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HomeMy WebLinkAboutCT 93-08; Carrillo Ranch Village O; Tentative Map (CT) (37)Recording Requested By and When Recorded Mail To: HECHT, SOLBERG, ROBINSON & GOLDBERG UP Mr. A. John Hecht 600 West Broadway, Eighth Floor San Diego, California 92101 MASTER DECLARATION OF RESTRICTIONS FOR RANCHO CARRILLO MASTER ASSOCIATION APPROVED PLAN Rancho Carrillo 5/1/97 TABLE OF CONTENTS PAGE RECITALS 1 ARTICLE 1 DEFINITIONS 3 Section 1.1 Apartment Project 3 Section 1.2 Articles 3 Section 1.3 Board 3 Section 1.4 Bylaws 3 Section 1.5 Carlsbad Brush Requirements 3 Section 1.6 City . . . 3 Section 1.7 Common Interest Development 3 Section 1.8 Cost Center Amenities 3 Section 1.9 Cost Center Area 4 Section 1.10 Cost Center Assessments 4 Section 1.11 Declarant 4 Section 1.12 Delegate 4 Section 1.13 Delegate District 4 Section 1.14 Eligible Insurer or Guarantor 4 Section 1.15 Eligible Mortgage Holder 5 Section 1.16 FHA 5 Section 1.17 FHLMC 5 Section 1.18 FNMA 5 Section 1.19 GNMA 5 Section 1.20 Guest Builder 5 Section 1.21 Master Association 5 Section 1.22 Master Association Property 5 Section 1.23 Master Declaration 6 Section 1.24 Member 6 Section 1.25 Mortgage 6 Section 1.26 Mortgagee 6 Section 1.27 Owner 6 Section 1.28 Phase 6 Section 1.29 Phase 1 6 Section 1.30 Retail Buyer 7 Section 1.31 Villages 7 Section 1.32 Properties 7 Section 1.33 Separate Interest 7 Section 1.34 VA 7 ARTICLE 2 MASTER ASSOCIATION PROPERTY 7 Section 2.1 Status of Title to Master Association Property 7 Section 2.2 Transfer of Master Association 7 Section 2.3 Master Association Management 8 Section 2.4 City Easement 10 Section 2.5 Delegation of Use 10 Rancho Carrillo 5/1/97 PAGE ARTICLE 3 MEMBERSHIP AND VOTING RIGHTS IN MASTER ASSOCIATION . . 10 Section 3.1 Organization of Master Association 10 Section 3.2 Membership 10 Section 3.3 Transfer of Membership 10 Section 3.4 Notice of Transfer 11 Section 3.5 Multiple Ownership 11 Section 3.6 Voting Classes 11 (a) Class A 11 (b) Class B 11 (c) Class C 12 Section 3.7 Voting by Delegates 13 (a) Delegates and Alternate Delegates from Subassociations .. 13 (b) Delegates and Alternate Delegates if No Subassociation ... 13 (c) Number of Delegate Votes 14 (d) No Class B or C Votes 14 (e) Allocation of Delegate Votes 14 Section 3.8 Suspension of Voting Rights 15 Section 3.9 Direct Vote of Members Required For Certain Matters 15 ARTICLE 4 COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIATION 16 Section 4.1 Covenant for Assessments 16 Section 4.2 Purpose of Assessments 16 (a) Generally 16 (b) Possible Suspension of Reserves 17 (c) Cost Center Assessments 17 (d) Cost Center Accounting 17 Section 4.3 Maximum Regular and Special Assessments 17 Section 4.4 Certain Items Not Included 18 Section 4.5 ORE Approved Budget Increases 18 Section 4.6 Special Assessment Exception 18 Section 4.7 Special Assessments For Cost Center Areas 18 Section 4.8 Due Dates; Certification of Payment Status 18 Section 4.9 Non-Lien Assessments (Compliance) 18 Section 4.10 Assessments Levied By City 19 Section 4.11 Schedule of Monetary Penalties 19 Section 4.12 Rate of Assessments 20 (a) Apartment Projects 20 (b) Non-lien Assessments 20 (c) Model Homes 20 (d) Cost Center Assessments 20 Section 4.13 Date of Commencement of Regular Assessments (Other Than Apartment Projects) 20 Section 4.14 Date of Commencement of Regular Assessments (Apartment Projects) 20 Rancho Carrillo 5/1/97 -II- PAGE Section 4.15 Earlier Commencement of Assessments If Specified 20 Section 4.16 Due Dates 21 Section 4.17 Model Homes 21 Section 4.18 Effect of Non-Payment of Assessments; Remedies of the Master Association 21 Section 4.19 Lien Rights 22 Section 4.20 Notice of Release 22 Section 4.21 Foreclosure Procedure; Power of Sale 22 Section 4.22 Subordination of the Lien to First Deeds of Trust and First Mortgages 23 Section 4.23 Estoppel Certificate 23 Section 4.24 Personal Liability of Owner 23 Section 4.25 Taxation of Master Association 23 Section 4.26 Uncompleted Facilities 24 Section 4.27 Capitalization of Master Association 24 (a) Phase 1 24 (b) Other Phases 24 (c) Escrow; Not in Lieu of Assessments; Builder/Declarant Exemption 24 Section 4.28 Assessment Amounts May Differ From Budget 24 ARTICLE 5 INSURANCE AND CONDEMNATION 25 Section 5.1 Insurance 25 (a) General Liability Insurance 25 (b) Officers and Directors 25 (c) Fidelity Bond 25 (d) Master Association Property Insurance 25 (e) If Coverage Not Available 25 (f) Copies of Policies; Provisions 26 (g) Annual Insurance Review 26 (h) Notice Required; Waiver of Subrogation 26 (i) Loan Purchaser Requirements 26 (j) Additional Insurance 26 (k) Owners' Insurance 26 Section 5.2 Condemnation 27 ARTICLE 6 MASTER ASSOCIATION MAINTENANCE RESPONSIBILITIES 27 Section 6.1 Areas to be Maintained 27 Section 6.2 Phasing 27 Section 6.3 Melrose Dam Maintenance 27 Section 6.4 Level of Other Landscape Maintenance 28 Section 6.5 Right To Enter 29 Section 6.6 No Off-Road Vehicles 29 Section 6.7 Maintenance Agreements 29 Section 6.8 City's Rights if Master Association Fails to Maintain 29 Rancho Carrillo 5/1/97 PAGE Section 6.9 Limitation on Liability of Master Association's Directors and Officers 29 (a) Claims Regarding Breach of Duty 29 (b) Other Claims Involving Tortious Acts and Property Damage . 30 ARTICLE 7 MAINTENANCE BY OWNERS AND SUBASSOCIATIONS 30 Section 7.1 Obligation To Maintain 30 Section 7.2 Walls and Fences 30 Section 7.3 Master Association Fences Or Walls Adjoin Separate Interests or Apartment Projects 30 (a) Boundary 31 (b) Maintenance 31 Section 7.4 Replacement of Walls or Fencing 31 Section 7.5 Subassociation Maintenance 31 Section 7.6 Master Association's Right To Maintain Owners' Apartment Projects and Separate Interests 31 Section 7.7 Owners To Notify Master Association 31 Section 7.8 Master Association's Right to Repair Neglected Lots 32 ARTICLE 8 MASTER ARCHITECTURAL COMMITTEE 32 Section 8.1 Multiple Committees Permitted 32 Section 8.2 Members of Master Architectural Committee 32 Section 8.3 Rights of Appointment 32 Section 8.4 Designation of MACs 33 Section 8.5 Architectural Review Procedures 33 (a) Review of Plans and Specifications 33 (b) Scope of Review 33 (c) Criteria 33 (d) No Obligation To Preserve View or Privacy 34 (e) Guidelines; Deposit 34 (f) Subassociation Architectural Controls 34 (g) Approvals May Be Conditioned 34 (h) Period for Approvals 35 (i) Variances 35 (j) No Waiver of Future Approvals 35 (k) Correction of Defects 35 Section 8.6 Meetings of the Master Architectural Committee 37 Section 8.7 Notice of Appointment 37 Section 8.8 Diligence In Construction 37 Section 8.9 Declarant and Guest Builder Exemptions 37 Section 8.10 Apartment Project Exemption 37 ARTICLE 9 ANNEXATION 38 Section 9.1 By Master Association 38 Section 9.2 By Declarant 38 Rancho Carrillo 5/1/97 -IV- PAGE Section 9.3 Deannexation 38 Section 9.4 Supplementary Restrictions 38 Section 9.5 VA 39 Section 9.6 Declarant's Consent Required For Amendment 39 ARTICLE 10 USE RESTRICTIONS 39 Section 10.1 In General 39 Section 10.2 Residential Use 39 Section 10.3 Solar Panels, Antennae, Satellite Dishes 39 Section 10.4 No Time-Share Projects 40 Section 10.5 Signs 40 Section 10.6 Animals . 40 Section 10.7 Nuisances 41 Section 10.8 Drainage 41 Section 10.9 No Hazardous Activities 41 Section 10.10 Unsightly Articles 42 Section 10.11 No Temporary Structures 42 Section 10.12 Garages; Vehicular Restrictions 42 Section 10.13 Installation of Front Yard Landscaping 42 Section 10.14 Outdoor Lighting 43 Section 10.15 Basketball Hoops 43 Section 10.16 Back Yards; No Sheds 43 Section 10.17 Compliance With City Requirements 43 Section 10.18 Owners Responsible for Damage 43 Section 10.19 Construction and Sales Activities 44 Section 10.20 Owners May Not Change Master Association Property 44 Section 10.21 Burning 44 Section 10.22 Site Distance Corridors 44 Section 10.23 Open Space and Fire Suppression Zones 44 Section 10.24 Reduction of Surface Pollutants 44 ARTICLE 11 RIGHTS OF LENDERS 45 Section 11.1 Payments of Taxes or Premiums by First Mortgagees 45 Section 11.2 Priority of Lien of Mortgage 45 Section 11.3 Curing Defaults 45 Section 11.4 Approval of Eligible Mortgage Holders 45 Section 11.5 Termination of Legal Status 46 Section 11.6 Restoration of Master Association Property 46 Section 11.7 Professional Management 47 Section 11.8 Notice to Eligible Mortgagees 47 Section 11.9 Documents to be Available 47 Section 11.10 Conflicts 48 Hancho Carrillo 5/1/97 -V- PAGE ARTICLE 12 ADDITIONAL PROVISIONS 48 Section 12.1 Enforcement 48 Section 12.2 Severability 48 Section 1 2.3 Amendments 48 (a) By Declarant 48 (b) By Members 48 (c) Amendments Material to Mortgagees 49 (d) Amendments To Specific Clauses 50 (e) Reduction of Required Percentage 50 (f) City Approval For Certain Amendments 50 (g) Amendment To Cost Center Provisions 50 Section 12.4 Extension of Master Declaration 50 Section 12.5 Encroachment Easements 51 Section 12.6 Master Association Maintenance of LMD Areas 52 Section 12.7 Cost Center Easements 52 Section 12.8 Easement to Inspect and Test 52 Section 12.9 Information About Public Transportation 52 Section 12.10 Special Responsibilities of Master Association 52 Section 12.11 Litigation ' 53 Section 12.12 Conflicts Between Master Declaration and Subassociation Declaration 53 Section 12.13 FHA and VA Approval 53 Section 12.14 Disclosure of Financing of Schools 53 SUBORDINATION AGREEMENT(S) Rancho Carriflo 5/1/97 -VI- MASTER DECLARATION OF RESTRICTIONS THIS MASTER DECLARATION OF RESTRICTIONS is made as of this day of , 1997, by CONTINENTAL RANCH, INC., a Delaware corporation (hereinafter referred to as "Declarant"), with reference to the following RECITALS: A. Declarant is the owner of substantial portions of that certain real property located in the City of Carlsbad, County of San Diego, California, which is more particularly described on Exhibit "A" attached hereto and by this reference made a part hereof (the "Properties"). The Properties consist of approximately 690 acres of land. Declarant anticipates that it may become the owner of those portions of the Properties not currently owned by Declarant. B. Declarant proposes that the Properties be developed in phases for residential and related uses. If fully developed consistent with current City approvals, there would be approximately 923 detached single-family residences and approximately 735 duplex, triplex, townhome and other attached homes constructed; however, there is no guarantee or assurance that all of the Properties will be developed or developed in any particular sequence or that all of the Properties will become annexed to this Master Declaration. C. The Properties include several planned neighborhood communities referred to as "Villages". Exhibit "B" attached hereto describes the Villages which are presently planned for the Properties. However, such planning is subject to being changed from time to time. D. Separate homeowners associations may be established for particular Villages (such homeowners associations are referred to as "Subassociations"). A separate declaration of restrictions ("Subassociation Declaration") will be recorded for each such Subassociation which is so formed. There is no requirement that a Subassociation be established for any portion of the Properties. Cost Centers (as later defined) may be established for neighborhoods which do not have Subassociations but which do have private streets or which have other commonly maintained amenities which are likely to be used only by the residents of that neighborhood. E. It is intended that each Village will be developed in phases ("Phases") and it is anticipated that there may be concurrent development and marketing of some Phases in more than one Village during the development of the Properties. Initially, this Master Declaration will encumber Village 0. It is intended that additional Villages or Phases within additional Villages will become annexed to this Master Declaration during the course of the development of the Properties. Rancho Carrillo 5/1/97 -1- F. Phase 1 will consist of Separate Interests to be located within Village O. Village O includes Lots of CARLSBAD TRACT NO. ,in the City of Carlsbad, County of San Diego, State of California, according to Map thereof No. . filed in the Office of the County Recorder of San Diego County, California, on . This Master Declaration will establish a Common Interest Development of the kind known as a Planned Development. The Planned Development of the Properties is sometimes referred to in this Master Declaration as "Rancho Carrillo". G. Declarant has established the RANCHO CARRILLO MASTER ASSOCIATION, a nonprofit mutual benefit corporation ("Master Association"), as the entity which will own and/or maintain certain open spaces, slope areas, entryways, walls, and similar areas within the Properties ("Master Association Property"). It is intended that certain open space areas (such as public street parkways and medians) be maintained by a landscaping maintenance district established or to be established by the City of Carlsbad. In addition, it is presently planned that a recreational vehicle parking lot and a recreational facility will be transferred to the Master Association as a part of the Master Association Property in future Phases. Currently it is planned that the recreational vehicle parking lot will be transferred to the Master Association at such time as Separate Interests are subject to the Master Association's regular assessments and that the recreation area will be transferred to the Master Association at such time as Separate Interests are subject to the Master Association's regular assess- ments. However, no assurance is given if or when the recreational vehicle lot or recreational facility will be built or transferred to the Master Association. H. It is not certain whether any Apartment Projects will be constructed within the Properties or, if constructed, whether they would be annexed to this Master Declaration. Declarant shall have the right to annex one or more Apartment Projects within the Properties to this Master Declaration. However, alternatively, the Master Association and an Apartment Project owner may, but shall not be obligated to, enter into an agreement for joint use of Master Association Property and cost sharing purposes, if applicable. I. It is intended that the property subject to this Master Declaration constitute a master planned community as such term is referred to in Section 2792.32 of Title 10 of the California CODE OF REGULATIONS. J. Before selling any of Phase 1, Declarant wishes to impose the following plan of covenants and restrictions on Phase 1. NOW, THEREFORE, Declarant hereby certifies and declares and does hereby establish the following general plan for the protection and benefit of all of the Properties and has fixed and does hereby fix the following protective covenants and restrictions upon each and every ownership interest in Phase 1 (described below) and those additional portions of the Properties which become annexed to this Master Declaration, under which covenants and restrictions each ownership interest therein shall be hereafter, held, used, occupied, leased, sold, encumbered, conveyed and/or transferred. Each and all of said covenants and restrictions are for the purpose of protecting the value and desirability of and shall inure to the benefit of all of the Properties, and shall run with and be binding upon and pass with Phase 1 and, upon annexation, each portion of the Properties which is subsequently annexed to this Master Rancho Carrillo 5/1/97 -2- Declaration and each and every ownership interest therein and shall inure to the benefit of, apply to and bind the respective successors in title or interest of Declarant to Phase 1, and, upon such annexation, additional portions of the Properties. The portions of the Properties to be so annexed may consist of additional Villages or only a certain Phase or Phases within Villages. The portions to be annexed to this Master Declaration may also include Master Association Property. ARTICLE 1 DEFINITIONS Section 1.1. "Apartment Project" shall mean and refer to three (3) or more residences which are on the same lot or parcel, rented to tenants but not within a Common Interest Development as defined in CIVIL CODE § 1351(c). An Apartment Project may be converted to a Common Interest Development with Separate Interests and shall be deemed so converted as to the entire Apartment Project upon the first conveyance to a third party of a separate apartment unit located in such project. Section 1.2. "Articles" shall mean and refer to the Articles of Incorporation of the Master Association as they may from time to time be amended. Section 1.3. "Board" shall mean and refer to the Board of Directors of the Master Association. Section 1.4. "Bylaws" shall mean and refer to the Bylaws of the Master Association as they may from time to time be amended. Section 1.5. "Carlsbad Brush Requirements" shall mean and refer to the brush control specifications contained in the City of Carlsbad Landscape Manual adopted by the City of Carlsbad on November 13,1990 together with (and as may be modified by) the particular brush management program approved by the City for the Rancho Carrillo project as the City of Carlsbad Landscape Manual or the brush management program(s) may be revised from time to time. Section 1.6. "City" shall mean the City of Carlsbad. Section 1.7. "Common Interest Development" shall mean and refer to any of the following types of projects: Condominium, community apartment, planned development or a stock cooperative, as such projects are defined under California law. Section 1.8. "Cost Center Amenities" shall mean and refer to those Master Association maintained amenities which are located within the Cost Center Area and are likely to be used primarily by the Owners within the Cost Center Area. The instrument (e.g., the Notice of Declaration of Annexation) which identifies a Cost Center Area shall also identify the applicable Cost Center Amenities. Two examples of amenities which may be Cost Center Amenities are (i) private streets which are internal to a Cost Center Area and which generally Rancho Carrillo 5/1/97 -3- serve primarily that area and (ii) a private park which generally serves a Cost Center Area but is isolated from other portions of the Properties and not likely to be used by Owners outside of the Cost Center Area. Section 1.9. "Cost Center Area" shall mean and refer to a portion of the Properties which has been designated to be within a specific Cost Center Area by a recorded document (such as a Notice of Declaration of Annexation) signed by Declarant and signed by each person who owns any portion of such area at the time the document designating the Cost Center Area is recorded. Although Cost Center Areas may be designated for Apartment Projects as well as Separate Interests, it is not intended that the same Cost Center Area include both Separate Interests and an Apartment Project. It is not intended that Cost Center Areas will be established for commonly maintained slopes, medians, parkways or for brush removal purposes. Section 1.10. "Cost Center Assessments" shall mean and refer to an additional component of Master Association regular assessments or special assessments against the Separate Interests or Apartment Project, which lie within a particular Cost Center Area, for payment of the operating costs and reserves and other items applicable to the Cost Center Amenities within the Cost Center Area. Reference to "regular assessments" or "special assessments" in this Master Declaration shall also refer to the Cost Center Assessments with respect to the Separate Interests or Apartment Project within a Cost Center Area. Section 1.11. "Declarant" shall mean and refer to CONTINENTAL RANCH, INC., a Delaware corporation. Declarant shall also refer to (i) the assigns of Declarant who are expressly assigned the rights of Declarant (any such assignment need not be of all of the rights of Declarant), and (ii) successors of Declarant who become successors by operation of law or by exercise of the remedies under a mortgage, deed of trust or deed in lieu of foreclosure. Section 1.12. "Delegate" shall mean and refer to the natural person selected to represent all the Class A Members within the Delegate District and to vote on their behalf, as further provided in this Master Declaration and in the Bylaws. Section 1.13. "Delegate District". Each group of Separate Interests which are under the jurisdiction of the same Subassociation shall comprise a separate Delegate District. Those Separate Interests, if any, which are not within the jurisdiction of any Subassociation shall be within the Delegate District described by documents executed by Declarant and recorded from time to time with the County Recorder of the County of San Diego. Declarant anticipates that there will be a separate Delegate District established for each Village within Rancho Carrillo. The first Delegate District is hereby designated as Village O Delegate District which will include the Separate Interests in Phase 1 and any additional Separate Interests which are added to such Delegate District by means of a recorded instrument(s) executed by Declarant from time to time. Section 1.14. "Eligible Insurer or Guarantor" shall mean and refer to an insurer or governmental guarantor who has requested notice from the Master Association of those matters which such insurer or guarantor is entitled to notice of by reason of this Master Declaration or the Bylaws of the Master Association and who has provided the Master Rancho Carrillo 5/1/97 -4- Association with the address to which such notice is to be sent and the Separate Interest number which is encumbered by a Mortgage in which it has an interest. Section 1.15. "Eligible Mortgage Holder" shall mean and refer to a holder of a first Mortgage on a Separate Interest or Apartment Project who has requested notice from the Master Association of those matters which such holder is entitled to notice of by reason of this Master Declaration or the Bylaws of the Master Association and who has provided the Master Association with the address to which such notice is to be sent and the Separate Interest unit number which is encumbered by a Mortgage in which it has an interest. Section 1.16. "FHA" shall mean and refer to the Federal Housing Administration. Section 1.17. "FHLMC" shall mean and refer to the Federal Home Loan Mortgage Corporation. Section 1.18. "FNMA" shall mean and refer to the Federal National Mortgage Association. Section 1.19. "GNMA" shall mean and refer to the Government National Mortgage Association. Section 1.20. "Guest Builder" shall mean and refer to the following persons if so designated