinquent Assessments shall not pass to the Owner’s successors in title unless expressly assumed by them.

Section 4.07 — Exemption of Certain Portions of the Development From Assessments

The following real property subject to this Master Declaration shall, unless devoted to the use as a residential dwelling, be exempt from the Assessments and the lien thereof provided herein:

(a) Any portion of the Development that is dedicated and accepted by a local public authority;

(b) Any Lot that is owned by the Master Association.

Section 4.08 — Notice and Procedure for Member Approval Pursuant to Sections 4.02 and 4.03

In the event that Member approval is required in connection with any increase or imposition of Assessments pursuant to Sections 4.02 and 4.03, above, the affirmative vote required to approve the increase shall be a Majority of a Quorum of the Members. The quorum required for such membership action shall be a simple majority of the Members.

Section 4.09 — Maintenance of Assessment Funds

(a) Bank Accounts. All sums received or collected by the Master Association from Assessments, together with any interest or late charges thereon, shall be promptly deposited in one or more insured checking, savings or money market accounts in a bank or savings and loan association selected by the Board of Directors. In addition, the Board shall be entitled to make prudent investment of Reserve Funds in insured certificates of deposit, money market funds or similar investments consistent with the investment standards normally observed by trustees. The Board and such officers or agents of the Master Association as the Board shall designate shall have exclusive control of said account(s) and investments and shall be responsible to the Owners for the maintenance at all times of accurate records thereof. The withdrawal of funds from Association accounts shall require the signature of two (2) officers of the Master Association as provided in Section 12.02 of the Bylaws. Any interest received on deposits shall be credited proportionately to the balances of the various Assessment fund accounts maintained on the books of the Master Association as provided in subparagraph (b), below.

(b) Expenditure of Assessment Funds. Except as provided below, the proceeds of each Assessment shall be used only for the purpose for which such Assessment was made, and such funds shall be received and held in trust by the Master Association for such purpose. Notwithstanding the foregoing, the Board, in its discretion, may make appropriate adjustments among the various line items in the Board’s approved general operating budget if the Board determines that it is prudent and in the best interest of the Master Association and its Members to make such adjustments. If the proceeds of any Special Assessment exceed the requirement of which such Assessment was levied, such surplus may, in the Board’s discretion, be: (i) returned proportionately to the contributors thereof; (ii) reallocated among the Master Association’s Reserve Accounts if any such account is, in the Board’s opinion, underfunded; or (iii) credited proportionately on account of the Owners’ future Regular Assessment obligations.

(c) Separate Accounts; Commingling of Funds. To preclude a multiplicity of bank accounts, the proceeds of all Assessments may be commingled in one or more accounts and need not be deposited in separate accounts so long as the separate accounting records described herein are maintained. For purposes of accounting, but without requiring any physical segregation of assets, the Master Association shall keep a separate accounting of all funds received by it in payment of each Assessment and of all disbursements made therefrom; provided, however, that receipts and disbursements of Special Assessments made pursuant to Section 4.03(a)(i), above, shall be accounted for together with the receipts and disbursements of Regular Assessments, and a separate accounting shall be maintained for each capital Improvement for which Reserve Funds for replacement are allocated.

Unless the Master Association is exempt from federal or state taxes, all sums allocated to capital replacement funds shall be accounted for as contributions to the capital of the Master Association and as trust funds segregated from the regular income of the Master Association or in any other manner authorized by law or by regulations of the Internal Revenue Service and the California Franchise Tax Board that will prevent such funds from being taxed as income of the Master Association.

(d) Reserve Funds. The Board shall not expend funds designated as Reserve Funds for any purpose other than the repair, restoration, replacement or maintenance of, or litigation involving the repair, restoration, replacement or maintenance of major components of the Development, if any, that the Master Association is obligated to repair, restore, replace, or maintain and for which the Reserve Fund was established. However, the Board may authorize the temporary transfer of money from a Reserve Fund to the Master Association’s general operating fund to meet short term cash flow requirements or other expenses; provided, the Board has made a written finding, recorded in the Board’s minutes, explaining the reasons that the transfer is needed, and describing when and how the money will be repaid to the Reserve Fund. Given the limited nature of the Master Association’s mission and the absence of any Common Areas it is not anticipated that there will be any need to establish Reserve Funds as part of the Master Association’s annual funding obligations.

The transferred funds shall be restored to the Reserve Fund within one year of the date of the initial transfer, except that the Board may, upon making a finding supported by documentation that a temporary delay would be in the best interests of the Owners and the Development as a whole, temporarily delay the restoration. The Board shall exercise prudent fiscal management in delaying restoration of these funds and in restoring the expended funds to the reserve account, and shall, if necessary, levy a Special Assessment to recover the full amount of the expended funds within the time limits required by this subparagraph (d). This Special Assessment is subject to the Member approval requirements of Section 4.03(b), above, if the aggregate amount of the Special Assessment exceeds five percent (5%) of the budgeted gross expenses of the Master Association for the year in which the Special Assessment is imposed. The Board may, at its discretion, extend the date the payment on the Special Assessment is due. Any extension shall not prevent the Board from pursuing any legal remedy to enforce the collection of an unpaid Special Assessment.

