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HomeMy WebLinkAboutCT 98-15; Rancho Carrillo Village B Phase II; Tentative Map (CT) (43)HECHT SOLBERG ROBINSON A-JOHN HECHT r>r\T rujCDr1 ATTORNEY AT LAW i GOLDBERG E-Mail: AJH@hsrg.com LLP February 9, 2000 Via Overnight Mail Ms. Nancy Nemec Continental Residential, Inc. 2237 Faraday Avenue, Suite 100 Carlsbad, CA 92008 Re: CT 98-15 (Serrano At Rancho Carrillo) Dear Nancy: Enclosed is the Declaration of Restrictions For Serrano At Rancho Carrillo. I understand that you will be sending a copy of the Declaration to the City for its review. To the assist the City I have described below those sections of the enclosed document, which satisfy the provisions in Planning Commission Resolution No. 4467 which pertain to the Declaration. Condition of Resolution Provision of Declaration 11 (A) 14.2 11(B) 7.3 (f) 11 (C) 4.20 11 (D) Recital I (page 2) 11 (E) 7.3 (and all Sub-sections) 11(F) 6.21 38 Article VII ATTORNEYS AT LAW 600 WEST BROADWAY, EIGHTH FLOOR SAN DIEGO, CALIFORNIA 92101 TELEPHONE 619.239.3444 FACSIMILE 619.232.6828 Ms. Nancy Nemec February 9, 2000 Page 2 Please let me know if I can assist you or the City with the City's review in any way. Very truly yours, A. JbtafHecE£A.P.L.C. HECTpr/SOLBERG, ROBINSON & GOLDBERG LLP AJH/ew Enclosure. Recording Requested By and When Recorded Mail To: HECHT, SOLBERG, ROBINSON & GOLDBERG LLP Mr. John Hecht 600 West Broadway, Eighth Floor San Diego, California 92101 DECLARATION OF RESTRICTIONS FOR SERRANO AT RANCHO CARRILLO (A CONDOMINIUM COMMON INTEREST DEVELOPMENT) TABLE OF CONTENTS RECITALS 1 ARTICLE I DEFINITIONS 3 Section 1.1 Architectural Committee 3 Section 1.2 Articles 3 Section 1.3 Association 3 Section 1.4 Association Property 3 Section 1.5 Board 3 Section 1.6 Building Envelope 3 Section 1.7 Bylaws 3 Section 1.8 Common Area 3 Section 1.9 Common Expenses 4 Section 1.10 Condominium 4 Section 1.11 Condominium Plan 4 Section 1.12 Covered Property 4 Section 1.13 DVA 5 Section 1.14 Declarant 5 Section 1.15 Declaration .5 Section 1.16 Eligible Insurer or Guarantor 5 Section 1.17 Eligible Mortgage Holder 5 Section 1.18 Exclusive Use Area 5 Section 1.19 Living Unit 5 Section 1.20 Member 6 Section 1.21 Mortgage 6 Section 1.22 Mortgagee 6 Section 1.23 Owner 6 Section 1.24 Phase 6 Section 1.25 Project 6 Section 1.26 Real Property 6 Section 1.27 Retail Purchaser 6 ARTICLE II PROPERTY RIGHTS IN ASSOCIATION PROPERTY AND COMMON AREA 6 Section 2.1 Title to the Association Property 6 Section 2.2 Owners' Easements of Enjoyment 7 Section 2.3 Delegation of Use 8 Section 2.4 City Easement 8 Section 2.5 Power of Attorney to Correct Errors 9 ARTICLE III MEMBERSHIP AND VOTING RIGHTS IN ASSOCIATION 9 Section 3.1 Each Owner Is A Member 9 Section 3.2 Classes of Voting Membership 9 Section 3.3 Termination of Class B Membership 10 Section 3.4 Commencement of Voting Rights 10 T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd ARTICLE IV COVENANT FOR MAINTENANCE ASSESSMENTS TO ASSOCIATION . 10 Section 4.1 Covenant for Assessments 10 Section 4.2 Purpose of Assessments 10 Section 4.3 Maximum Regular and Special Assessments 11 Section 4.4 Non-Lien Assessments (Compliance) 12 Section 4.5 Schedule of Monetary Penalties 12 Section 4.6 Rate of Regular Assessments 13 Section 4.7 Rate of Special Assessments for Repairs 13 Section 4.8 Date of Commencement of Regular Assessments 13 Section 4.9 Adjustment of Assessments; Due Dates 13 Section 4.10 Limited Regular Assessments 13 Section 4.11 Model Homes 14 Section 4.12 Effect of Non-Payment of Assessments; Remedies of the Association 14 Section 4.13 Subordination of the Lien to First Deeds of Trust and First Mortgages 15 Section 4.14 Estoppel Certificate 16 Section 4.15 Non-Use of Association Property or Common Area 16 Section 4.16 Taxation of Association 16 Section 4.17 Payment of Assessments By Declarant 16 Section 4.18 Sub-metering of Water 16 Section 4.19 Uncompleted Facilities 17 Section 4.20 Assessments Levied by City 17 Section 4.21 Capitalization of Association 18 ARTICLE V POWERS AND DUTIES OF ASSOCIATION 18 ARTICLE VI USE OF CONDOMINIUMS 18 Section 6.1 Residential Purposes 18 Section 6.2 Lease of Condominium 18 Section 6.3 Use Not to Impair Insurance 18 Section 6.4 Animals 19 Section 6.5 Nuisance 19 Section 6.6 Sign Control 19 Section 6.7 Outside Antennae 19 Section 6.8 No Owner Modification to Association Property or Common Area . 