by Declarant: Each person (including any legal entity) who acquires a portion of the Properties for the purpose of improving such portion for resale to the general public. "Guest Builder" shall not mean and refer to Declarant or any successive Declarant. No person shall be deemed to be a Guest Builder unless Declarant so designates such person in writing. Section 1.21. "Master Association" shall mean and refer to RANCHO CARRILLO MASTER ASSOCIATION, a California Nonprofit Mutual Benefit Corporation, its successors and assigns. Section 1.22. "Master Association Property" shall mean all real property, easements, interests in real property and licenses owned by or transferred to the Master Association for the common benefit of the Owners. The Master Association Property shall be deemed "common area" as defined in California CIVIL CODE Section 1351 (b). The Master Association Property which is a part of Phase 1 is described as follows: [Describe the Master Association Property for Phase 1] Exhibit "B" attached hereto generally shows those areas which it is presently believed will become the Master Association Property during the course of the development of Properties. However, Exhibit "B" is tentative. The locations of the areas shown on Exhibit "B" are subject to change, the Master Association Property is not limited to the areas shown on Exhibit "B" Rancho Carr/7/o 5/1/97 -5- and no assurance is given that all the area shown on Exhibit "B" will be annexed to this Master Declaration or become part of the Master Association Property. The Master Association Property may include slopes outside of the Properties, including those slope maintenance easements granted by those certain easement agreements ("Bressi Slope Easements)" recorded , 1997 as Document No. 1997- , recorded , 1997 as Document No. 1997- , and recorded , 1997 as Document No. 1997- , Official Records of San Diego County, California. Declarant shall have the right to transfer to the Master Association its slope maintenance and related indemnity obligations under the Bressi Slope Easements. Section 1.23. "Master Declaration" shall mean and refer to this Master Declaration of Restrictions as it may be amended from time to time. Section 1.24. "Member" shall mean and refer to each Owner entitled to membership in the Master Association pursuant to the Article herein entitled "MEMBERSHIP AND VOTING RIGHTS IN MASTER ASSOCIATION". Section 1.25. "Mortgage" shall mean and refer to a Deed of Trust as well as a mortgage. Section 1.26. "Mortgagee" shall mean and refer to the beneficiary of a Deed of Trust as well as the mortgagee of a mortgage encumbering a Separate Interest. Section 1.27. "Owner" means and refers to the person or persons, firm, corporation, partnership or other entity who are alone or collectively the record owner of a fee simple title to a Separate Interest or Apartment Project, including Declarant and Guest Builders, but excluding those having any such interest merely as security for the performance of an obligation. The term "Owner" shall include both the vendor and the vendee under an installment land sales contract (as described in Sections 2985 through 2985.6 of the California CIVIL CODE), as well as the holder of a leasehold estate having a term of ten (10) or more years, including renewal periods. Section 1.28. "Phase" shall mean and refer to a group of Separate Interests which is annexed hereto and designated by Declarant as a separate Phase by a document (which may be the Notice of Declaration of Annexation) executed by Declarant and recorded with the County Recorder of the County of San Diego. If a Guest Builder has record title ownership of the Separate Interests at the time of such recordation, the document to be recorded shall also be signed by the Guest Builder. Should Declarant not have made a contrary designation, each group of Separate Interests which have been made subject to this Master Declaration and are covered by a separate final subdivision public report issued by the California Real Estate Commissioner shall constitute a separate Phase. Phase 1 shall be deemed a separate Phase. Each Apartment Project which has been annexed hereto, if any, shall also be deemed a separate Phase. Section 1.29. "Phase 1" means and refers to the following described detached residences to be built within Village 0 which are to be covered by the first final subdivision public report issued by the California Real Estate Commissioner for any portion of Village 0: Rancho Carrillo 5/1/97 -6- There will be additional Phases within Village O. Section 1.30. "Retail Buyer" means an Owner of a Separate Interest who acquires his or her Separate Interest by authority of a final subdivision public report issued by the Real Estate Commissioner of the State of California. "Retail Buyer" does not refer to Declarant or a Guest Builder. Section 1.31. "Villages" means and refers to those areas designated on Exhibit "B" attached hereto as Villages. However, Declarant shall have the right to change the Village designations of any portion of the Properties except for Separate Interests which have been conveyed to Retail Buyers. Any such re-designations may be in Declarations of Annexation or another recorded instrument. This Master Declaration initially encumbers only Phase 1 of Village O. Section 1.32. "Properties" shall mean and refer to that certain real property described in Recital A to this Master Declaration. Section 1.33. "Separate Interest" shall have the same meaning as is set forth in CIVIL CODE § 1351(1). Two examples of Separate Interests are an individual unit in a condominium project and an individual lot or parcel in a planned development project. Unless stated other- wise, reference to a "Separate Interest" shall refer to the residence together with other improvements located outside the residence but within the Separate Interest. A residential structure which includes a main residence and a "granny flat" shall be deemed a single Separate Interest unless shown otherwise on a condominium plan or subdivision map. "Separate Interest" does not refer to an Apartment Project. Section 1.34. "VA" shall mean and refer to the Department of Veterans Affairs. ARTICLE 2 MASTER ASSOCIATION PROPERTY Section 2.1. Status of Title to Master Association Property. All Master Association Property which is transferred to the Master Association shall be transferred subject to this Master Declaration, together with those covenants, conditions, restrictions, easements, dedications and other encumbrances of record and reservations set forth on the deed of conveyance; however, no Master Association Property will be transferred to the Master Association subject to any Mortgages or other monetary liens other than non-delinquent general and special taxes and assessments. Section 2.2. Transfer of Master Association Property. The following open space lots within CT No. 93-08, Map No. : Rancho Carrillo 5/1/97 -7- shall be transferred to the Master Association prior to close of the first escrow for the sale to a Retail Buyer of a Separate Interest in the last Phase which is located within CT No. 93-08. The open space lots which are shown on each other recorded final subdivision map for other portions of the Properties which become annexed hereto shall be transferred to the Master Association prior to close of the first escrow for the sale to a Retail Buyer of a Separate Interest in the last Phase which is located within such final subdivision map. Section 2.3. Master Association Management. The Master Association shall manage and control the Master Association Property. Use of the Master Association Property will be subject to the following: (a) The Master Association shall have the right to charge for reasonable admission and other fees for use of any portion of the Master Association Property and to adopt rules and regulations regarding use of the Master Association Property, but in doing so, the Board shall not distinguish between Owners or occupants of Separate Interests and tenants in an Apartment Project which has been annexed hereto. The Master Association shall have the right to enter into agreements which allow the use of the Master Association Property by persons who are not Members (e.g., tenants of an apartment project not annexed hereto) on such terms and conditions as are acceptable to the Board. (b) The Master Association shall have the right to suspend an Owner's voting rights and right to use of any portion of the Master Association Property for any period during which any assessment against his or her Separate Interest or Apartment Project remains unpaid; and for a period not to exceed thirty (30) days for any infraction of its published rules and regulations. No such suspension shall be effective unless the Owner has been given fifteen (15) days' prior notice of the suspension and the reasons therefor and the Owner has been given an opportunity to be heard by the Board, orally or in writing, not less than five (5) days prior to the effective date of the suspension. Notice may be given to the Owner by any method reasonably calculated to provide actual notice, but if given by mail must be given by first-class or registered mail sent to the last address of the Owner shown on the records of the Master Association. In no event will the Master Association have the right to suspend the right of access of an Owner to his or her Separate Interest or Apartment Project. (c) The Master Association Property shall be subject to any dedicated public rights and any third party easements or other rights which may exist of record. For example, the right to use the Master Association Property shall be subject to the provisions of any open space easements or similar interests dedicated to the City of Carlsbad or any other governmental or quasi-governmental entity on any subdivision map (or otherwise) covering the Properties or any portion of the Properties. Rancho Carrillo 5/1/97 -8- (d) The Master Association Property shall be subject to the provisions of the Carlsbad Brush Requirements. (e) The Master Association shall have the right, in accordance with the Articles and Bylaws, to borrow money for the purpose of improving any Master Association Property, and with the assent of a majority of each class of Members, hypothecate any or all real or personal property owned by the Master Association. (f) The Master Association shall have the right to dedicate any of the Master Association Property to any public agency or any public interest environmental or charitable organization. (g) The Master Association shall have the right to adjust boundaries between any Master Association Property and any adjoining property subject to the approval of the adjoining property owner. (h) Declarant and its agents, employees and independent contractors and Guest Builders shall have: (i) A non-exclusive easement over the Master Association Property for the purpose of making repairs and for the purpose of constructing, marketing, leasing and maintaining any portion of the Properties and maintaining sales and construction offices; and (ii) the right to the non-exclusive use of the Master Association Property by Declarant and Guest Builders for the purpose of maintaining signs, flags and similar improvements reasonably appropriate for marketing any portion of the Properties. The rights under this Subsection (ii) shall continue for a period of not more than (A) five (5) years after annexation of all the Properties, or (B) the sale of all Separate Interests within the Properties, whichever shall first occur. Declarant shall be obligated to restore any damage which results from exercise of these rights. (i) Declarant shall have the right to reasonably use any clubhouse or other recreational facilities within the Master Association Property for promotional and marketing activities and Declarant shall have the right to reasonably demonstrate any recreational facilities to prospective purchasers. The use of the Master Association Property by Declarant and its agents shall not unreasonably interfere with the use thereof, if any, by the Class A Members of the Master Association. Notwithstanding any other provision hereof, all rights of the Master Association and Owners with respect to the Master Association Property are subject to all limitations Kancho Carrillo 5/1/97 -9- imposed by any open space easements dedicated to the City of Carlsbad, the Carlsbad Brush Requirements and all other items of record. Section 2.4. City Easement. The City shall have an easement over the Master Association Property for maintenance purposes which may be exercised upon the failure of the Master Association to maintain the Master Association Property, pursuant to this Master Declaration, and in accordance with the City's conditions of approval of final subdivision maps covering portions of the Properties. Section 2.5. Delegation of Use. Any Owner may delegate, in accordance with the Bylaws, his or her rights of enjoyment, if any, to the Master Association Property to the members of his or her family, his or her tenants or contract purchasers who reside within his or her Separate Interest or Apartment Project. However, no such delegation by an Owner will in any way extinguish, limit or otherwise release the Owner of any obligations or duties imposed on the Owner by this Master Declaration and other governing documents. ARTICLE 3 MEMBERSHIP AND VOTING RIGHTS IN MASTER ASSOCIATION Section 3.1. Organization of Master Association. The Master Association is organized as a California corporation under the California Nonprofit Mutual Benefit Corporation Law and is charged with the duties and vested with the powers prescribed by law and set forth in the Articles, Bylaws and this Master Declaration. Neither the Articles nor the Bylaws shall be amended so as to be inconsistent with this Master Declaration. In the event that there should exist any ambiguity in any provision of the Articles or Bylaws, then the provision shall be construed, to the extent possible, so that the provision shall be consistent with this Master Declaration. Section 3.2. Membership. Each Owner (including Declarant and Guest Builders) of one or more Separate Interests or Apartment Projects shall be a Member of the Master Association. Membership in the Master Association shall be subject to the terms and provisions of the Articles, Bylaws and the Board rules and regulations to the extent the provisions thereof are not in conflict with the provisions of this Master Declaration. Tenants of Separate Interests or Apartment Projects will not be Members of the Master Association. Section 3.3. Transfer of Membership. Membership in the Master Association shall be appurtenant to the Separate Interest or Apartment Project owned by each Owner, and transfer of the Separate Interest or Apartment Project shall automatically transfer the membership in the Master Association. A membership shall not be transferable or assignable, except to the person to whom title to the Separate Interest or Apartment Project is transferred. Ownership of a Separate Interest or Apartment Project shall be the sole qualification for membership in the Master Association. Any attempt to make a prohibited transfer of a membership shall be void and shall not be reflected on the books of the Master Association. A Member shall have the right to assign his or her rights of use and enjoyment of the Master Association Property to a tenant of his or her Separate Interest or Apartment Project in accor- dance with this Master Declaration. Kancho Carrillo 5/1/97 -10- Section 3.4. Notice of Transfer. Each Owner shall inform the Master Association of the name of the purchaser of his or her Separate Interest or Apartment Project upon transfer to the successive Owner and, in the event the Owner should fail or refuse to do, the Board shall have the right to record the transfer upon the books of the Master Association without such notice. The Master Association may levy a reasonable transfer fee limited to the Master Association's actual costs to change its records, as a special assessment against each new Owner and his or her Separate Interest or Apartment Project to reimburse the Master Asso- ciation for the administrative cost of recording the transfer of the membership to the new Owner in the records of the Master Association. Section 3.5. Multiple Ownership. When more than one person, partnership, corporation, firm or other entity owns a portion of the interest in a Separate Interest or Apartment Project or when there is more than one Owner of a Separate Interest or Apartment Project (as in the case of the vendor and the vendee under an installment land sales contract, or as in the case of a leasehold estate exceeding ten (10) years) each such person shall be a Member and, at any duly constituted meeting of the Members in a Delegate District, the vote for the Separate Interest or Apartment Project shall be exercised as they among themselves determine, but in no event shall more votes be cast with respect to any Separate Interest or Apartment Project than could be cast if there were only one Owner. Unless the Board receives written objection in advance, if any Owner casts a vote, it will thereafter be conclusively presumed for all purposes that he or she was acting with the authority and consent of all other Owners of the respective Separate Interest or Apartment Project. Section 3.6. Voting Classes. The Master Association shall have three (3) classes of voting membership, as follows: (a) Class A. Initially, Class A Members shall be: (i) all Owners of Separate Interests, with the exception of Declarant and Guest Builders; and (ii) all Owners of Apartment Projects, including Declarant and Guest Builders. Each Class A Member shall be entitled to one (1) vote for each Separate Interest which he or she owns and one-half (Vz) of one (1) vote for each separate apartment unit which is located within an Apartment Project which he or she owns. No votes shall, however, be attributable to a Separate Interest until the Master Association's regular assessments have commenced against the Separate Interest pursuant to the Article below entitled "COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIATION". Votes will be attributable to an Apartment Project only to the extent the Master Association's regular assessments have commenced against the Apartment Project pursuant to the Article below entitled "COVENANT FOR MAINTENANCE ASSESS- MENTS TO MASTER ASSOCIATION". Declarant and Guest Builders shall become Class A Members with regard to Separate Interests owned by Declarant or the Guest Builders upon the conversion of Declarant's or the Guest Builder's Class B membership to Class A membership as provided below. (b) Class B. The Class B Members shall be Declarant and Guest Builders. The Class B Members shall be entitled to three (3) times the number of votes to which the Class B Members would have been entitled as Class A Members for the Separate Ftancho Camllo 5/1/97 -11- Interests owned by the Class B Members. No votes shall, however, be attributable to a Separate Interest until the Master Association's regular assessments have commenced against the Separate Interest pursuant to the Article below entitled "COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIATION". No Class B membership shall be attributable to Apartment Projects. The Class B member- ship shall forever cease as to all Separate Interests and be converted to Class A mem- bership on the happening of any of the following events, whichever occurs earlier: (i) When the Master Association's regular assessments have commenced against an aggregate of 1,235 Separate Interests and apartment units in Apartment Projects; (ii) On the fifth anniversary following the most recent conveyance to a Retail Buyer of the first Separate Interest in any Phase; (iii) On the twenty-fifth anniversary of the first conveyance of a Separate Interest to a Retail Buyer. A Class B Member shall have the right to cause earlier conversion of its membership to Class A by so notifying the Secretary of the Master Association in writing. (c) Class C. In addition to other memberships it may hold, Declarant shall be the sole Class C Member of the Master Association. The Class C membership shall be considered a part of the Master Association's voting power for the sole purpose of the Class C Member electing a majority of the directors of the Master Association, and reference to "each class of membership" in this Master Declaration or in the Bylaws or the Articles shall not refer to Class C membership for any purpose other than election of Master Association directors. The directors shall be elected as set forth in the Bylaws. The Class C membership shall forever cease on the happening of any of the following events, whichever occurs earlier: (i) When the Master Association's regular assessments have commenced against an aggregate of 1,235 Separate Interests and apartment units in Apartment Projects; (ii) On the fifth anniversary following the most recent conveyance to a Retail Buyer of the first Separate Interest in any Phase.; (iii) On the twenty-fifth anniversary of the first conveyance of a Separate Interest to a Retail Buyer. The Class C member shall have the right to cause early termination of the Class C membership or to reduce the number of directors which the Class C member is entitled to appoint by so notifying the Secretary of the Master Association in writing. Anything herein stated to the contrary notwithstanding, this Section shall not be amended to affect Class B or C voting rights without Declarant's prior written consent. Rancho Carrillo 5/1/97 -12- Section 3.7. Voting by Delegates. (a) Delegates and Alternate Delegates from Subassociations. The Properties shall be divided into Delegate Districts for purposes of casting Class A votes, as described in this Article and as described in the Section entitled "Delegate District" of the Article above entitled "DEFINITIONS". Each Delegate District which is comprised of Separate Interests under the jurisdiction of a Subassociation shall be represented by the person elected by the Class A Members of the Subassociation as the Delegate. The Subassociation's Class A Members shall also designate another person to be an Alternate Delegate who shall have and shall exercise the powers and duties of the Dele- gate for that Delegate District whenever the Delegate is absent, disabled or unable to act. The Subassociation's Declaration of Restrictions and/or Bylaws may set forth the procedure whereby such Delegate and Alternative Delegate are elected by the members of the Subassociation who are Class A Members of the Master Association. Should such procedures not be set forth, the procedures set forth in this Section shall apply to