When the decision is made to use Reserve Funds or to temporarily transfer money from the Reserve Fund to pay for litigation, the Master Association shall notify the Members of that decision in the next available mailing to all Members pursuant to California Corporations Code section 5016, and of the availability of an accounting of those expenses. The Master Association shall make an accounting of expenses related to the litigation on at least a quarterly basis. The accounting shall be made available for inspection by Members at the Master Association’s principal office.

Section 4.10 — Delinquency Dates and Collection of Delinquent Assessments

(a) Delinquency Dates and Right to Pursue Collection in An Action at Law. Installments of Regular Assessments shall be delinquent if not paid within fifteen (15) days of the due date as established by the Board. Special Assessments, Special Individual Assessments and Emergency Assessments shall be delinquent if not paid within the times prescribed in Sections 4.03(c), and 4.04(b), respectively. When an Assessment becomes delinquent, the amount thereof may, at the Board’s election, bear interest at the maximum rate allowed by law commencing thirty (30) days after the due date until the same is paid. In addition to the accrual of interest, the Board of Directors is authorized and empowered to promulgate a schedule of reasonable late charges for any delinquent Assessments. Once an Assessment is delinquent, the Master Association may bring a legal action directly against the Owner for breach of the Owner’s personal obligation to pay the Assessment and in such action shall be entitled to recover the delinquent Assessment or Assessments, accompanying late charges, interest, costs and reasonable attorneys’ fees. Before commencing such an action, the Master Association shall provide notice to the delinquent Owner in accordance with subparagraph (b), below.

(b) Requirement of Notice to Owners Who Are Delinquent in the Payment of Assessments. At least thirty (30) days prior to initiating an action against an Owner to collect a delinquent Assessment, the Master Association shall notify the Owner in writing by certified mail of the following (the “Delinquency Notice”):

(i) A general description of the collection procedures of the Master Association and the method of calculation of the amount of the Owner’s delinquency, a statement that the Owner of the Lot or Separate Interest has the right to inspect the Master Association records, pursuant to Section 8333 of the Corporations Code, in order to confirm the amount of the claimed delinquency.

(ii) An itemized statement of the charges owed by the Owner, including items on the statement which indicate the amount of any delinquent Assessments, the fees and reasonable costs of collection, reasonable attorneys’ fees, any late charges, and interest, if any.

(iii) A statement that the Owner shall not be liable to pay the charges, interest, and costs of collection, if it is determined the Assessment was paid on time to the Master Association.

(iv) The right of the notified Owner to request a meeting with the Master Association Board as provided in subparagraph (d), below.

(c) Application of Payments. Any payments made by the Lot Owner toward the delinquent Assessment shall first be applied to the Assessments that are owed at the time the payment is made; and only after the Assessments owed are paid in full shall the payments be applied to the fees and the costs of collection, attorneys’ fees, late charges or interest. When an Owner makes a payment, the Owner may request a receipt and the Master Association shall provide it. The receipt shall indicate the date of payment and the person who received the payment on behalf of the Master Association. The Master Association shall provide its Members with a mailing address for overnight payment of Assessments.

(d) Process for Disputing Assessment Obligations. An Owner may dispute the amounts claimed as due and owing in the Delinquency Notice by submitting to the Board a written explanation of the reasons for his or her dispute. If the Owner wishes to submit an explanation, it must be mailed to the Master Association within fifteen (15) days of the postmark of the Delinquency Notice. The Board shall respond in writing to the Owner within fifteen (15) days of the date of the postmark of the Owner’s explanation. Owners who are delinquent in the payment of Assessments may also request, at the time the Owner submits his or her explanation, an opportunity to meet and confer with the Board.

Section 4.11 — Transfer of Lot; Effect on Assessment Obligations

The following rules shall govern the right of the Master Association to enforce its Assessment collection remedies following the sale or foreclosure of a Lot or Separate Interest:

(a) No sale or transfer of a Lot or Separate Interest as the result of foreclosure, exercise of a power of sale, or otherwise, shall relieve the new Owner of such Lot or Separate Interest (whether it be the former beneficiary of the first Mortgage or other prior encumbrance or a third party acquiring an interest in the Lot or Separate Interest) from liability for any Assessments which thereafter become due with respect to the Lot or Separate Interest.

(b) No sale or transfer of a Lot or Separate Interest as the result of foreclosure, exercise of a power of sale, or otherwise, shall affect the Master Association’s right to maintain an action against the foreclosed previous Owner personally to collect the delinquent Assessments, late charges, interest and associated costs of collection incurred prior to and/or in connection with the sale or transfer.