19 Section 6.9 No Offensive Activity 20 Section 6.10 Power Equipment 20 Section 6.11 Use of Association Property and Common Area 20 Section 6.12 Owners Liable for Damage 21 Section 6.13 Decorating by Owner 21 Section 6.14 No Impairment of Structures 21 Section 6.15 Exclusive Use Areas 21 Section 6.16 Use of Exclusive Use Areas 21 Section 6.17 Garages 23 Section 6.18 Outside Parking 23 Section 6.19 Right of Access 23 T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -U- Section 6.20 Window Coverings 23 Section 6.21 Sight Distance Corridors 23 Section 6.22 City Requirements; Fire Suppression Zones 24 Section 6.23 Post-Tensioned Slabs 24 Section 6.24 No Over Irrigation 24 Section 6.25 Trash Drop Off Locations 24 Section 6.26 No Discharging of Toxic Chemicals 24 Section 6.27 Construction and Sales Activities 25 ARTICLE VII RESPONSIBILITIES OF MAINTENANCE 25 Section 7.1 Maintenance by Owners 25 Section 7.2 Failure to Maintain 26 Section 7.3 Maintenance by Association 26 Section 7.4 Reimbursement 27 Section 7.5 Wood-Destroying Pests 27 ARTICLE VIII SEPARATION OF INTERESTS AND PARTITION PROHIBITED 28 Section 8.1 No Separation of Interests 28 Section 8.2 No Partition 28 Section 8.3 Power of Attorney 28 ARTICLE IX DAMAGE, DESTRUCTION AND CONDEMNATION OF COMMON AREA OR ASSOCIATION PROPERTY 29 Section 9.1 Damage or Destruction 29 Section 9.2 Condemnation 30 Section 9.3 Insurance 30 Section 9.4 Mortgagee Approval 32 ARTICLE X DAMAGE, DESTRUCTION AND CONDEMNATION OF SEPARATE INTERESTS 32 Section 10.1 Damage or Destruction 32 Section 10.2 Condemnation 33 Section 10.3 Mortgagee Approval 33 ARTICLE XI CONDEMNATION OF ASSOCIATION PROPERTY 33 ARTICLE XII ASSOCIATION'S RIGHT OF ENTRY 33 ARTICLE XIII ADDITIONAL EXCLUSIVE EASEMENTS AND LICENSES 34 Section 13.1 Common Area Licenses 34 Section 13.2 Association Property 34 ARTICLE XIV ENFORCEMENT 34 Section 14.1 Enforcement 34 Section 14.2 No Waiver 34 T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -iii- ARTICLE XV ADDITIONAL PROVISIONS 34 Section 15.1 Severability 34 Section 15.2 Amendments Prior to Escrow Closings 34 Section 15.3 Amendments After Escrow Closings 34 Section 15.4 Mortgagee Approval of Amendment 34 Section 15.5 Extension of Declaration 36 Section 15.6 Annexation; Reservation of Easements 36 Section 15.7 Enforcement Litigation 38 Section 15.8 Encroachment Easements 38 Section 15.9 Provisions Apply to All Condominiums 38 Section 15.10 DVA Approval 38 Section 15.11 FHA Approval 39 Section 15.12 Special Responsibilities of Association 39 Section 15.13 Limitation of Restrictions on Declarant 39 Section 15.14 Owners' Compliance 40 Section 15.15 Payments of Taxes or Premiums by First Mortgagees 40 Section 15.16 Mortgagee Curing Defaults 40 Section 15.17 Approval of First Mortgagees 40 Section 15.18 Notice to Eligible Mortgagees 41 Section 15.19 Documents to be Available to Mortgagees 42 Section 15.20 Mortgagee Protection 42 Section 15.21 Conflicts 42 Section 15.22 Provisions of Civil Code Section 1360 42 Section 15.23 Documents to be Provided to Prospective Purchasers 43 Section 15.24 Easement to Inspect and Test 44 Section 15.25 Association Property and Common Area Inspection 44 Section 15.26 Definitions 46 Section 15.27 Dispute Notification and Resolution Procedure 46 Section 15.28 Judicial Reference of Certain Disputes 48 Section 15.29 Judicial Reference in Purchase Agreements 49 Section 15.30 No Amendment Without Declarant's Consent 49 ARTICLE XVI DEVELOPMENT BY DECLARANT 49 Section 16.1 Planned Development 49 Section 16.2 Reservation of Rights to Complete Project 49 Section 16.3 Failure to Complete Project 50 Section 16.4 Right of Declarant to Redesign Project 50 Section 16.5 Amendment to Condominium Plan(s) 50 Section 16.6 Power of Attorney 50 Section 16.7 Indemnification of Owners on Exercise of Power of Attorney .... 