election of the Delegates and Alternate Delegates. (b) Delegates and Alternate Delegates if No Subassociation. The District's Delegate and Alternate Delegate shall be selected as follows for any Delegate District comprised of Separate Interests not within the jurisdiction of a Subassociation. (i) Each such Delegate District which is established for Separate Interests not covered by a Subassociation shall hold an annual meeting of its Class A Members prior to the annual meeting of all Members of the Master Association. At the first meeting of each Delegate District's Class A Members and at each subsequent annual meeting, the Class A Members of such Delegate District shall elect (A) one (1) Delegate to the Master Association to exercise the Class A voting power of all of the Members within the Delegate District and (B) one (1) Alternate Delegate, who shall have and shall exercise the powers and duties of the Delegate for that Delegate District whenever the Delegate is absent, disabled or unable to act. (ii) The chairman of any meeting at which the Delegate and the Alternate Delegate are elected shall certify in writing to the Board the name and address of the Delegate and the Alternate Delegate elected, the time and place of the meeting at which the election occurred, and the Delegate District which the Delegate and the Alternate Delegate represent. (iii) The Delegate and the Alternate Delegate shall continue in office for one (1) year or until their successors are elected, whichever is later, except that a Delegate or an Alternate Delegate may be removed without cause by the vote in person or by proxy at any duly constituted meeting of at least a majority of the Class A voting power of the Members in the Delegate District. (iv) Only Members of the Master Association or, if a Member is a corporation or partnership or similar entity, the authorized agent of such entity, shall be eligible for election as a Delegate or an Alternate Delegate. Upon Rancho Carrillo 5/1/97 -13- termination of any Delegate's or Alternate Delegate's membership in the Master Association, the Delegate's or Alternate Delegate's term of office shall immediately terminate and a new Delegate or Alternate Delegate shall be elected in his or her place. (v) The Delegate and the Alternate Delegate shall be elected in accor- dance with the voting procedures set forth herein and in the Bylaws. (c) Number of Delegate Votes. At each annual or special meeting of Members of the Master Association, each Delegate shall be entitled to cast the Class A voting power for all of the Separate Interests located in the Delegate District represented by the Delegate against which the Master Association's regular assessments have commenced pursuant to the Article below entitled "COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIATION". If the Delegate District consists of an Apartment Project, the Delegate shall be entitled to cast the Class A voting power equal to one-half (%) of one (1) vote for each separate apartment unit within the Apartment Project, provided the Master Association's regular assessments have commenced against the Apartment Project pursuant to the Article below entitled "COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIA- TION". Should an Apartment Project be developed incrementally, then the number of Class A votes attributable to the Apartment Project shall be equal to one-half (Vz) of the number of apartment units which are "located" in such project pursuant to the Section below entitled "Date of Commencement of Regular Assessments (Apartment Projects)" as of the date of the vote. (d) No Class B or C Votes. No Delegate will have any authority to cast any votes except the Class A votes for his or her District. Declarant alone shall have the right to cast the Class C votes, and Declarant and each Guest Builder will have the right to cast their respective Class B votes at any annual or special meeting of Members of the Master Association or on any other applicable occasion. Nothing herein stated shall be deemed to prevent Declarant or any Guest Builder from appointing a proxy to cast votes. (e) Allocation of Delegate Votes. A Delegate (other than a Delegate of an Apartment Project) shall have the authority, in his or her sole discretion, to call a special meeting of the Members within his or her Delegate District for the purpose of obtaining instructions as to the manner in which he or she is to vote on any issue to be voted on by the Delegates. Thereafter, the Delegate representing the Delegate District shall cast all of the voting power in the Delegate District in the same proportion, as nearly as possible without counting fractional votes, as the Members in the Delegate District shall have cast their voting power "for" and "against" such issue in person or by proxy. With respect to all other voting issues, a Delegate shall cast his or her District's voting power in the manner as he or she may, in his or her sole discretion, deem appropriate, acting on behalf of all the Members owning Separate Interests in his or her Delegate District. When a Delegate is voting in his or her own discretion, without instruction from the Members whom he or she represents, the Delegate may cast all of the votes which he or she represents as a unit, or the Delegate Rancho Carrillo 5/1/97 -14- may apportion the votes and cast some votes in favor of a given proposition and some votes in opposition to the proposition. Each Delegate personally, and not by proxy, shall cast the votes which he or she represents. It will be conclusively presumed for all purposes of Master Association business that any Delegate casting votes on behalf of the Members owning Separate Interests in his or her Delegate District has acted with the authority and consent of all the Members. All agreements and determinations lawfully made by the Master Association in accordance with the voting procedures established herein, and in the Bylaws, shall be deemed to be binding on all Members, and their successors and assigns. Section 3.8. Suspension of Voting Rights. As provided in the Article above entitled "MASTER ASSOCIATION PROPERTY", the Board shall have the authority, after notice and hearing, to suspend the voting rights of any Member for any period during which the payment of any assessment against the Member and his or her Separate Interest or Apartment Project remains delinquent. Any suspension of the voting rights of any Member for non-payment of any assessment shall not constitute a waiver or discharge of the Member's obligations to pay the assessments provided for herein. Suspension of a Class A Member's voting rights shall result in suspension of such Member's vote by the applicable Delegate. Section 3.9. Direct Vote of Members Required For Certain Matters. Voting for the following matters shall be by Members of the Master Association who are Owners of Separate Interests and not by their Delegates: (a) A vote to approve assessment increases pursuant to the Section below entitled "Maximum Regular and Special Assessments" of the Article below entitled "COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIATION"; (b) A vote to approve an amendment to this Master Declaration pursuant to the Section below entitled "Amendments" of the Article below entitled "ADDITIONAL PROVISIONS"; (c) A vote to approve an amendment to the Bylaws pursuant to the Section of the Bylaws entitled "By Members" of the Article in the Bylaws entitled "AMENDMENTS". (d) A vote to elect or remove a Delegate shall be by Members of the Delegate District to which such Delegate is to be elected or from which such Delegate is to be removed. (e) A vote by the Members pursuant to the Section below entitled "Special Responsibilities of Master Association" of the Article entitled "ADDITIONAL PROVISIONS"; (f) A vote to approve the sale of property of the Master Association during any fiscal year having an aggregate fair market value in excess of five percent (5%) of the budgeted gross expenses of the Master Association for the fiscal year, pursuant to Rancho Carrillo 5/1/97 -15- the Section of the Bylaws entitled "General Rights and Powers; Borrowing Money; Selling Master Association Property"; (g) A vote to approve aggregate capital expenditures during any fiscal year in excess of five percent (5%) of the budgeted gross expenses of the Master Association for that fiscal year, pursuant to the Section of the Bylaws entitled "Restoration and Replacement; Capital Expenditures"; and (h) A vote to approve a service or management contract with a term longer than one (1) year, pursuant to the Section of the Bylaws entitled "Goods and Services". ARTICLE 4 COVENANT FOR MAINTENANCE ASSESSMENTS TO MASTER ASSOCIATION Section 4.1. Covenant for Assessments. Declarant, for each Separate Interest or Apartment Project owned within the Properties, hereby covenants, and each Owner of a Separate Interest or Apartment Project by acceptance of a deed therefor, whether or not it shall be so expressed in such deed, is deemed to covenant and agree to pay to the Master Association: (i) regular assessments and (ii) special assessments, such assessments to be established and collected as hereinafter set forth and as provided in the Bylaws. Any assessment shall be deemed delinquent if not paid within fifteen (15) days after it becomes due. The regular and special assessments, together with interest at the rate of twelve percent (12%) per annum commencing thirty (30) days after the assessment becomes due, costs, late charges equal to $10.00 or ten percent (10%) of the delinquent assessment, whichever is greater, and reasonable attorney's fees, shall, except as stated below, be a continuing lien upon the Separate Interest or Apartment Project against which each such assessment is made, the lien to become effective upon recordation of a notice of assessment. Each such assess- ment, together with interest, costs, late charges and reasonable attorney's fees shall also be the personal obligation of the person who was the Owner of such Separate Interest or Apartment Project at the time when the assessment fell due. The personal obligation for delinquent assessments shall not pass to an Owner's successors in title unless expressly assumed by them. No Owner of a Separate Interest or Apartment Project may exempt himself or herself from liability for assessments by waiver of the use or enjoyment of any of the Master Association Property or by abandonment of his or her Separate Interest or Apartment Project. Declarant shall pay all assessments levied by the Master Association against any Separate Interest or Apartment Project owned by it at the same time, in the same manner and in the same amounts as any other Owner. Section 4.2. Purpose of Assessments. (a) Generally. The assessments levied by the Master Association shall be used exclusively to promote the health, safety and welfare of all the residents in all the Phases and for the improvement and maintenance of the Master Association Property for the common good of all the Phases, to discharge the Master Association's obligations under this Master Declaration and the Bylaws, and to reimburse the Master Rancho Carrillo 5/1/97 -16- Association for the costs incurred in bringing an Owner into compliance with the Bylaws, this Master Declaration and the rules and regulations adopted by the Board. The regular assessments shall include an adequate reserve fund for the periodic maintenance, repair and replacement of those portions of the Master Association Property where appropriate. (b) Possible Suspension of Reserves. Reserves for certain items may be suspended for a limited period pursuant to a maintenance or subsidy agreement between Declarant or a Builder and the Master Association, the terms of which have been approved by the California Department of Real Estate. (c) Cost Center Assessments. Cost Center Assessments component of the regular assessments levied by the Master Association against the Separate Interests or Apartment Project within a Cost Center Area shall be used exclusively for the operational costs and reserves applicable to the Cost Center Amenities within the Cost Center Area. Cost Center Assessments may include, without limitation, estimated or actual costs and expenses incurred by the Master Association in connection with administrating the Cost Center Area, maintaining, repairing and replacing the Cost Center Area amenities, obtaining and maintaining insurance coverage related to the Cost Center Area amenities, providing utility services to the Cost Center Area amenities and funding reasonable reserves for the repair or replacement of Cost Center Area amenities. (d) Cost Center Accounting. The Master Association shall provide for separate accounting for funds which are collected and expended on behalf of Cost Center Area. The Master Association shall also provide for the reserve study and the annual review and disclosure of the reserves applicable to a Cost Center Area. Section 4.3. Maximum Regular and Special Assessments. The Board shall levy regular and special assessments sufficient to perform the obligations of the Master Association as provided in this Master Declaration and the Bylaws; provided, however, except for assessment increases necessary for emergency situations: (a) the Board may not increase the regular assessments for any fiscal year unless the Board has complied with the provisions of California CIVIL CODE §1365.5 (preparation and distribution of the budget), and (b) the Board may not impose annual regular assessments which are in aggregate more than twenty percent (20%) greater than the annual regular assess- ments for the Master Association's preceding fiscal year nor special assessments which in the aggregate exceed five percent (5%) of the budgeted gross expenses of the Master Association for the fiscal year, without the approval of Owners casting a majority of the votes at a meeting or election of the Association conducted in accordance with Chapter 5 (commencing with §7510) of Part 3 of Division 2 of Title 1 of the California CORPORATIONS CODE and §7613 of the California CORPORATIONS CODE at which a quorum was present or participated. For purposes of this Rancho Carrillo 5/1/97 -17- Section 4.3, "quorum" means more than fifty percent (50%) of the Owners. An emergency situation is any one of the following: (1) An extraordinary expense required by an order of a court; (2) An extraordinary expense necessary to repair or maintain any Phase(s) or any part of it for which the Master Association is responsible where a threat to personal safety is discovered; (3) An extraordinary expense necessary to repair or maintain any Phase(s) or any part of it for which the Master Association is responsible that could not have been reasonably foreseen by the Board in preparing and distributing the proforma operating budget under Section 1365 of the California CIVIL CODE. However, prior to the imposition or collection of an assessment under this Subsection (3), the Board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the Members of the Master Association with the notice of assessment. Section 4.4. Certain Items Not Included. Sums assessed against Owners pursuant to the Section below entitled "Non-Lien Assessments (Compliance)" shall not be considered in calculating the increases in assessments. Section 4.5. DRE Approved Budget Increases. Notwithstanding the above stated limitation against increases in general assessments, the Board may increase regular assessments more than 20% if such increase was shown on a Master Association budget approved by the California Real Estate Commissioner, provided such increase is consistent with the requirements of California law. Section 4.6. Special Assessment Exception Notwithstanding the above stated limitation against increases in special assessments, the Board may levy special assessments pursuant to the Section in the Bylaws entitled "Limitation on Expenditure of Reserve Funds". Section 4.7. Special Assessments For Cost Center Areas. Special assessments may also be levied against the Separate Interests or Apartment Project within a Cost Center Area when they are directly related to the Cost Center Amenities within such Cost Center Area. Section 4.8. Due Dates: Certification of Payment Status. The due dates shall be established by the Board. The Master Association shall, within ten (10) days of delivery of a written request and for a fee which does not exceed the Master Association's reasonable cost to prepare and reproduce the certificate, furnish a certificate signed by an officer of the Master Association or its agent setting forth whether the assessments on a specified Apartment Project or Separate Interest have been paid. If a certificate states an assessment has been paid, such certificate shall be conclusive evidence of such payment. Section 4.9. Non-Lien Assessments (Compliance). The Master Association may also impose a special assessment against any Member as a monetary penalty and/or to reimburse Rancho Carrillo 5/1/97 -18- the Master Association for costs incurred in bringing a Member and/or his or her Separate Interest or Apartment Project or tenants into compliance with the provisions of this Master Declaration, the Articles, the Bylaws or the Master Association rules and regulations, which assessment may be imposed upon the vote of the Board after notice and an opportunity for a hearing which satisfy the requirements of Section 7341 of the California CORPORATIONS CODE, as set forth in the Bylaws; provided, however, that except to the extent such special assessment is to reimburse the Master Association for the cost of collecting assessments, the special assessment shall not constitute a lien on the Owner's Separate Interest or Apartment Project and shall be assessed only against the Owner which is or was in non-compliance. This Section does not refer to charges imposed against an Owner which are late payment charges allowed by California law for delinquent assessments, nor charges to reimburse the Master Association for the loss of interest and for costs reasonably incurred (including attorney's fees) in its efforts to collect delinquent assessments. Section 4.10. Assessments Levied By City. In the event the City performs main- tenance of the Master Association Property as provided in Section 6.8, the City shall submit a written invoice to the Master Association for all costs incurred by the City to perform such maintenance of the Master Association Property. The City shall provide a copy of such invoice to each Owner, together with a statement that if the Master Association fails to pay such invoice in full within the time specified, the City will pursue collection against the Owners pursuant to the provisions of this Section and Section 6.8 below. The invoice shall be due and payable by the Master Association within twenty (20) days of receipt by the Master Association. If the Master Association fails to pay such invoice in full within the period specified, payment shall be deemed delinquent and shall be subject to a late charge in an amount equal to six percent (6%) of the amount of the invoice. Thereafter, the City may pursue collection from the Master Association by means of any remedies available in law or in equity. Without limiting the generality of the foregoing, in addition to all other rights and remedies available to the City, the City may levy a special assessment against the Owners of each Separate Interest in the project for an equal pro-rata share of the invoice, plus the late charge. Such special assessment shall constitute a charge on the land and shall be a continuing lien upon each Separate Interest against which the special assessment is levied. Each Owner in the project hereby vests the City with the right and power to levy such special assessment, to impose a lien upon their respective Separate Interest and to bring all legal actions and/or pursue lien foreclosure procedures against any Owner and his or her respective Separate Interest for purposes of collecting such special assessment in accordance with the procedures set forth in this Article. Section 4.11. Schedule of Monetary Penalties. If the Master Association adopts a policy of imposing any monetary penalty, including any fee, on any Owner for violation of this Master Declaration or the rules of the Master Association, including any monetary penalty relating to the activities of a guest or invitee of an Owner, the Board shall adopt and distribute to each Owner, by personal delivery or first-class mail, a schedule of the monetary penalties that may be assessed for those violations, which shall be in accordance with the authorization for Owner discipline set forth in this Master Declaration and the Bylaws. The Board shall not be required to distribute any additional schedules of monetary penalties unless there are changes from the schedule that was adopted and distributed to the Owners pursuant to this Section. Rancho Carrillo 5/1/97 -19- Section 4.12. Rate of Assessments. Both regular and special assessments shall be levied upon each Separate Interest in a uniform amount except as follows. (a) Apartment Projects. The regular and special assessments against an Apartment Project shall be in the amount of one-half (/z) the assessment against each Separate Interest times the number of apartments located within the Apartment Project against which assessments have commenced. However, should an Apartment Project be converted to a Common Interest Development, from and after the date the first Separate Interest is conveyed, each separate residential unit (as shown on the condominium plan) shall be deemed a Separate Interest and assessed accordingly. (b) Non-lien Assessments. The Section above entitled "Non-Lien Assess- ments (Compliance)" is an exception to the requirement that assessments be uniform. (c) Model Homes. The Section below entitled "Model Homes" is an exception to the requirement that assessments be uniform. (d) Cost Center Assessments. In addition to the other components of regular assessments, the Separate Interests or Apartment Project within a Cost Center Area will be subject to the Cost Center Assessments applicable to the Cost Center Area. The Cost Center Assessments shall be uniform for all Separate Interests within a Cost Center Area. Section 4.13. Date of Commencement of Regular Assessments (Other Than Apart- ment Projects). Except for Apartment Projects, the regular assessments shall commence as to all the Separate Interests in a Phase on the first day of the month following the conveyance of the first Separate Interest to Retail Buyer in that Phase. For purposes hereof, "conveyance of the first Separate Interest to an Owner" does not refer to the conveyance of a Separate Interest to a Guest Builder or