52 Section 16.8 Limitation on Amendment 52 EXHIBIT "A" THE REAL PROPERTY EXHIBIT "B" PHASING OF THE PROJECT SUBORDINATION AGREEMENT(S) T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -IV- DECLARATION OF RESTRICTIONS THIS DECLARATION OF RESTRICTIONS is made this _ day of , 2000, by CONTINENTAL RESIDENTIAL, INC., a California corporation, d/b/a Continental Homes (hereinafter called "Declarant"); This Declaration is made with reference to the following RECITALS: A. THE REAL PROPERTY. Declarant is the owner of that certain Real Property located in the City of Carlsbad, County of San Diego, California, more particularly described as on Exhibit "A" attached to this Declaration. B. THE PROJECT. Declarant plans to construct a phased residential condominium project called "SERRANO AT RANCHO CARRILLO" on portions of the Real Property with more than one home in each building. C. PHASING OF SERRANO AT RANCHO CARRILLO. It is currently intended that SERRANO AT RANCHO CARRILLO will be marketed in the seven (7) Phases described on Exhibit "B" attached to this Declaration. However, there is no guarantee that all Phases will be con- structed or completed or that the phasing will occur in the exact order set forth on Exhibit "B". If all Phases of SERRANO AT RANCHO CARRILLO are completed and annexed as planned, there will be a total of one hundred twenty-four (124) Condominiums in the Project. Each Condominium shall have appurtenant to it a membership in SERRANO AT RANCHO CARRILLO ASSOCIATION, a California nonprofit mutual benefit corporation ("Association"), which will be the management body for the Project and the owner in fee of the Association Property. D. PROPERTY COVERED BY THIS DECLARATION. Initially, this Declaration encumbers only the following real property (the Covered Property): Lot 1 of CITY OF CARLSBAD TRACT 98-15 RANCHO CARRILLO VILLAGE "B", according to Map thereof No. , filed with the County Recorder of San Diego County, California on , 2000. Other portions of the Real Property may be annexed to this Declaration pursuant to the Section below entitled "Annexation; Reservation of Easements" and thereby become a part of the Covered Property. E. CONDOMINIUMS. Declarant intends to establish a condominium project under the provisions of the California CIVIL CODE. Each home in the Covered Property will be located T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -1 - within space shown as a Living Unit on a Condominium Plan. Each Living Unit will consist of a separate interest to space within a building and it is intended that there will be more than one Living Unit in each building. (Four-Plex and Five-Plex buildings are presently planned for the Project). F. CONDOMINIUM PLANS. It is currently intended that there will be a separate Condominium Plan for each residential building within the Covered Property. For purposes of convenience, Condominium Plans covering more than one of the residential buildings intended to be constructed on the land described in Recital D above may be attached together and recorded together. Each residential building within the Covered Property will be within a Building Envelope shown on the applicable Condominium Plan. G. THE COMMON AREA AND ASSOCIATION PROPERTY. The Common Area will consist of those portions of SERRANO AT RANCHO CARRILLO which are owned in undivided interests amongst certain Owners, with the Owners of the Living Units in a building sharing an equal undivided interest in the Common Area portions of the applicable Building Envelope; the Common Area portions of a Building Envelope will be the entire Building Envelope excepting the Living Units in the building. The Association Property refers to portions of the Covered Property which will be transferred to the Association (either as easements or fee title). The Association Property will include all portions of the Covered Property other than the Building Envelopes. Any Association Property to be owned by the Association with respect to a Phase shall be conveyed to the Association prior to close of the first escrow in the respective Phase to a Retail Purchaser. H. No REPRESENTATION OF COMPLETION. Declarant makes no representation that all the Condominiums, Association Property or Common Area planned for the Project will in fact be completed. I. MASTER DECLARATION. The Real Property, being a part of an overall project known as "Rancho Carrillo", is subject to that certain Master Declaration of Restrictions For Rancho Carrillo Master Association (the "Master Declaration") recorded June 17, 1998, Document No. 1998-0369115, Official Records of San Diego County, California. Owners will be members of both the Association and the Rancho Carrillo Master Association. J. CONDOMINIUM ELEMENTS. Generally, the Owners of a Condominium will receive those property interests which are described below in the definition of "Condominium". K. COMMON PLAN OF RESTRICTIONS; BINDING ON FUTURE OWNERS. Before selling or