to a successive Declarant. Section 4.14. Date of Commencement of Regular Assessments (Apartment Projects). Unless the Notice of Declaration of Annexation whereby an Apartment Project becomes annexed hereto sets forth an earlier date, the regular assessments shall commence against an Apartment Project on the date the first apartment in the Apartment Project becomes occupied. If any buildings within an Apartment Project are constructed incrementally, then, unless the applicable Notice of Declaration of Annexation sets forth an earlier commencement date(s), those apartment units within each apartment building shall be deemed to be "located" within the Apartment Project (and assessments will commence as to the same) at such time as the first apartment unit in such building becomes occupied. Section 4.15. Earlier Commencement of Assessments If Specified. Anything herein stated to the contrary notwithstanding, Declarant shall have the right but not the obligation to cause earlier dates of commencement of assessments (regular and special) as to particular Separate Interests or Apartment Projects by so declaring in a Notice of Declaration of Annex- ation or other instrument executed by Declarant and filed with the County Recorder of the Rancho Carrillo 5/1/97 -20- County of San Diego. Any such instrument must also be executed by the record title owner of the Phase if the Phase is not owned by Declarant as of the date of such recordation. Section 4.16. Due Dates. The Board shall fix the amount of the regular assessment in advance of each regular assessment period, but may change the assessment amount on any subsequent occasion, subject to the limitations stated in this Master Declaration. Written notice of any changes to regular assessments or of any special assessment shall be sent to every Owner by first class mail not less than 30 days nor more than 60 days prior to the change in regular assessment or the special assessment becoming effective. The due dates shall be established by the Board. Section 4.17. Model Homes. Conveyance of a Separate Interest which is being used by Declarant or a Guest Builder for model home, sales office, design center, construction office or similar purposes (any of which uses are referred to in this Section as "Model Home") shall not commence the regular assessments against such Separate Interest or other Separate Interests within the Phase until discontinuance of use of such Separate Interest as a Model Home or conveyance of any non-Model Home Separate Interest in the Phase, whichever first occurs. During the period of time commencing on the first day of the month after conveyance of a Separate Interest being used by Declarant as a Model Home and ending on the date regular assessments commence against such Separate Interest: (a) Declarant or the Guest Builder (as applicable) shall be solely responsible to maintain all portions of the Phase in which a Separate Interest is being used as Model Home; and (b) Declarant or the Guest Builder (as applicable) shall pay to the Master Association that portion, if any, of the budgeted reserves for replacement of any Master Association Property components which is applicable to each Separate Interest being used as a Model Home within the Phase in which the Model Home which has been conveyed is located. "Budgeted reserves for replacement of any Master Associa- tion Property components" means and refers to such amounts as are shown to be for such purpose on the budget submitted by Declarant to and approved by the California Real Estate Commissioner. The Board shall have the right to inspect the areas being maintained by Declarant pursuant to this Section to determine that such maintenance meets reasonable standards. Section 4.18. Effect of ISIon-Pavment of Assessments: Remedies of the Master Association. Any assessment made in accordance with this Master Declaration shall be a debt of the Owner of a Separate Interest or Apartment Project from the time the assessment is due. The Master Association shall have the right to impose a late charge on delinquent assessments equal to $10.00 or ten percent (10%) of the assessment, whichever is greater. Delinquent assessments shall also bear interest at the rate of twelve percent (12%) per annum commencing thirty (30) days after the assessment becomes due. Before the Master Association may place a lien upon a Separate Interest or Apartment Project to collect a debt which is past due, the Master Association shall notify the Rancho Carrillo 5/1/97 -21- Owner in writing by certified mail of the fee and penalty procedures of the Master Association, provide an itemized statement of the charges owed by the Owner, including items on the statement which indicate the principal owed, any late charges and the method of calculation, any attorney's fees and the collection practices used by the Master Association, including the right of the Master Association to the reasonable costs of collection. Any payments toward such a debt shall be first applied to the principal owed, and only after the principal owed is paid in full shall such payments be applied to interest or collection expenses. At any time after any assessments levied by the Master Association affecting any Separate Interest or Apartment Project have become delinquent and provided the Board has complied with the requirements set forth in the preceding paragraph, the Board may file for recording with the County Recorder of the County of San Diego a notice of delinquency as to such Separate Interest or Apartment Project, which notice shall state all amounts which have become delinquent with respect to such Separate Interest or Apartment Project and the costs (including attorney's fees), interest and late charges which have accrued thereon, the amount of any assessments relating to such Separate Interest or Apartment Project which is due and payable although not delinquent, a description of the Separate Interest or Apartment Project with respect to which the delinquent assessments are owed, the name of the record or reputed record Owner of such Separate Interest or Apartment Project and the name and address of the trustee authorized by the Master Association to enforce the lien by sale. Such notice shall be signed by the President or Vice President and by the Secretary or Assistant Secretary of the Master Association and mailed in the manner set forth in CIVIL CODE Section 2924(b) to all record owners of the Owner's interest in the project no later than ten (10) calendar days after recordation of the notice of delinquency. Section 4.19. Lien Rights. Immediately upon recording of any notice of delinquency pursuant to the foregoing provisions of this Article, the amounts delinquent, as set forth in such notice, together with the costs of collection (including, but not limited to, attorney's fees), late charges and interest accruing thereon, shall (except as provided in Section 4.9 above) be and become a lien upon the Separate Interest or Apartment Project described therein, which lien shall also secure all other payments and/or assessments which shall become due and payable with respect to said Separate Interest or Apartment Project following such recording, and all costs (including attorney's fees), late charges and interest accruing thereon. When a notice of assessment has been recorded, such assessment shall constitute a lien on each respective Separate Interest or Apartment Project prior and superior to all other liens, except (i) all taxes, bonds, assessments and other levies which, by law, would be superior thereto, and (ii) the lien or charge of any first Mortgage of record. Section 4.20. Notice of Release. In the event the delinquent assessments and all other assessments which have become due and payable with respect to a Separate Interest or Apartment Project together with all costs (including attorney's fees), late charges and interest which have accrued on such amounts, are fully paid or otherwise satisfied prior to the completion of any sale held to foreclose the lien provided for in this Article, the Board shall record a further notice, similarly signed, stating the satisfaction and releasing of such lien. Section 4.21. Foreclosure Procedure: Power of Sale. After expiration of thirty (30) days following the recording of a lien created pursuant to this Article, each assessment lien Rancho Carrillo 5/1/97 -22- may be foreclosed in the same manner as the foreclosure of a mortgage upon real property under the laws of the State of California, or may be enforced by sale pursuant to Sections 2924 et seq. and Section 1367 of the California CIVIL CODE, and to that end a power of sale is hereby conferred upon the Master Association. The Master Association, acting on behalf of the Owners, shall have the power to bid for the Separate Interest or Apartment Project at a foreclosure sale, and to acquire and hold, lease, mortgage and convey the same. Suit to recover a money judgment for unpaid assessments, rent and attorney's fees shall be main- tainable without foreclosing or waiving the lien securing the same. Section 4.22. Subordination of the Lien to First Deeds of Trust and First Mortgages. The lien of the assessments provided for herein shall be subordinate to the lien of any first Mortgage upon any Separate Interest or Apartment Project. Sale or transfer of any Separate Interest or Apartment Project shall not affect the assessment lien. However, the sale or transfer of any Separate Interest or Apartment Project pursuant to judicial or non-judicial foreclosure of a first Mortgage shall extinguish the lien of such assessments as to payments which became due prior to such sale or transfer. No sale or transfer shall relieve such Separate Interest or Apartment Project from lien rights for any assessments thereafter becoming due. Where the Mortgagee of a first Mortgage of record or other purchaser of a Separate Interest or Apartment Project obtains title to the same as a result of foreclosure, such acquirer of title, his or her successors and assigns, shall not be liable for the share of the assessments by the Master Association chargeable to such Separate Interest or Apartment Project which became due prior to the acquisition of title to such Separate Interest or Apartment Project owned by such acquirer. The unpaid share of assessments shall be deemed to be common expenses collectible from all of the Owners including such acquirer, his or her successors and assigns. Section 4.23. Estoppel Certificate. The Master Association shall furnish, pursuant to the Section above entitled "Maximum Regular and Special Assessments", a certificate signed by an officer of the Master Association or the Master Association's management agent setting forth whether the assessments on a specified Separate Interest or Apartment Project have been paid. A properly executed certificate of the Master Association as to the status of assessments against a Separate Interest or Apartment Project is binding upon the Master Association as of the date of its issuance. Section 4.24. Personal Liability of Owner. No Owner may exempt himself or herself from personal liability for assessments levied by the Master Association, nor release the Separate Interest or Apartment Project owned by him or her from the liens and charges hereof by waiver of the use or enjoyment of any of the Master Association Property or by abandon- ment of his or her Separate Interest or Apartment Project. Section 4.25. Taxation of Master Association. Any taxes which are assessed against the Master Association Property or the personal property of the Master Association shall be added to the regular assessments and, if necessary, a special assessment may be levied in an amount equal to the taxes, to be paid in two (2) installments, thirty (30) days prior to the due date of each tax installment. Rancho Carrillo 5/1/97 -23- Section 4.26. Uncompleted Facilities. The Board may (but shall have no obligation to) exclude from Master Association regular assessments those portions of budgeted assessments which are for the purpose of defraying expenses and reserves directly attributable to the existence of improvements to be maintained by the Master Association but which are not complete at the time of the assessment. Any such exemption from assessments shall be in effect only until completion of the improvements, which may be evidenced by recordation of a notice of completion for the same. Section 4.27. Capitalization of Master Association. (a) Phase 1. Upon acquisition of record title to a Separate Interest from Declarant or a Guest Builder, each Owner of a Separate Interest within Phase 1 shall contribute to the capital of the Master Association an amount equal to one-sixth (1/6) the amount of the then regular annual assessment for that Separate Interest. (b) Other Phases. Upon acquisition of record title to a Separate Interest from Declarant or a Guest Builder, each Owner of a Separate Interest within a Phase subsequent to Phase 1, shall contribute to the capital of the Master Association the amount, if any, specified by Declarant; provided, however, such amount of capital contribution so specified by Declarant shall not exceed one-sixth (1/6) the amount of the then regular annual assessment for that Separate Interest. (c) Escrow; Not In Lieu of Assessments; Builder/Declarant Exemption. It is intended that the capital contributions made pursuant to this Section shall be depos- ited by the buyer into the purchase and sale escrow and disbursed from the escrow to the Master Association upon close of the escrow. The payments required under this Section are in addition to and not in lieu of regular and special assessments of the Master Association. It is not intended that this Section apply to conveyances of Separate Interests to Guest Builders or to resales of Separate Interests by purchasers from Declarant or Guest Builders. Section 4.28. Assessment Amounts May Differ From Budget. The Master Associa- tion's phased budget may show that the budgeted regular assessment amounts change as assessments commence against additional Phases within the Properties during the period in which the Properties are being developed and marketed. However, the Board shall have the right to reasonably vary the regular assessment amounts from the budgeted assessment amounts. It is anticipated that the Board may decide to not change or to delay the changes in the regular assessment amounts as assessments commence against subsequent Phases in order to avoid the confusion and administrative burden which would result from multiple changes in the regular assessment amounts. Rancho Carrillo 5/1/97 -24- ARTICLE 5 INSURANCE AND CONDEMNATION Section 5.1. Insurance. (a) General Liability Insurance. The Master Association shall obtain a comprehensive general liability and property damage insurance policy insuring the Master Association and the Owners against liability incident to ownership or use of the Master Association Property. The limits of such insurance shall not be less than $3 Million covering all claims for death, personal injury and property damage arising out of a single occurrence. (b) Officers And Directors. Section 1365.7 of the California CIVIL CODE provides for a partial limitation on the liability of volunteer officers and directors of the Master Association who reside in a Separate Interest, provided that certain requirements, as set forth in the Code section, are satisfied. The requirements include that general liability insurance and insurance covering individual liability of officers and directors for negligent acts or omissions be carried by the Master Association in specified amounts. The Master Association shall maintain the insurance which satisfies the requirements of the Code to limit the liability of volunteer officers and directors of the Master Association. (c) Fidelity Bond. The Master Association shall maintain a fidelity bond in an amount equal to at least the estimated maximum amount of funds, including reserves, in custody of the Master Association or its management agent at any given time; provided, however, the fidelity bond shall not be less than a sum equal to three (3) months' aggregate regular assessments on all Separate Interests and Apartment Projects subject to assessments, including reserve funds. The fidelity bond shall name the Master Association as obligee and insure against loss by reason of the acts of the Board, officers and employees of the Master Association, and any management agent and its employees, whether or not such persons are compensated for their services. (d) Master Association Property Insurance. The Master Association shall obtain the following fire insurance covering the Master Association Property if and when a building with a replacement value of $10,000 or more, in 1997 dollars, becomes located on the Master Association Property. A master fire insurance policy with glass coverage and extended coverage endorsement for 100% of the current replacement cost of all of the Master Association Property buildings, excluding land, foundations, excavations and other items that are usually excluded from insurance coverage. The maximum deductible amount shall be the lesser of $10,000 or 1 % of the policy face amount. Any proceeds from such insurance shall be payable to the Master Association for the benefit of the Owners and their Mortgagees. (e) If Coverage Not Available. If in any event any insurance policy, or endorsement thereof, required by this Article is for any reason not reasonably available, then the Master Association shall obtain such other or substitute policy or endorsement Rancho Carrillo 5/1/97 -25- as may be available which provides, as nearly as possible, the coverage described above. The Board shall notify the Owners of any material adverse changes in the Master Association's insurance coverage. (f) Copies of Policies; Provisions. Copies of all such insurance policies (or certificates thereof showing the premiums thereon to have been paid) shall be retained by the Master Association and open for inspection by Owners at any reasonable time(s). All such insurance policies shall provide that they shall not be cancellable by the insurer without first giving at least thirty (30) days' prior notice in writing to the Master Association. (g) Annual Insurance Review. The Board shall review the insurance carried by the Master Association at least annually, for the purpose of determining the amount of the insurance referred to in this Article. The Board may obtain a current appraisal of the full replacement value of any improvements owned by the Master Association, without deduction for depreciation, by a qualified appraiser, prior to each annual review. Notwithstanding the requirement for annual review, the insurance policies carried by the Master Association shall, to the extent possible, provide for automatic adjustments of coverage levels to reflect the changes in costs resulting from inflation. (h) Notice Required; Waiver of Subrogation. All insurance policies shall provide that they shall not be cancellable by the insurer without first giving at least ten (10) days prior notice in writing to the Master Association and the servicer of each first Mortgage which requests such notice, and shall contain a waiver of subrogation by the insurers against the Master Association, Board and Owners. (i) Loan Purchaser Requirements. The Master Association shall continuously maintain in effect casualty and liability insurance and a fidelity bond meeting the insurance and fidelity bond requirements, if any, applicable to the Properties, as established by FHA, VA, FNMA, GNMA or FHLMC so long as any of the foregoing agencies is a Mortgagee or Owner of a Separate Interest within the Properties, except to the extent such coverage is not available or has been waived in writing by FHA, VA, FNMA, GNMA and FHLMC, as applicable. (j) Additional Insurance. The Master Association may obtain such additional insurance coverage as its Board deems appropriate, including, but not limited to, coverage of its directors and officers. (k) Owners' Insurance. It is not intended that the Master Association insurance policies cover any Separate Interest or Apartment Project and each Owner is responsible to obtain his or her own casualty and general liability insurance covering his or her Separate Interest or Apartment Project. Each Owner shall obtain and maintain, at his or her own expense, fire insurance coverage as may be required by the Owner's institutional Mortgagee or, if no institutional Mortgage encumbers the Separate Interest or Apartment Project, fire insurance in an amount not less than the replacement cost of the structure. Kancho Carrillo 5/1/97 -26- Section 5.2. Condemnation. In the event the Master Association Property or any portion thereof shall be taken for public purposes by condemnation as a result of any action or proceeding in eminent domain, or shall be transferred in lieu of condemnation to any authority entitled to exercise the power of eminent domain, then the award or consideration for such taking or transfer shall be paid to and belong to the Master Association. ARTICLE 6 MASTER ASSOCIATION MAINTENANCE RESPONSIBILITIES Section 6.1. Areas to be Maintained. The Master Association shall maintain and provide for the maintenance of all of the Master Association Property, including, but not limited to, any and all improvements which may have been made to the Master Association Property, some of which may include recreational facilities, a recreational vehicle storage lot (located on lot of CT 93-08, Map No. ), irrigation systems, landscaping, erosion control devices, slopes, walls, drainage facilities, including but not limited to concrete terrace drains, other private storm drain systems, private sewers, private water systems, fences, fire breaks, brush management areas, open space areas, driveways, parking areas, private streets, entryways, trash areas, pedestrian paths (some or all of which may be dedicated to the public), a pedestrian bridge and buildings located within the Master Association Property. The Master Association shall have the right to replace fences or walls within the Master Association Property provided that any such replacement fencing is in substantial conformance with the fencing and wall design approved by the City. The Master Association Property may in addition include certain public areas such as parkways and medians within public streets. Alternatively, those areas may be maintained by a public district or a Subassociation. The Master Association will be obligated to maintain the Master Association Property within a Phase upon commencement of the Master Association's regular assessments for such Phase, unless and during the period the Declarant or a Guest Builder agrees to maintain such area. Unless the context clearly indicates otherwise, reference to "Master Association Property" in this Master Declaration or in the Bylaws will refer to all areas the Master Associa- tion is obligated to maintain. Section 6.2. Phasing. The Master Association Property located in Phase 1 is described in the Article above entitled "DEFINITIONS". The Master Association Property located in subsequent Phases will generally be those areas so described in the Notices of Declaration of Annexation for such Phases. Section 6.3. Melrose Dam Maintenance. A portion of the Master Association Property in which water may accumulate during certain storms is identified by the Department of Water Resources for the State of California as "Melrose Avenue Dam No. 1834". The approximate location of this area ("Melrose Avenue Embankment") is shown on Exhibit "B" attached hereto. This area falls within the jurisdiction of the California Division of Safety of Dams ("DSOD"). The following requirements will apply from and after the date the Master Association becomes responsible to maintain the Melrose Avenue Embankment: Rancho Carrillo 5/1/97 -27- (a) The Master Association's representative, contractor or consultant will meet with the DSOD at such time as DSOD performs its annual inspection of the Melrose Avenue Embankment and the Master Association shall be responsible to pay all applicable inspection fees required by the DSOD. (b) The Master Association shall be responsible for maintenance of the access road, the slopes and open space area (including the east facing Melrose slope, inclusive of the area beneath the City drainage and access easements and the approach to the headwall and outlet structure) and the protective fencing around the retention basin in a manner consistent with DSOD requirements. (c) Except for improvements which become necessary as a result of the City's failure maintain items for which it is responsible, the Master Association shall be responsible to pay any future costs related to subsequent improvements to the dam outlet and inlet structures as may be required by the DSOD regardless of whether or not such improvements are to be located within City easements. (d) The Master Association shall cause any trees and bushes to be removed from the upstream embankment face and a minimum of ten (10) feet past the toe of the embankment into natural terrain to the extent required by the DSOD. It is not currently anticipated that DSOD will require the landscaping required by City (as shown on approved landscaping plans) be so removed. (e) The Master Association shall cause all grassy areas and ground cover to be regularly maintained and not allow the height of such landscaping to exceed DSOD requirements. The Master Association shall take appropriate steps to remove any trash and debris from the inlet area of the box culvert which would obstruct the flow of water. (f) The Master Association shall cause the rodent population to be controlled. (g) The Master Association shall cause trash pick-up to be regularly performed. (h) The Master Association shall cause re-planting and re-seeding as required by the DSOD. The Master Association agrees to save and hold the City harmless from any action which may arise from the maintenance of the Master Association Property within the Melrose Avenue Embankment. Section 6.4. Level of Other Landscape Maintenance. The Master Association shall provide landscaping, pruning and gardening properly to maintain and periodically replace when necessary the trees, plants, grass and other vegetation originally placed in areas it is obligated to maintain and to remove trash and debris from the Master Association Property. The Master Association shall take such maintenance actions as are necessary to avoid erosion and to Rancho Carritlo 5/1/97 -28- assure proper drainage of all areas it is obligated to maintain. The Master Association in its maintenance activities shall comply with any City (and any other applicable governmental) standards, requirements or restrictions which are applicable to the Properties, including the Carlsbad Brush Requirements. All landscaping within the Master Association Property shall be maintained in a healthy and thriving condition, free from weeds, trash and debris and shall be maintained at least to the standards set by the City. Section 6.5. Right To Enter. The Master Association shall have the right to enter onto any Separate Interest or Apartment Project as may be necessary for the construction, maintenance or emergency repair of the Master Association Property or, if necessary, for the benefit of the Owners in common. Any damage caused by the entry of the Master Association onto a Apartment Project or Separate Interest shall be repaired by the Master Association at its expense. It is not intended that this Section give the Master Association the right to enter inside any residence except during emergencies. Section 6.6. No Off-Road Vehicles. The Master Association shall not permit recreational off-road motor vehicle activity within the Master Association Property. Section 6.7. Maintenance Agreements. The Master Association may enter into agreements with Declarant, Guest Builders or others which provide for the maintenance of Master Association Property. Section 6.8. City's Rights If Master Association Fails To Maintain. In the event the Master Association fails to maintain all or any portion of the Master Association Property in accordance with this Article, the City shall have the right, but not the duty, to perform the necessary maintenance. If the City elects to perform such maintenance, the City shall give written notice to the Master Association, with a copy thereof to the Owners, setting forth with particularity the maintenance which the City finds to be required and requesting the same to be carried out by the Master Association within a period of thirty (30) days from the giving of such notice. In the event the Master Association fails to carry out such maintenance of the Master Association Property within the period specified by the City's notice, the City shall be entitled to cause such work to be completed and shall be entitled to reimbursement with respect thereto from the Owners as provided in Section 4.10 above. Section 6.9. Limitation on Liability of Master Association's Directors and Officers. (a) Claims Regarding Breach of Duty. No director or officer of the Master Association shall be personally liable to any of the Master Association's members, or to any other person, for any error or omission in the discharge of their duties and responsibilities or for their failure to provide any services required hereunder or under the Bylaws, provided that such director or officer acted in good faith, in a manner that such a person believes to be in the best interest of the Master Association and with such care, including reasonable inquiry, as an ordinary prudent person in a like position would use under similar circumstances. Without limiting the generality of the foregoing, this standard of care and limitation of liability shall extend to matters including, but not limited to, the repair and maintenance of Master Association Property. Rancho Carrillo 5/1/97 -29- (b) Other Claims Involving Tortious Acts and Property Damage. No director or officer of the Master Association shall be responsible to any Owner or any member of its family or tenants, guests, servants, employees, licensees, invitees, or any other person for any loss or damage suffered by reason of theft or otherwise of any article, vehicle or other item of personal property which may be stored by such Owner or other person on any Apartment Project or within any Separate Interest or for any injury to or death of any person or loss or damage to the property of any other person caused by fire, explosion, the elements or any other Owner or person within the Properties, or by any other cause, unless the same is attributable to his or her own willful or wanton act of gross negligence. It is the intent of this section to provide volunteer directors and officers with protection from liability to the full extent permitted by California CIVIL CODE Section 1365.7, or comparable superseding statute, and to the extent this provision is inconsistent with said section, the CIVIL CODE shall prevail. ARTICLE 7 MAINTENANCE BY OWNERS AND SUBASSOCIATIONS Section 7.1. Obligation To Maintain. No Apartment Project, Separate Interest or improvement anywhere within any Phase shall be permitted to fall into disrepair or an unsightly condition, and each Owner shall keep his or her Apartment Project or Separate Interest free from weeds and all debris and shall keep all improvements located on his or her Apartment Project or Separate Interest in good condition and repair. All landscaping shall be maintained in a healthy and thriving condition, free from weeds, trash and debris, and maintained at least to standards set by the City. Unless the Master Association or a Subassociation has assumed the maintenance of the same, the Owner of a Separate Interest shall be responsible to maintain all drainage facilities, including, but not limited to concrete terrace drains, located on that Separate Interest. The Master Architectural Committee shall have the right to determine whether an Apartment Project, Separate Interest or its improvements have fallen into disrepair or an unsightly condition for purposes of this Section and the Master Architectural Committee's decision shall be final and binding on the respective Owner. Each Owner shall comply with the Carlsbad Brush Requirements and any other applicable City requirements, as the same are applicable to his or her Separate Interest or Apartment Project except to the extent such obligations have been expressly assumed in writing by the Master Association or a Subassociation. Section 7.2. Walls and Fences. The interior surface of a fence or wall located between two Separate Interests shall be maintained by the respective Owners and the respective Owners shall share equally in the cost of repairing or replacing the structure of any such fence except for (i) damage caused by one such Owner or (ii) fences or walls the maintenance of which has been assumed by a Subassociation or the Master Association. Should an Owner cause any damage to a fence or wall, such Owner shall be solely responsible to repair the same. Section 7.3. Master Association Fences Or Walls Adjoin Separate Interests or Apart- ment Projects. The following provisions shall apply with respect to those fences or walls which (i) have been identified as part of the Master Association Property (i.e., which the Master Rancho Carrillo 5/1/97 -30- Association is to maintain), (ii) have been placed at the approximate boundary between the Master Association Property and the adjoining Apartment Project or Separate Interest and (iii) therefore physically separate the Master Association Property from an adjoining Apartment Project or Separate Interest. Unless otherwise provided in a Notice of Declaration of Annexation or a deed conveying Master Association Property: (a) Boundary. The actual location of the fence or wall shall establish the boundary between the Master Association Property and the adjoining Apartment Project or Separate Interest and easements are hereby reserved for the continuation, repair and replacement of the fence or wall by the Master Association regardless of whether the fence or wall lies exactly on the boundary line or within the Apartment Project or Separate Interest. Should the fence or wall be located inside the Master Association Property, easements are also reserved to allow the Owner of the Apartment Project or Separate Interest adjoining the wall or fence to use the Master Association Property which lies outside the fence or wall, subject to any open space restrictions or other dedications or reservations or items of title. (b) Maintenance. It shall be the Master Association's responsibility to maintain, repair and replace any such wall or fence except for the interior surfaces of such walls or solid fences. It shall be the responsibility of the Owner of the Apartment Project or Separate Interest to maintain the interior surface of any such wall or solid fences. Section 7.4. Replacement of Walls or Fencing. Any wall or fence which is replaced shall be replaced with substantially the same type of wall or fencing which substantially complies with the wall and fencing design approved by the City. Section 7.5. Subassociation Maintenance. Each Subassociation shall require all improvements under its jurisdiction or ownership to be kept in good condition, appearance and repair. Section 7.6. Master Association's Right To Maintain Owners' Apartment Projects and Separate interests. In the event that any Owner or Subassociation shall in the Board's opinion permit any property which is the responsibility of such Owner or Subassociation to maintain, to fall into a dangerous, unsafe, unsightly or unattractive condition as determined by the Board, then the Board shall have the right to demand that such condition be remedied. Should the condition not be remedied within fifteen days, the Board shall have the right, but not the obligation, to correct the condition, and to enter upon the portion of the Properties which has fallen into such condition for the purpose of doing so. The Owner or Subasso- ciation, as the case may be, shall promptly reimburse the Master Association for the cost of such corrective action, including, but not limited to, the Master Association's court costs and reasonable attorney's fees should the Board determine it is in its best interests to obtain a court order allowing such entrance by the Board's representatives. Section 7.7. Owners To Notify Master Association. In the event any Owner believes the Master Association has permitted any Master Association Property to become dangerous Rancho Carrillo 5/1/97 -31- as a result of poor maintenance, the Owner has the duty to immediately report such dangerous condition to the Master Association. Section 7.8. Master Association's Right to Repair Neglected Lots. In the event that any Owner shall in the Board's opinion permit any property which is the responsibility of such Owner to maintain to fall into a dangerous, unsafe, unsightly or unattractive condition as deter- mined by the Board, then the Board shall have the right to demand that such condition be remedied. Should the condition not be remedied within fifteen (15) days, the Board shall have the right, but not the obligation, to correct the condition, and to enter upon the portion of the Project which has fallen into such condition for the purpose of doing so. The Owner shall promptly reimburse the Master Association for the cost of such corrective action, including, but not limited to, the Master Association's court costs and reasonable attorney's fees should the Board determine it is in its best interests to obtain a court order allowing such entrance by the Board's representatives. No entry inside a residence may be made without the consent of the Owner. ARTICLE 8 MASTER ARCHITECTURAL COMMITTEE Section 8.1. Multiple Committees Permitted. One or more Master Architectural Committees ("MACs") may be established pursuant to this Article (separate committees may be established for certain neighborhoods within the Properties). It is not intended that any portion of the Properties be subject to the jurisdiction of more than one Master Architectural Committee; however, portions of the Properties may be subject to an architectural committee of a Subassociation in addition to the jurisdiction of the Master Architectural Committee. Reference in this Master Declaration to the "Master Architectural Committee" shall mean and refer to each such Master Architectural Committee which has jurisdiction over a particular geographic area of the Properties. Section 8.2. Members of the Master Architectural Committee. Each Master Architectural Committee shall consist of from one (1) to five (5) members; however, the number of members may be increased by resolution of the Board. The members of the Master Architectural Committee may be removed at any time without cause by the person appointing the member under the authority granted by this Article. Unless changed by resolution of the Board, the address of the Master Architectural Committee for all purposes, including the submission of plans for approval, shall be at the principal office of the Master Association as designated by the Board pursuant to the Bylaws. Members of the Master Architectural Committee shall serve until such time as the member has resigned or been removed by the party which appointed the member. Members of the MAC need not be Owners. The Master Association is specifically authorized to reasonably compensate a professional property manager, architect, or other similar professional for service as a member of the MAC. Section 8.3. Rights of Appointment. Declarant may, at its sole option, appoint all of the original members of each Master Architectural Committee, and all replacements, until three (3) years following the first conveyance of a Separate Interest to an Owner other than a subsequent Declarant or a Builder. Thereafter, the Board shall have the right to appoint at Rancho Carrillo 5/1/97 -32- least one member of each Master Architectural Committee, but Declarant may, at its sole option, appoint a majority of the members until (i) an aggregate of 1,235 apartment units in Apartment Projects and Separate Interests have been sold and closed escrow to Class A Members or (ii) until the fifth anniversary of the most recent conveyance to an Owner (other than to a successive Declarant or Guest Builder) under authority of a public report issued by the California Real Estate Commissioner of the first Separate Interest in any Phase, whichever occurs first. Thereafter, the Board shall have the right to appoint the remaining members of each Master Architectural Committee. Members of a Master Architectural Committee need not be Members of the Master Association. Section 8.4. Designation of MACs. Each MAC shall be designated by Declarant signing, acknowledging and recording a notice of MAC designation which: (i) names the MAC and (ii) legally describes the portion of the Properties over which the particular MAC will have jurisdiction. Phase 1 is hereby designated as being within the Master Architectural Committee For Village O. Section 8.5. Architectural Review Procedures. (a) Review of Plans and Specifications. Except as otherwise stated in this Master Declaration, no building, addition, hardscaping, landscaping, irrigation system, swimming pool, spa, fence, wall, exterior lighting or similar improvement (any of which is referred to as an "Improvement"), including any exterior changes (e.g. changes in color scheme) or alterations in any existing Improvement, shall be commenced, erected or maintained upon any Phase until the plans and specifications therefor showing the nature, kind, shape, height, width, color, materials and location of the same shall have been submitted to and approved in writing by the Master Architectural Committee. (b) Scope of Review. At its discretion, the Master Architectural Committee may limit the scope of its review and exclude certain Improvements from its review. For example, the Master Architectural Committee may decide to exclude from review certain or all back yard Improvements. Also, the Master Architectural Committee may decide not to review any Improvements within areas of the Properties which are subject to architectural review by Boards of Directors of Subassociations or architectural review committees established by Subassociation Declarations. The Master Archi- tectural Committee shall not be responsible for reviewing, nor shall its approval be deemed approval of, any plan or design from the standpoint of structural safety or con- formance with building or other codes, special use permits, provisions of the Carlsbad Brush Requirements, site approvals or other governmental requirements. (c) Criteria. In rendering its decisions, the MAC may consider whether the construction, alterations or additions contemplated in the location indicated will be detrimental to the appearance of the Properties as a whole, whether a particular Owner's "view" or privacy will be materially affected (and how to balance those sometimes conflicting criteria), whether the appearance of any structure affected thereby will be in harmony with the surrounding structures, whether the construction thereof will detract from the beauty and attractiveness of the Properties as a whole, and whether the upkeep and maintenance thereof will become a burden on the Master Kancho Carril/o 5/1/97 -33- Association or any applicable Subassociation. The MAC shall consider whether any additions to the structure of a home will be architecturally compatible with the existing structures as well as the surrounding area. (d) No Obligation To Preserve View or Privacy. Although the MAC may consider view issues when rendering its decisions, neither the MAC nor Declarant makes any representation that any view or privacy from any Separate Interest or Apartment Project will be protected and neither the MAC nor the Declarant has any obligation to maintain, protect, enhance or preserve any view from any Separate Interest, Apartment Project or other portion of the Properties. (e) Guidelines; Deposit. The Master Architectural Committee may from time to time adopt and promulgate guidelines ("Guidelines") which, among other matters, may set forth design and architectural standards and procedural requirements for the submission of plans for review. The Master Architectural Committee may require such detail in plans and specifications submitted for its review as it deems proper, including, without limitation, floor plans, site plans, drainage plans, elevation drawings and description or samples of exterior material and colors. Unless such rules are complied with, the plans and specifications shall not be deemed received. The Guidelines may require a reasonable deposit (not to exceed $750.00 in 1997 dollars to accompany each application for approval which may be used by the Master Architectural Committee to (i) hire consultants and otherwise pay out of pocket expenses incurred by its review, (ii) to pay the costs of clean up from construction, should the Owner fail to do so, and (iii) to pay the costs of repairing any portion of any Phase which may be damaged from construction of the Improvements. The applicant for plan approval shall be responsible to reimburse the Master Architectural Committee for any such out of pocket expenses reasonably incurred by the Committee, regardless of whether such expenses exceed the deposit amount. (f) Subassociation