conveying any interests in the Covered Property, Declarant desires to subject the Covered Property to certain covenants and restrictions, in accordance with a common plan, for the benefit of Declarant and any and all present and future owners of the Covered Property. NOW, THEREFORE, Declarant hereby declares that all the Covered Property, (including, upon annexation, additional portions of the Real Property which are added to the Covered Property), shall be held, sold and conveyed subject to the following easements, restrictions and covenants, which are enforceable equitable servitudes as described in California CIVIL CODE Section 1354 and which are for the purpose of establishing a general plan for protecting the value and desirability of, and which shall run with the Covered Property and be binding on all T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -2- parties having any right, title or interest in the Covered Property, their heirs, successors and assigns, and shall inure to the benefit of each Owner thereof. ARTICLE I DEFINITIONS Section 1.1. "Architectural Committee" shall mean and refer to the person or persons which may be from time to time appointed by the Board to serve as the Architectural Committee. The members of the Architectural Committee need not be members of the Board or the Association. Each member of the Architectural Committee shall serve until he or she resigns or is removed by the Board. The Board shall act as the Architectural Committee in the event the Board does not appoint an Architectural Committee. The architectural control provisions set forth below are in addition to the architectural control provisions set forth in the Master Declaration. Section 1.2. "Articles" shall mean and refer to the Articles of Incorporation of the Association as they may from time to time be amended. Section 1.3. "Association" shall mean and refer to SERRANO AT RANCHO CARRILLO ASSOCIATION, a California Nonprofit Mutual Benefit Corporation, its successors and assigns. Section 1.4. "Association Property" shall mean all real property and easements owned by the Association from time to time for the common use and enjoyment of the Owners. It is anticipated the Association Property will include the remainder of the Covered Property after excluding all the Building Envelopes. Any pipes, wires or other utility installations which serve more than one Living Unit but which are not owned and maintained by the City or a public utility and are not part of the Common Area will also be Association Property (e.g., it is currently intended that there will be a private sub-meter water system and private storm drain system within the Project). Television cable and related CATV equipment and other communication equipment may be owned by the cable supplier or another third party. Section 1.5. "Board" shall mean and refer to the Board of Directors of the Association. Section 1.6. "Building Envelope" shall mean and refer to that three dimensional portion of the Covered Property, established pursuant to GOVERNMENT CODE § 66427. Each Building Envelope shall be the area which is so described on the applicable Condominium Plan. It is intended that a separate Condominium Plan will be recorded for each Building Envelope. Each Condominium Plan will also describe the Living Units, Common Area and Exclusive Use Areas within the Building Envelope. Section 1.7. "Bylaws" shall mean and refer to the Bylaws of the Association as they may from time to time be amended. Section 1.8. "Common Area" shall consist of all portions of a Building Envelope except the Living Units located in such Building Envelope. The boundaries of the Common Area shall be the boundaries of the applicable Building Envelope as shown on the applicable Condominium Plan. The Owners of the Living Units within a Building Envelope shall receive an equal undivided ownership interest in the Common Area of that Building Envelope only, with the T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -3- undivided interest of each such Owner being equal to the reciprocal of the number of Living Units within the Building Envelope. It is intended that the Common Area include all portions of the building in a Building Envelope, including, but not limited to, the roof, any chimneys, vents, balconies, foundations, overhangs, columns and other appurtenances regardless of whether any such items lie outside