Architectural Controls. The jurisdiction of the Master Architectural Committee over construction in any Phase shall be in addition to that of any architectural committee established under any Subassociation Declaration, and any work or Improvement may require the approval of both any such architectural committee and the Master Architectural Committee. Furthermore, any Improvements to common area portions of the Properties under the ownership or management and control of a Subassociation shall be subject to the architectural controls herein set forth. However, the Master Architectural Committee shall have the right to exclude from its jurisdiction any particular Improvements, including, but not limited to, Improvements reviewed by an architectural committee established under a Sub- association Declaration. (g) Approvals May Be Conditioned. The Master Architectural Committee may condition its approval of proposals or plans and specifications upon such changes therein as it deems appropriate, or upon the agreement by the person submitting the same to grant appropriate easements to the Master Association for the maintenance thereof, or to reimburse the Master Association for the cost of maintenance, or all Rancho Carril/o 5/1/97 -34- three, and may require submission of additional plans and specifications or other information prior to approving or disapproving any material submitted. (h) Period for Approvals. Decisions of the Master Architectural Committee and the reasons therefor shall be transmitted to the applicant at the address set forth in the application for approval within thirty (30) days after receipt by the Master Architectural Committee of all materials required by the Master Architectural Committee. Any application submitted pursuant to this Section shall be deemed approved unless written disapproval, conditional approval or a request for additional information or materials by the Master Architectural Committee shall have been delivered to the applicant within thirty (30) days after the date of receipt by the Master Architectural Committee of all required materials. Upon completion of the contemplated Improvement, the applicant shall give written notice to the Master Architectural Committee of such completion and, for purposes hereof, the date of receipt of the written notification by the Master Architectural Committee shall be deemed to be the date of completion of the Improvement. (i) Variances. The Master Architectural Committee may authorize variances from compliance with any of the architectural provisions or restrictions of this Master Declaration when circumstances such as topography, natural obstructions, hardship, aesthetic or environmental considerations may require. All variances must be evidenced in writing, must be signed the Master Architectural Committee, and shall become effective upon execution. If a variance is granted, no violation of the covenants and restrictions contained in this Master Declaration shall be deemed to have occurred with respect to the matter for which the variance was granted. The granting of a variance shall not operate to waive any of the terms and provisions of this Master Declaration for any purpose except as to the particular property and particular provision hereof covered by the variance, nor shall it affect in any way the applicant's obligation to comply with all governmental laws and regulations affecting his or her use of the property, including, but not limited to, zoning ordinances, provisions of the Carlsbad Brush Requirements, conditions and requirements of special use permits and site plan approvals, setback lines or any other requirements imposed by any governmental authority. (j) No Waiver of Future Approvals. The approval by the Master Architec- tural Committee of any proposals or plans and specifications or drawings for any work done or proposed or in connection with any other matter requiring the approval and consent of the Master Architectural Committee shall not be deemed to constitute a waiver of any right to withhold approval of or to consent to any similar proposals, plans and specifications, drawings or any matter whatsoever that is subsequently or addi- tionally submitted for approval. (k) Correction of Defects. Inspection of work and correction of defects therein may proceed as follows: (i) The Master Architectural Committee or its duly authorized representative may at any time inspect any Improvement, or change or Rancho Carrillo 5/1/97 -35- alteration thereof, for which approval of plans is required under this Article; provided, however that the Master Architectural Committee's right of inspection shall terminate sixty (60) days after the Owner (or Subassociation, if it manages or controls the area in question) shall have given written notice of the completion of the work to the Master Architectural Committee, provided that such Improvement was actually completed as of the date of such notification. If, as a result of its inspection, the Master Architectural Committee finds that the Improvement, or change or alteration thereof, was done without obtaining approval of the plans therefor or was not done in substantial compliance with the plans approved by the Master Architectural Committee, it shall notify the Owner (or Subassociation, if applicable) in writing of the failure to comply with this Article within thirty (30) days after the inspection, specifying the particulars of non-compliance ("Notice of Non-Compliance"). The Master Architectural Committee shall have the authority to require the Owner (or Subassociation, if applicable) to take such action as may be necessary to remedy the non- compliance. (ii) If upon the expiration of thirty (30) days from the date of the Notice of Non-Compliance the Owner or Subassociation (whichever is applicable) shall have failed to remedy the non-compliance, then the Master Architectural Committee shall notify the Board in writing of such failure and the nature thereof, and the estimated cost of correcting or removing the same. The Board shall then have the right at its option either to pursue such remedies against the Owner or Subassociation as it may have in any court of competent jurisdiction or to determine whether there is a non-compliance after notice and hearing, in the manner as may be set forth in the Master Architectural Commit- tee's Guidelines. If a non-compliance is determined to exist at the notice and hearing, the Owner or Subassociation, as applicable, shall remedy or remove the same within a period of not more than thirty (30) days from the date that notice of the Board ruling is delivered to the Owner or Subassociation. If the Owner or Subassociation does not comply with the Board ruling within such period, the Board, at its option, may record a Notice of Non-Compliance against the real property in which the non-compliance exists, remove the non-complying Improvement, or remedy the non-compliance; and the Owner shall reimburse the Master Association, upon demand, for all expenses incurred in connection there- with. If such expenses are not promptly repaid by the Owner or Subassociation to the Master Association, the Board may levy a special assessment against the Owner or Subassociation for reimbursement. The right of the Master Association set forth in this Subsection to remove any Improvement or remedy the non-compliance shall be in addition to all other rights and remedies which the Master Association may have at law, in equity or under this Master Declaration. (iii) As to any Improvements constructed in compliance with this Article, the Master Association shall, upon written request, provide to the Owner thereof (or to the Subassociation with respect to areas it manages and controls) a notice (the "Notice of Compliance") in recordable form, signed by the Rancho Carrillo 5/1/97 -36- President and the Secretary of the Master Association, evidencing such compli- ance. The Notice of Compliance, when recorded, shall be conclusive evidence of compliance with the provisions of this Article as to the Improvements described in the recorded Notice of Compliance. (iv) The Master Architectural Committee shall adopt a procedure by which a prospective Owner intending to erect Improvements on any portion of the Properties may submit and obtain advance approval by the Master Architectural Committee for the prospective Owner's plans prior to the purchase of the property. Section 8.6. Meetings of the Master Architectural Committee. Each Master Archi- tectural Committee shall meet from time to time as necessary to perform its duties hereunder. Each Master Architectural Committee may from time to time by resolution unanimously adopted in writing designate a "Committee Representative" (who may, but need not, be one of its members) to take any action or perform any duties for and on behalf of the Master Architectural Committee. In the absence of such designation, the vote of a majority of the members of the Master Architectural Committee or the written consent of a majority of the members of the Master Architectural Committee shall constitute an act of the Master Architectural Committee. Section 8.7. Notice of Appointment. Whenever a member of the Master Architec- tural Committee is appointed or removed while both Declarant and the Board have rights of appointment, written notice to the other party of such appointment or removal shall be given by the party appointing or removing the member. Section 8.8. Diligence In Construction. Each Owner shall cause to be completed in a timely and diligent manner any Improvements which are commenced on such Owner's Apartment Project or Separate Interest. The Guidelines may establish the maximum time periods for such completion. Section 8.9. Declarant and Guest Builder Exemptions. This Article shall not apply to Declarant or any Guest Builder. Notwithstanding any other provision of this Master Declaration to the contrary, neither Declarant nor a Guest Builder need seek or obtain Master Architectural Committee approval for any Improvement constructed or placed by Declarant or Guest Builders on any portion of the Properties (including any revision or remodeling by Declarant or a Guest Builder), regardless of whether such areas are owned by them. Neither this Section nor the Section above entitled "Rights of Appointment" shall be amended without Declarant's prior written consent. Section 8.10. Apartment Project Exemption. This Article shall not apply to the construction, re-construction, remodeling or any other Improvement to any Apartment Project. Notwithstanding any other provision of this Master Declaration to the contrary, no owner or developer of an Apartment Project need seek or obtain Master Architectural Committee approval for any Improvement of or to any Apartment Project. This Section shall not be amended without Declarant's and each Apartment Project owner's prior written consent. Rancho Carrillo 5/1/97 -37- ARTICLE 9 ANNEXATION Section 9.1. By Master Association. Additional real property may be annexed to the Properties or to this Master Declaration upon the vote or written assent of two-thirds (2/3) of the voting power of Members of the Master Association, excluding the vote of Declarant. Upon such approval, the owner of the property wishing it to be annexed may file of record a Notice of Declaration of Annexation which shall extend the scheme of this Master Declaration to such property. Such vote may be exercised by the Delegates. Section 9.2. By Declarant. Additional land within the Properties may be annexed as Apartment Projects, Separate Interests and Master Association Property and other areas subject to the jurisdiction of the Master Association by Declarant without the consent of Members of the Master Association or the Board at any time and from time to time. However, Declarant shall have no obligation to annex any portion of the Properties and annexations may occur in any order. The following requirements shall apply to annexations of additional land made pursuant to this Section: (a) The annexation shall not cause a substantial increase in Master Association's regular assessments unless such increase was disclosed in a final subdivision public report, issued by the California Real Estate Commissioner for an earlier Phase. Issuance of a final subdivision public report for a Phase shall conclusively evidence that such requirement has been satisfied. (b) Each Notice of Declaration of Annexation shall describe the property to be annexed by such instrument. (c) The Notice of Declaration of Annexation with respect to Separate Interests being annexed must not change the provisions of this Master Declaration or the Bylaws regarding allocation of assessments, the effective date of such allocations, use rights or easements to the Master Association Property or voting rights. Section 9.3. Deannexation. Declarant shall have the right to deannex any Phase in whole or part or to deannex any Apartment Project by Declarant executing and recording a Notice of Deannexation any time before the Master Association's regular assessments commence against such Phase or Apartment Project, respectively. Section 9.4. Supplementary Restrictions. The documents by which additional portions of the Properties are annexed hereto (generally referred to as "Notices of Declaration of Annexation") may also set forth supplemental covenants and restrictions covering the portions of the Properties being so annexed. A Notice of Declaration of Annexation may annex any portion of the Properties (e.g., one or more Phases, a portion or all of a Village, Master Association Property or other portions of the Properties). Each Notice of Declaration of Annexation shall be executed by Declarant. Rancho Carrillo 5/1/97 -38- Section 9.5. VA. Any annexation pursuant to this Section shall be in substantial accord with the general plan of annexation which may have been submitted to and approved by the VA, as reasonably determined by the VA and any such deannexation shall be subject to the reasonable approval by the VA. Section 9.6. Declarant's Consent Required For Amendment. This Article (other than the Section above entitled "By Master Association") shall not be amended without Declarant's prior written consent. ARTICLE 10 USE RESTRICTIONS Section 10.1. In General. Each Apartment Project and Separate Interest shall be held, used and enjoyed subject to the following limitations and restrictions, subject to the exemptions of Declarant and Guest Builders set forth herein. The Master Architectural Committee may waive in whole or in part any of the following limitations and restrictions in accordance with the Article above entitled "MASTER ARCHITECTURAL COMMITTEE" if the strict application thereof could be unreasonably or unduly harsh under the circumstances. Any such waiver or interpretation may be issued by the Master Architectural Committee regardless of whether the party seeking the waiver is exempt from the Article entitled "MASTER ARCHITECTURAL COMMITTEE". Any such interpretation or waiver of the following provi- sions shall be in writing or shall be contained in written Guidelines promulgated from time to time by the Master Architectural Committee. Section 10.2. Residential Use. No Apartment Project or Separate Interest shall be used except for residential purposes; provided, however, Declarant and each Guest Builder shall have the right to use any Separate Interests owned or leased by them for model homes, sales offices, rental offices and similar uses until all Separate Interests have been sold by Declarant and each Guest Builder. Each Owner of an Apartment Project shall have the right to continuously use portions of their project as leasing offices. Nothing stated in this Section shall disallow a Separate Interest or apartment from being used for such home businesses as may be allowed by applicable City zoning controls, permits and regulations provided that such uses are otherwise in compliance with the provisions of this Master Declaration. Section 10.3. Solar Panels. Antennae. Satellite Dishes. Rooftop panels installed for the collection of solar energy for domestic hot water shall be permitted on roofs at locations that maximize the southerly exposure for the collection of solar energy. Solar panels installed to serve recreational pools and spas shall be permitted but shall not be located on any section of the roof surface or other portion of a Separate Interest which is viewable from a public or private street, unless location elsewhere would significantly increase the cost of the system or significantly decrease its efficiency. No lines, wires, antennae, satellite dish or other devices for the reception, communication or transmission of electric current or power, including telephone, television and radio signals, shall be constructed, placed or maintained anywhere in or upon any Separate Interest unless the same is contained in conduits or cables constructed, placed or maintained Rancho Carrillo 5/1/97 -39- underground or is otherwise not visible to other residents or to the public. The MAC may impose conditions to the approval of the installation of a television or radio antenna or a satellite dish. However, in considering whether to approve an antenna or to impose requirements on such approval, the MAC shall not violate any applicable law or regulation. For example, as of the date of the Master Declaration, a Federal Communications Commission regulation (47 C.F.R. §1.4000) prohibits restrictions which preclude reception of an acceptable quality signal from any of the following or unreasonably delays, prevents or unreasonably increases the costs of the installation, maintenance or use of any of the following: (a) An antenna that is designed to receive direct broadcast satellite service, including direct-to-home satellite services, that is one meter or less in diameter; (b) An antenna that is designed to receive video programming services via multipoint distribution services, including multichannel distribution services, instructional television fixed services and local multipoint distribution services and that is one meter or less in diameter or diagonal measurement; or (c) An antenna that is designed to receive television broadcast signals. The applicable MAC shall have jurisdiction to disapprove any outside apparatus which it, in its sole discretion, determines will be unsightly from any other Separate Interest, open space or public or private street. Nothing herein stated shall be deemed to forbid the installation and use of temporary power or telephone services or other improvements if incident to the construction of improvements approved by the applicable MAC. The applicable MAC shall have jurisdiction to disapprove any outside apparatus which it, in its sole discretion, determines will be unsightly from any other Apartment Project, Separate Interest, open space or public or private street. Section 10.4. No Time-Share Projects. No Apartment Project or Separate Interest shall be divided into a time-share estate or time-share use as defined in California BUSINESS AND PROFESSIONS CODE Section 11003.5 without the prior written approval of the Master Archi- tectural Committee. Section 10.5. Signs. No sign, poster, billboard, advertising device or other display of any kind shall be displayed to the public view except (i) such signs as may be used by Declarant and Guest Builders, Apartment Project Owners and their successors, in connection with the development of the Properties and the sale or leasing of apartments or Separate Interests and (ii) one sign on each Separate Interest advertising the same for sale or lease provided the sign is of customary and reasonable dimensions. The right of any Guest Builders to display any signs under this Section shall be subject to the Guest Builder obtaining the prior written consent of Declarant. Section 10.6. Animals. No animals of any kind shall be raised, bred or kept on the Properties, except that a reasonable number of dogs, cats or other household pets may be Rancho Carril/o 5/1/97 -40- kept, provided that they are not kept, bred or maintained for any commercial purpose, nor in violation of any other provision of this Master Declaration. A "reasonable number" as used in this Section shall ordinarily include no more than an aggregate of three (3) dogs and cats per household; provided, however, a reasonable number in any instance may be more or less depending on whether the pets constitute a nuisance to other Owners. Animals belonging to Owners, occupants or their licensees, tenants or invitees within the Properties must be either kept within an enclosure, an enclosed yard or on a leash being held by an individual capable of controlling the animal. Each Owner shall be liable to each and all remaining Owners, their families, guests, tenants and invitees, for any unreasonable noise or damage to person or property caused by any animals brought or kept upon the Properties by the Owner or by members of his or her family, his or her tenants or his or her guests; and it shall be the duty and responsibility of each Owner to immediately clean up any waste from his or her animals. Section 10.7. Nuisances. Nothing shall be done on any Apartment Project or Separate Interest which is or may become an annoyance or nuisance to the other Owners. For example, no external speakers, bells or horns shall be permitted other than usual and customary burglar alarm systems. Each Owner and Subassociation, where applicable, shall take appropriate steps to prevent the accidental tripping of any alarm system which may be installed on the Owner's Apartment Project or Separate Interest or controlled by the Subassociation respectively. Ordinary and usual techniques of construction of Improvements permitted hereunder shall not be deemed a nuisance. Any violation of the Section above entitled "Animals" or ordinances or regulations of the City of Carlsbad is hereby declared to be a nuisance. Section 10.8. Drainage. Easements are hereby reserved for the flow of water over and through the established drainage of each Apartment Project and Separate Interest and no Owner of a Separate Interest or Apartment Project will in any way interfere with the established drainage of his or her Apartment Project or Separate Interest from adjoining or other Apartment Projects, Separate Interests, Master Association Property or other property unless adequate provisions have been made for proper drainage. "Established drainage" is defined as the drainage which existed at the time the final grading of the Apartment Project or Separate Interest was originally completed. "Established drainage" refers to both surface drainage and subsurface drainage, if any. Any Owner who changes the drainage of his or her Apartment Project or Separate Interest shall be responsible for any damages which might result to the property of such Owner, the property of the Master Association or to the property of any third party. Each Owner will permit free access by other affected Owners and by the Master Association to slopes and drainageways located on the Owner's Apartment Project or Separate Interest if such access becomes necessary for the maintenance or permanent stabilization of slopes or maintenance of the drainage system or facilities which benefit other portions of the Properties. Section 10.9. No Hazardous Activities. No activities shall be conducted on any portion of the Properties, and no Improvements shall be constructed on any Apartment Project or Separate Interest which are or might be unsafe or hazardous to any person or property. Rancho Carrillo 5/1/97 -41- Reasonable and customary construction activities by Declarant, any Guest Builder or any Owner shall not be deemed to constitute hazardous activities. Section 10.10. Unsightly Articles. No unsightly articles shall be permitted to remain on any Apartment Project or Separate Interest so as to be visible from any other portion of the Properties. Without limiting the generality of the foregoing, all refuse, garbage and trash shall be kept from public view at all times. Trash for pick up shall be placed in covered, sanitary containers of good condition and such container shall be placed in public view no earlier than the evening before pick up and shall be removed from public view on the day of pick up. No clotheslines shall be installed on any Apartment Project or Separate Interest in such a manner as to be within public view. No clothing or household fabrics shall be hung, dried or aired outside any Separate Interest or Apartment Project and no lumber, grass, shrub or tree clipping or plant waste, metals, bulk materials or scrap or refuse or trash shall be kept, stored or allowed to accumulate on any Apartment Project or Separate Interest, except within an enclosed structure or otherwise appropriately screened from public view. Section 10.11. No Temporary Structures. No tent, shack or other temporary building, Improvement or structure shall be placed upon any portion of any Phase except with the approval of the Master Architectural Committee. This Section shall not apply to temporary structures which are reasonable and customary to facilitate construction activities on any Apartment Project or Separate Interest. Section 10.12. Garages: Vehicular Restrictions. Except for model homes and sales or leasing offices used by Declarant or Guest Builders, no Owner shall convert his or her garage to any use which prevents its use for vehicular parking of the number of automotive vehicles owned by the Owner. No dune buggy, boat, trailer, recreational vehicle, mobile home, motor home, van which weighs more than 10,000 pounds, camper shell whether detached from a vehicle or mounted on a vehicle, nor truck which (i) weighs more than 10,000 pounds or (ii) has a mounted camper shell which protrudes from the truck from either side or from beyond the rear gate or above the cab ceiling, shall be parked anywhere in the Properties except outside of public view unless the Master Architectural Committee rules otherwise. Commercial vehicles shall be permitted within the Properties within garages and for construction purposes, for purposes of making deliveries and similar purposes. No dismantled or wrecked vehicle or equipment shall be parked, stored or deposited in the Properties within public view and no vehicle shall be repaired in the Properties within public view. No noisy or smoky vehicles or off-road unlicensed vehicles shall be oper- ated within the Properties. No Owner shall park his or her vehicle in any area where parking is disallowed by the City. Section 10.13. Installation of Front Yard Landscaping. Unless Declarant or a Guest Builder has done so, each initial Owner of a Separate Interest improved with a residence at the time the Owner acquired title shall, within three (3) months after acquiring ownership prepare Rancho Carrillo 5/1/97 -42- and submit to the applicable Master Architectural Committee a landscaping plan for the front yard of his or her Separate Interest. If such plan is disapproved, a revised plan(s) shall be submitted no more than thirty (30) days after such disapproval, until a plan has been approved by the Master Architectural Committee. Each such Owner shall install the improvements shown on the approved landscape plan within six (6) months after the Owner acquires title to a Separate Interest. Each Owner and Subassociation shall at all times maintain the landscaping under their respective control in a neat and attractive condition, and shall periodically replace when necessary the trees, plants, grass and other vegetation regardless of whether the same were originally installed by Declarant or any Guest Builder. No plants or seeds, infected with insects or plant diseases shall be brought upon, grown or maintained upon any part of the Properties. All landscaping to be installed by an Owner or Subassociation shall comply with the requirements of the Article above entitled "MASTER ARCHITECTURAL COMMITTEE"; provided, however, nothing herein stated is intended to make such Article applicable to any party which is exempt from the same. In the event that any Owner or Subassociation shall fail to install and maintain landscaping in conformance with this Article, the Board, upon thirty (30) days' prior written notice to such Owner or Subassociation, shall have the right either to seek any remedies at law or in equity which it may have or to correct such condition and, after notice and hearing, to enter upon the applicable property for the purpose of doing so, and such Owner or Subassociation (whichever is applicable) shall promptly reimburse the Master Association for any such costs. Section 10.14. Outdoor Lighting. All private outdoor lights located in the project shall be directed away from open space areas where the potential to disturb wildlife exists. Section 10.15. Basketball Hoops. No basketball hoops, backboards or similar apparatus shall be placed anywhere on a Separate Interest within public view. No such apparatus shall be placed closer than fifteen (15) feet from neighboring residential building without MAC approval. Section 10.16. Back Yards: No Sheds. Each Owner will keep and maintain the back yard of his or her Separate Interest in good appearance and condition. No sheds shall be placed on a Separate Interest within public view without MAC approval. Section 10.17. Compliance With City Requirements. Each Owner shall comply with all applicable zoning, planned development permits and other City requirements. Section 10.18. Owners Responsible for Damage. Should any Owner or such Owner's employees, agents or contractors cause any damage to sidewalks, curbs or other City property or rights of way, or to any Master Association Property, such Owner shall immediately and fully repair such damage at the Owner's expense. In the event such damage is repaired by the City, the Master Association, Declarant or any Guest Builder, the Owner shall immediately reimburse such party for the full costs of repair. Rancho Carrillo 5/1/97 -43- Section 10.19. Construction and Sales Activities. The development, construction, marketing and sales activities of Declarant and each Guest Builder are exempt from the covenants, restrictions and limitations set forth in this Article. None of the covenants, restrictions and limitations set forth in this Article or elsewhere in this Master Declaration shall be applied to the development, construction, marketing or sales activities of Declarant or any Guest Builder or construed in such a manner as to prevent or limit development, construction, marketing or sales activities by Declarant or any Guest Builder. Section 10.20. Owners May Not Change Master Association Property. No Owner shall have any right whatsoever to make any change or improvement to the Master Association Property and no Owner shall cause any damage to the Master Association Property. Each Owner shall be liable to the Master Association and the other Owners for any damage to any of the Master Association Property that may be sustained by reason of the negligence of that Owner, that Owner's family members, contract purchasers, tenants, guests, or invitees. Section 10.21. Burning. There shall be no exterior fires whatsoever except barbecue fires located only upon the Owner's Apartment Project or Separate Interest and contained within receptacles designed for such purpose. Otherwise, outside fires are not permitted unless prior written approval is given by the Master Association and such Owner acts in compliance with all local governmental fire safety and permit regulations. No Owner shall permit any condition to exist on his or her Apartment Project or Separate Interest, including, without limitation, trash piles or weeds, which creates a fire hazard or is in violation of local fire regulations and fuel modification and brush management requirements. Section 10.22. Site Distance Corridors. No structure, fence, wall, tree, shrub, sign or other object over thirty inches (30") above the street level may be placed or permitted to encroach within the area identified as a sight distance corridor in accordance with City standards. The Master Association (with respect to the Master Association Property), each Subassociation (with respect to the areas it manages and controls) and the Owner of each affected Separate Interest or Apartment Project, with respect to the property it owns, shall at all times comply with these requirements. Section 10.23. Open Space and Fire Suppression Zones. Easements may be establish (e.g., by final subdivision maps covering portions of the Properties) to establish open space areas and fire suppression zones. Each Owner, each Subassociation and the Master Association shall at all times comply with the applicable requirements and restrictions so imposed, including, but not limited to, restrictions on development in buffer/open space easements. For example, no private development shall be allowed which is inconsistent with any open space restriction which is dedicated to the City on any final subdivision map nor on any open space lot owned by the City except as maybe specifically permitted by the City. Section 10.24. Reduction of Surface Pollutants. The Association shall coordinate the programs established by the City from time to time to assist Owners with the removal and proper disposal of toxic and hazardous waste products. Toxic chemicals or hydrocarbon compounds such as gasoline, motor oil, antifreeze, solvents, paints, paint thinners, wood preservatives and other such fluids shall not be discharged into any street or drive, public or fiancho Carrillo 5/1797 -44- private, or into any storm drain or storm water conveyance systems. Use and disposal of pesticides, fungicides, herbicides, insecticides, fertilizers and other such chemical treatments must, as prescribed in their respective containers, meet Federal, State, County and City requirements. The Master Association, and each Subassociation, with respect to the areas within their respective management and control, shall use Best Management Practices to eliminate or reduce surface pollutants when planning any changes to landscaping or surface improvements. ARTICLE 11 RIGHTS OF LENDERS Section 11.1. Payments of Taxes or Premiums by First Mortgagees. First Mortgagees may, jointly or severally, pay taxes or other charges which are in default and which may or have become a charge against the Master Association Property, unless such taxes or charges are separately assessed against the Owners, in which case, the rights of first Mortgagees shall be governed by the provisions of their deeds of trust. First Mortgagees may, jointly or severally, also pay overdue premiums on casualty insurance policies, or secure a new casualty insurance coverage on the lapse of a policy for the Master Association Property, and first Mortgagees making such payments shall be owed immediate reimbursement thereof from the Master Association. Entitlement to such reimbursement shall be reflected in an agreement in favor of any first Mortgagee who requests the same to be executed by the Master Association. Section 11.2. Priority of Lien of Mortgage. No breach of the covenants, restrictions or limitations herein contained shall affect, impair, defeat or render invalid the lien or charge of any first Mortgage made in good faith and for value encumbering any Apartment Project or Separate Interest, but all of said covenants, restrictions and limitations shall be binding upon and effective against any Owner whose title is derived through foreclosure or trustee's sale, or otherwise, with respect to a Apartment Project or Separate Interest. Section 11.3. Curing Defaults. A Mortgagee who acquires title by judicial foreclosure, deed in lieu of foreclosure or trustee's sale shall not be obligated to cure any breach of the provisions of this Master Declaration which is non-curable or of a type which is not practical or feasible to cure. The determination of the Board made in good faith as to whether a breach is non-curable or not feasible to cure shall be final and binding on all Mortgagees. Section 11.4. Approval of Eligible Mortgage Holders. Except as provided by statute, unless at least sixty-seven percent (67%) of the Eligible Mortgage Holders (based on one vote for each Separate Interest and one-half of one vote for each separate apartment unit in an Apartment Project encumbered by the first Mortgage) have given their prior written approval or unless Delegates holding at least sixty-seven percent (67%) of the Class A voting power have given their prior written approval, the Master Association shall not be entitled to do any of the following by act or omission: (a) Seek to abandon or terminate the project. Rancho Carrillo 5/1/97 -45- (b) Change the pro rata interest or obligations of any Separate Interest in order to levy assessments or charges, allocate distribution of hazard insurance proceeds or condemnation awards or determine the pro rata share of ownership in the Master Association Property. This Subsection does not apply to annexations of additional portions of the Properties pursuant to this Master Declaration. (c) Partition or re-subdivide a Separate Interest or Apartment Project which has been encumbered by a Mortgage held by an Eligible Mortgage Holder. (d) Seek to abandon, partition, subdivide, encumber, sell or transfer Master Association Property which consists of recreation areas (this requirement does not apply to areas which are Master Association Property only for maintenance purposes). Reasonable boundary adjustments and granting of easements for public utilities or other public purposes consistent with the intended use of the Master Association Property is not a transfer within the meaning of this Subsection. (e) Use hazard insurance proceeds for losses to any portion of the Properties (whether Separate Interests or Master Association Property) for other than the repair, replacement or reconstruction of the same. Section 11.5. Termination of Legal Status. Except as provided by statute, any action to terminate the legal status of the project after substantial destruction or condemnation occurs must be agreed to by at least fifty-one percent (51 %) of the Eligible Mortgage Holders (based on one vote for each Separate Interest and one-half of one vote for each separate apartment unit in an Apartment Project encumbered by the first Mortgage) and Delegates and others holding at least sixty-seven percent (67%) of the total voting power of the Master Association. Termination of the legal status of the project for reasons other than substantial destruction or condemnation of the project must be agreed to by at least sixty-seven percent (67%) of the Eligible Mortgage Holders (based on one vote for each Separate Interest and one- half of one vote for each separate apartment unit in an Apartment Project encumbered by the first Mortgage). Any Mortgagee of a first Mortgage shall be deemed to have agreed to such termination if such Mortgagee of a first Mortgage fails to submit a written response to any written proposal for termination within thirty (30) days after such Mortgagee of a first Mortgage receives proper notice of the proposal, provided the notice was delivered by certified or registered mail, with a "return receipt" requested. Section 11.6. Restoration of Master Association Property. Any restoration or repair of any Master Association Property after partial condemnation or damage due to an insurable event shall be performed substantially in accordance with this Master Declaration and original plans and specifications unless other action is approved by at least sixty-seven percent (67%) of the voting power of the Master Association and Eligible Mortgage Holders of Mortgages on at least fifty-one percent (51 %) of the Separate Interests and units in Apartment Projects then subject to assessment by the Master Association (with one vote attributable to each Separate Interest and one-half of one vote attributable to each apartment unit in an Apartment Project) and which are subject to Mortgages held by Eligible Mortgage Holders. Rancho Carrillo 5/1/97 -46- Section 11.7. Professional Management. DecJarant shall have the right to require the Master Association to obtain the services of a professional property manager to assist in the discharge of the Master Association's duties. Furthermore, when professional management has been previously required by either Declarant or any Eligible Mortgage Holder, whether such entity became an Eligible Mortgage Holder at that time or later, any decision to establish self-management by the Master Association shall require the prior consent of at least sixty- seven percent (67%) of the voting power of the Master Association and the approval of Eligible Mortgage Holders of Mortgages on Separate Interests who represent at least fifty-one percent (51%) of the votes of Separate Interests which are subject to Mortgages held by Eligible Mortgage Holders. The term of any agreement for professional management shall not exceed one (1) year and any agreement for professional management or any other contract providing for services by Declarant must provide for termination by either party without cause or payment of a termination fee upon ninety {90) days or fewer written notice. Section 11.8. Notice to Eligible Mortgagees. Upon written request to the Master Association identifying the name and address of the holder and the Separate Interest number or address, any Eligible Mortgage Holder will be entitled to timely written notice of: (a) Any condemnation loss or any casualty loss which affects a material portion of the project or any Separate Interest or Apartment Project on which there is a first Mortgage held by such Eligible Mortgage Holder. (b) Any default in the performance by an Owner subject to a first Mortgage held by such Eligible Mortgage Holder of any obligation under this Master Declaration, the Bylaws or the rules and regulations of the Board, including any delinquency in the payment of assessments or charges owed by an Owner, which remains uncured for a period of sixty (60) days. (c) Any lapse, cancellation or material modification of any insurance policy or fidelity bond maintained by the Master Association. (d) Any proposed action which would require the consent of a specified percentage of Eligible Mortgage Holders as specified above. Section 11.9. Documents to be Available. The Master Association shall, within ten (10) days of delivery of a written request and for a fee which does not exceed its reasonable cost to prepare and reproduce the items, make available to Owners and Mortgagees, and holders, insurers or guarantors of any first Mortgage, current copies of this Master Declaration, the Bylaws, Articles, rules and regulations concerning the project and the books, records and financial statements of the Master Association. The Master Association shall also make such items available to prospective purchasers. "Available" means available for inspection, upon request, during normal business hours or under other reasonable circumstances. Any Eligible Mortgage Holder or Eligible Insurer or Guarantor shall be entitled to have an audited financial statement for the immediately preceding fiscal year prepared after submission of a written request for the same. However, should such request be made by an Eligible Mortgage Holder whose Mortgage encumbers an Apartment Project, the audited financial statement, if not otherwise available, shall be at the expense of the Eligible Mortgage Holder. Any such financial Rancho Carrillo 5/1/97 -47- statement so requested shall be furnished within 120 days of the Master Association's fiscal year end provided the request was made within a reasonable time prior to such date. Section 11.10. Conflicts. In the event of any conflict between any of the provisions of this Article and any of the other provisions of this Master Declaration, the provisions of this Article shall control. ARTICLE 12 ADDITIONAL PROVISIONS Section 12.1. Enforcement. The Master Association, Declarant, any Guest Builder and any other Owner shall have the right to enforce, by any proceedings at law or in equity, all restrictions, covenants, limitations and reservations now or hereafter imposed by the provisions of this Master Declaration. Failure by the Master Association, Declarant, any Guest Builder or any Owner to enforce any covenants, restrictions, limitations or reservations herein contained shall in no event be deemed a waiver of the right to do so thereafter. The City shall have the right, but not the obligation, to enforce those provisions set forth in this Master Declaration which are in favor of the City or in which the City has an interest. Section 12.2. Severability. Should any provision in this Master Declaration be void or become invalid or unenforceable in law or equity by judgment or court order, the remaining provisions hereof shall be and remain in full force and effect. Section 12.3. Amendments. (a) By Declarant. Until commencement of the Master Association's regular assessments, this Master Declaration may be amended or terminated by Declarant by the recording of an instrument for such purpose with the County Recorder of the County of San Diego. (b) By Members. Except as may otherwise be stated in this Master Declaration, this Master Declaration may be amended at any time and from time to time by an instrument in writing signed by the Master Association's secretary certifying that (i) at least sixty-six and two-thirds percent (66-2/3%) of the Class B voting power and (ii) not less than sixty-six and two-thirds percent (66-2/3%) of the voting power of Class A membership of the Master Association have approved such amendment, any which amendment shall become effective upon the recording thereof with the Office of the County Recorder of the County of San Diego, California. After conversion of the Class B membership in the Master Association to Class A membership, this Master Declaration may be amended at any time and from time to time by an instrument in writing signed by the Master Association's secretary certifying that Delegates who hold not less than (i) sixty-six and two-thirds percent (66-2/3%) of the total voting power of the Master Association, and (ii) at least sixty-six and two-thirds percent (66-2/3%) of the voting power of Members of the Master Association other than Declarant and Rancho Carrillo 5/1/97 -48- Guest Builders have approved such amendment. The percentage of voting power necessary to amend a specific clause or provision of this Declaration shall not be less than any percentage of affirmative votes prescribed for action to be taken under that clause. (c) Amendments Material to Mortgagees. Anything herein stated to the contrary notwithstanding, no material amendment may be made to this Master Declaration without the prior written consent of fifty-one percent (51 %) or more of the Mortgages held by Eligible Mortgage Holders (based upon one vote for each Separate Interest and one-half of one vote for each separate apartment unit in an Apartment Project encumbered by the Mortgage); provided, further, that so long as there remains Class B membership in the Master Association, any material amendment to this Master Declaration shall require the prior approval of the VA. A draft of any amendment should be submitted to the VA for its approval prior to approval of the amendment by the membership of the Master Association. Normally "material amendment" shall mean any significant amendments to provisions of this Master Declaration governing any of the following subjects: (i) voting rights; (ii) increases in the Master Association's regular assessments that raise the amount assessed during the previous fiscal year by more than 25%, assessment liens or the priority of assessment liens; (iii) reductions in reserves for maintenance, repair and replacement of Master Association Property; (iv) responsibility for maintenance and repairs; (v) reallocation of interests in or the rights to use Master Association Property or elements of ownership; (vi) redefinition of the boundaries of Separate Interests; (vii) convertibility of Separate Interests into Master Association Property and vice versa (other than non-material boundary adjustments); (viii) annexation and deannexation; (ix) hazard or fidelity insurance requirements; (x) imposition of any restrictions on the leasing of Separate Interests or Apartment Projects; Rancho Carrillo 5/1/97 -49- (xi) imposition of any restrictions on an Owner's right to sell or transfer his or her Separate Interest or Apartment Project; or (xii) any provisions that expressly benefit holders of first Mortgages. An amendment to the Declaration shall not be considered material if it is for the purpose of correcting technical errors or for clarification or for making a change which is of no practical significance. Any Mortgagee of a first Mortgage shall be deemed to have approved an amendment to this Declaration if such Mortgagee of a first Mortgage fails to submit a written response to any written proposal for an amendment within thirty (30) days after such Mortgagee of a first Mortgage receives proper notice of the proposal, provided the notice was delivered by certified or registered mail, with a "return receipt" requested. (d) Amendments To Specific Clauses. Notwithstanding the above provisions, the percentage of the voting power necessary to amend a specific clause or provision in the Declaration shall not be less than the percentage of affirmative votes necessary for action to be taken under that clause or provision. (e) Reduction of Required Percentage. The percentage of membership votes or written consents required to amend the Declaration may be reduced under certain circumstances by Court Order obtained pursuant to California CIVIL CODE § 1356. If) City Approval For Certain Amendments. No amendment to or revoca- tion of the provisions of Sections 2.1, 2.3(c), 2.3(d), 2.4, 4.10, 4.18 (to the extent of the City's lien rights thereunder), 6.1, 6.3, 6.4, 6.8, 7.4, 10.17, 10.22 or 10.23 shall be made without the prior written consent of the City. Furthermore, any amendment to this Declaration shall require the consent of the City if such amendment would reduce or eliminate the standards of maintenance and repair or reduce or eliminate any right of the City set forth in this Declaration. (g) Amendment To Cost Center Provisions. In addition to the other applicable requirements for amendment set forth in this Article, there shall be no amendment to any provisions of this Master Declaration or set forth in an Notice of Declaration of Annexation which pertain to a Cost Center without the approval of a majority of the voting power of the Owners who are subject to the Cost Center. Section 12.4. Extension of Master Declaration. Each and all of these covenants, restrictions, limitations and reservations shall run with and bind the land for a term of fifty (50) years from the date this Master Declaration is recorded, after which date they shall automa- tically be extended for successive periods of ten (10) years, unless Master Association Members having sufficient voting power to amend this Master Declaration have executed and recorded at any time within six (6) months prior to the end of said fifty (50) year period, or within six (6) months prior to the end of any such ten (10) year period, in the manner required for a conveyance of real property, a written instrument in which it is agreed that said Rancho Carrillo 5/1/97 -50- restrictions shall terminate at the end of said fifty (50) year period or at the end of any such ten (10) year period. Section 12.5. Encroachment Easements. The following easements are hereby reserved by Declarant, subject to all items of record, including, but not limited to, the general utility easements of record: (a) It is intended that, unless Declarant decides to relocate the same, each fence or wall installed by Declarant with the intention of separating Separate Interests Master Association Property or Apartment Projects at the boundaries between such areas shall establish the usable boundaries between the affected areas, regardless of whether the fence or wall lies exactly on the boundary line. An easement is hereby reserved for each such fence or wall to be repaired and replaced by the party(ies) obligated to maintain the same, in the location where such fence or wall was so installed by Declarant. Declarant shall have the right, but not the obligation, to relocate any such fence or wall to the applicable boundary line during the period of time that Declarant has the right to annex portions of the Properties to this Master Declaration. The portions of land lying inside a fence or wall which was intended to be installed at the boundary of the Separate Interest may be used by the Separate Interest Owner for yard purposes, subject to any open space easements or other items of record. The portions of land lying outside a fence or wall which adjoin Master Association Property may be used by the Master Association for such purposes. (b) In the event any improvement to any Separate Interest or Apartment Project encroaches upon the Master Association Property or in the event any improvement on the Master Association Property encroaches upon any Apartment Project or Separate Interest as a result of the original construction by Declarant or a Guest Builder or reconstruction or repair to original dimensions, or shifting, settlement or movement on or of any portion of the Apartment Project, Separate Interest or the Master Association Property, an easement for the encroachment and for maintenance of the same shall exist so long as the encroachment exists; provided, however, in no event shall an easement for encroachment be created in favor of an Owner or the Master Association if the encroachment occurred due to the willful misconduct of the Owner or the Master Association. In the event a structure is partially or totally destroyed and then rebuilt or repaired, the minor encroachments over adjoining Master Association Property, Separate Interest or Apartment Project shall be permitted and there shall be easements for maintenance of the encroachments so long as they shall exist. "Improvement" as used in this subsection does not include a fence or wall (fences and walls are the subject of subsection (a) of this Section). (c) An easement is hereby reserved in favor of each Separate Interest and Apartment Project over adjoining areas for the purpose of accommodating encroachments due to design, construction, engineering errors, errors in construction, settlement or shifting of the building, roof overhangs, architectural or other appendants and drainage of water from roofs. There shall be easements for the maintenance of en- croachments so long as they shall exist; provided, however, that no easement is created in favor of an Owner if the encroachment occurred due to the willful Rancho Carrillo 5/1/97 -51- misconduct of the Owner. In the event a structure is partially or totally destroyed and then rebuilt or repaired, the minor encroachments over adjoining areas shall be permitted and there shall be easements for maintenance of encroachments so long as they shall exist. Section 12.6. Master Association Maintenance of IMP Areas. It is intended that a City landscape maintenance district ("LMD") maintain the median within the portions of Melrose Avenue which are within the Properties. Should the LMD terminate or the LMD or should the LMD not maintain the median because of insufficient funding, the Master Association will perform the maintenance subject to the City granting the Master Association the right to do so. Section 12.7. Cost Center Easements. Declarant hereby reserves in favor of the Master Association easements to maintain those portions of the Properties which are subject to maintenance by the Master Association and pursuant to Cost Center provisions set forth in a Notice of Declaration of Annexation or other recorded instrument. Section 12.8. Easement to Inspect and Test. Declarant reserves easements to enter any Separate Interest, including the interior of the residence and the yard, to inspect those areas and to conduct destructive testing referred to in California CIVIL CODE § 1375(d). However, Declarant shall notify the Owner of the Separate Interest of at least three alternative dates and times when such inspection can take place (the earliest of which shall not be less than ten (10) days after the notification is given) and Declarant shall give the Owner the opportunity to specify which date and time is acceptable to the Owner. Should the Owner not respond affirmatively with respect to one of the dates and times within five (5) days, then Declarant may decide which of the dates and times the inspection and testing shall take place and so notify the Owner. Alternatively, Declarant may seek a judicial order allowing such inspection and testing to take place. Declarant shall be entitled to its reasonably incurred attorney's fees and be deemed the "prevailing party" should such a court order be sought and obtained. Declarant shall be obligated to fully repair any damage caused by any such destructive testing. Section 12.9. Information About Public Transportation. The Master Association shall annually obtain and distribute to Owners and occupants of Lots information from Caltrans and North County Transit Authority regarding the availability of public transportation, ride-sharing and transportation pooling services in the area of the Properties. This information shall also be provided in each sales office. Section 12.10. Special Responsibilities of Master Association. In the event that the improvements to be installed by Declarant or a Guest Builder to the Master Association Property have not been completed prior to the issuance by the California Real Estate Commissioner of a Final Subdivision Public Report covering the applicable Phase, and in the further event that the Master Association is the obligee under a bond to secure performance by Declarant or a Guest Builder to complete such improvements, then if such improvements have not been completed and a Notice of Completion filed within sixty (60) days after the completion date specified in the Planned Construction Statement appended to the bond, the Board shall consider and vote upon the question of whether or not to bring action to enforce Rancho Carrillo 5/1/97 -52- the obligations under the bond. If the Master Association has given an extension in writing for the completion of any such improvement, then the Board shall consider and vote on said question if such improvements have not been completed and a Notice of Completion filed within thirty (30) days after the expiration of the extension period. In the event that the Board determines not to take action to enforce the obligations secured by the bond, or does not vote on the question as above provided, then, in either such event, upon petition signed by Members representing five percent (5%) or more of the voting power of the Master Associa- tion (excluding the voting power of Declarant and Guest Builders), the Board shall call a special meeting of the Members of the Master Association to consider the question of overriding the decision of the Board or of requiring the Board to take action on the question of enforcing the obligations secured by the bond. Said meeting of Members shall be held not less than thirty- five (35) days nor more than forty-five (45) days following receipt of the petition. At said meeting a vote of a majority of the voting power of Members of the Master Association, excluding the vote of Declarant and Guest Builders, to take action to enforce the obligations under the bond shall be deemed to be the decision of the Master Association, and the Board shall thereafter implement the decision by initiating and pursuing appropriate action in the name of the Master Association. Nothing in this Section shall imply that the VA has approved or will approve any such bonding arrangement. Section 12.11. Litigation. In the event of litigation arising out of or in connection with this Master Declaration, the prevailing party (including, but not limited to, an Owner, the Master Association, Declarant, and a Guest Builder) shall be entitled to receive costs of suit and such sum for attorney's fees as the Court deems reasonable. Section 12.12. Conflicts Between Master Declaration and Subassociation Declaration. This Master Declaration shall be deemed to supersede any Subassociation Declaration in the event of and to the extent of any conflicts between this Master Declaration and any Subassociation Declaration. No architectural committee established pursuant to a Subassociation Declaration shall make rulings or establish architectural standards which conflict with the Guidelines of the Master Architectural Committee (as such Guidelines may change from time to time). Section 12.13. FHA and VA Approval. As long as there is a Class B membership in the Master Association, the following actions will require the prior approval of the FHA and the VA: Annexation or deannexation of additional property to the Properties, any mergers or consolidation of the Master Association, any dedications or mortgaging of Master Association Property, any special assessments, and any amendment to this Master Declaration, a draft of which shall be submitted to and approved by the VA prior to recording. Section 12.14. Disclosure of Financing of Schools. Should a Community Facilities District become established to finance the impacts to school facilities from development of the Properties, notices of special tax shall be given by Declarant or the Guest Builder, as applicable, pursuant to GOVERNMENT CODE §53341.5. Rancho Carrillo 5/1/97 -53- IN WITNESS WHEREOF, the undersigned, being Declarant herein, has set its hand and seal as of the date first hereinabove written. CONTINENTAL RANCH, INC., a Delaware corporation By:. Title:. By: Title: STATE OF CALIFORNIA ) ) ss. COUNTY OF SAN DIEGO ) On , before me, , Notary Public, personally appeared -- - * personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (Seal) Rancho Carrillo 5/1/97 -54- MAY-0B-B7 14-24 FROM.CONTINENTAL HOMES ID<B1B7832B75 PACE 2/3 » J-12987 EXHIBIT "A" RANCHO CARRILLO BOUNDARY Being a portion of Parcel One of Parcel Map No. 1763 in the City of Carlsbad, County of San Diego, State of California according to the map thereof on file in the Office of the County Recorder of said county, being more particularly described as follows: Beginning at the most Southeasterly comer of said Parcel One; thence along the Easterly One of said Parcel One North 02938W (North 02'3B'5B* West record) West 2052.51 feet to the TRUE POINT OF BEGINNING; thence leaving said Easterly line South 87°22100" West 250.00 feet; thence North 02°38W West 200.00 feet; thence North 60°48'06W East 167.71 feet; thence North 02°38'00" West 240.00 feet; thence South 87°22'00" West 450.00 feet; thence North 02°38'00" West 330.00 feet; thence North 42622'00" East 353.55 feet; thence North 87°22'00* East 300.00 feet to the Easterly line of said Parcel One; thence along said Easterly line South 02*38*00" (South 02*38'58" East record) East 1095.00 feet to the TRUE POINT OF BEGINNING. Together with the following described parcel of land: A parcel of land being a portion of the Southerly one half of Section 18 and a portion of Section 19, Township 12 South, Range 3 West San Bernardino Meridian and a portion of Fractional Section 13 and a portion of Fractional Section 24, Township 12 South, Range 4 West, San Bernardino Meridian, City of Carlsbad, County of San Diego, State of California described as follows: Beginning at a point on the Westerly boundary line of Record of Survey No. 9112 on file in the Office of the County Recorder of said County of San Diego, said point also being on the centeriine of Palomar Airport Road and the beginning of a non-tangent 1200.00 foot radius curve concave Southwesterly, to which a radial line bears North 02°03'04" East; thence leaving said Westerly line and along said centeriine Southeasterly along the arc of said curve through a central angle of 20'13'34" a distance of 423.61 feet; thence South 67°43'22" East 1328.80 feet to the beginning of a tangent 1000.00 foot radius curve concave Northeasterly; thence Southeasterly along the arc of said curve through a central angle of 03°09*32" a distance of 55.13 feet to the beginning of a non-tangent 2263.00 foot radius curve concave Northerly to which a radial line bears North 08°33'46" East; thence Easterly along the arc of said curve through a central angle of 16* 17*25" a distance of 643.41 feet to the beginning of a non-tangent 1000.00 foot radius curve concave Northwesterly to which a radial line bears North 18°16'59" West; thence Northeasterly along the arc of said curve through a central angle of 03*09'32" a distance of 55.13 feet; thence North 68*33*29" East 1525.56 feet to the beginning of a tangent 6000.00 foot radius curve concave Southeasterly; thence Northeasterly along the arc of said curve MAY-0S-87 14.2B FROM,CONTINENTAL HOMES ID.B1S7S32B7B PACE 3/3 through a central angle of 05*39'05" a distance of 591.81 feet; thence North 74M2'34" East 454.40 feet to the beginning of a tangent 3000.00 foot radius curve concave Southeasterly; thence Northeasterly along the arc of said curve through a central angle of 00°52'58" a distance of 46.22 feet to a point on the Easterly boundary (ine of said Record of Survey No. 9112; thence leaving said centeriine and Southerly, Westerly and Northerly along the boundary lines of said Record of Survey the following courses: South 00*39*50" West 2492.24 feet; thence South 00°08'23" West 2669.98 feet; thence South 00°07'39" West 1335.81 feet; thence North 89*45*39" West 1314.12 feet; thence North 89°48'08" West 1248.20 feet; thence North 89*46'41" West 1848.74 feet thence South 00*51'48" West 431.07 feet to the beginning of a non-tangent 900.00 foot radius curve concave Northeasterly, to which a radial line bears South 15*05*10" West; thence Northwesterly along the arc of said curve through a central angle of 01 *44'50" a distance of 27.45 feet; thence North 73*10'OO" West 120.00 feet to the beginning of a tangent 900.00 foot radius curve concave Northeasterly; thence Northwesterly along the arc of said curve through a central angle of 29*32*00" a distance of 463.91 feet; thence South 46*22'00* West 82.83 feet to the beginning of a tangent 150.00 foot radius curve concave Northerly; thence Westerly along the arc of said curve through a central angle of 82°18'00" a distance of 215.46 feet; thence North 51 *20'00" West 440.25 feet to the beginning of a tangent 700.00 loot radius curve concave Northeasterly; thence Northwesterly along the arc of said curve through a central angle of 19*20'00" a distance of 236.20 feet; thence North 32*00*00" West 425.00 feet to the beginning of a tangent 750.00 foot radius curve concave Southwesterly, thence Northwesterly along the arc of said curve through a central angle of 57*1744" a distance of 750.00 feet; thence North 89*17'44" West 480.00 feet; thence North 00'41'42" East 205.09 feet; thence South 89*26*46" East 2458.80 feet; thence North 02*38*00" West 5065.02 feet to the Point of Beginning. Excepting therefrom the following described parcel of land: Commencing at the Southeast comer of said Record of Survey No. 9112; thence North 00007T39" East along the Easterly line thereof 1335.81 feet; thence leaving said Easterly fine North 89°46*11" West 1308.84 feet; thence North 00*21*00" East 1398.14 feet; thence North 89*39*00" West 542.11 feet to the TRUE POINT OF BEGINNING, being a point on that certain document granted to the Cfty of Carlsbad of February 24,1977 as File/Page 77-068081; thence along said document the following courses: South 36*15*49" West 408.00 feet; South 05*10*15" East 176.66 feet; South 06*32*57" West 225.02 feet; South 79°55'36" East 228.30 feet; South 32*22*19" East 107.90 feet; South 19*16'22" West 68.69 feet; South 76*50*48" West 575.23 feet; North 48051'58" West 291.10 feet; North 16°01'37" East 549.47 feet; North 49°58'58" East 494.91 feet; North 85°50'40" East 240.49 feet to the TRUE POINT OF BEGINNING. Jb/12987.001 EXHIBIT "B" Plat Showing Approximate Location of Master Association Property And Description/Depiction of the Villages ATTACHED