the boundary lines shown on the applicable Condominium Plan. In interpreting deeds and plans, the then existing physical boundaries of a building whether in its original state or reconstructed in substantial accordance with the original plans thereof, shall be conclusively presumed to be its boundaries rather than the boundaries expressed in the deed or plan, regardless of settling or lateral movement of the building and regardless of minor variance between boundaries shown on the plan or deed and those of the building. Section 1.9. "Common Expenses" means and includes the actual and estimated expenses of operating the Project and any reasonable reserve for such purposes as found and determined by the Board and all sums designated common expenses by or pursuant to the condominium documents. Section 1.10. "Condominium" shall mean and refer to a fee simple estate in the Project and shall consist of: (a) A Living Unit airspace; (b) The exclusive right to use and occupy any Exclusive Use Area which the applicable Condominium Plan shows as being appurtenant to the Living Unit; (c) An undivided interest as tenant in common to the Common Area; (d) An easement over the Association Property which has been conveyed to the Association, subject to the Association's rules, regulations and procedures. Section 1.11. "Condominium Plan" shall mean and refer to each Condominium Plan recorded pursuant to California CIVIL CODE Section 1351(e) covering any portion of the Covered Property. It is intended that several separate Condominium Plans be recorded concurrently, and for purposes of convenience, more than one such Condominium Plan may be attached together as a single document; however, each such Condominium Plan shall remain a separate Condominium Plan within the meaning of CIVIL CODE SECTION 1351 (e). Section 1.12. "Covered Property" shall initially mean following real property: Lot 1 of CITY OF CARLSBAD TRACT 98-1 5 RANCHO CARRILLO VILLAGE "B", according to Map thereof No. , filed with the County Recorder of San Diego County, California on , 2000. Other portions of the Real Property may be annexed to this Declaration pursuant to the Section below entitled "Annexation; Reservation of Easements" and will thereby become a part of the Covered Property. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -4- Section 1.13. "DVA" shall mean and refer to the United States Department of Veterans Affairs. Section 1.14. "Declarant" shall mean and refer to CONTINENTAL RESIDENTIAL, INC., a California corporation, d/b/a Continental Homes. Declarant shall also refer to (a) the assigns of Declarant who are expressly assigned the rights of Declarant and (b) 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 1.15. "Declaration" shall mean and refer to this enabling Declaration of Restrictions, as it may from time to time be amended. Section 1.16. "Eligible Insurer or Guarantor" shall mean and refer to an insurer or governmental guarantor who has requested notice from the Association of those matters which such insurer or guarantor is entitled to notice of by reason of this Declaration or the Bylaws of the Association and who has provided the Association with the address to which such notice is to be sent and the Condominium unit number which is encumbered by a Mortgage in which it has an interest. Section 1.17. "Eligible Mortgage Holder" shall mean and refer to a holder of a first Mortgage on a Condominium who has requested notice from the Association of those matters which such holder is entitled to notice of by reason of this Declaration or the Bylaws of the Association and who has provided the Association with the address to which such notice is to be sent and the Condominium unit number which is encumbered by a Mortgage in which it has an interest. Section 1.18. "Exclusive Use Area" shall mean and refer to those portions of the Association Property or Common Area to which an exclusive right to use is granted to an Owner as shown and described on the applicable Condominium Plan. Balcony, Patio and Entry Exclusive Use Areas are currently planned for the Project. A Condominium Plan may show the minimum square footage area of one or more Exclusive Use Areas but not show the actual dimensions of the Exclusive Use Area except by reference to Project improvements {e.g., fences and walls which adjoin a Patio). Section 1.19. "Living Unit" shall mean and refer to a separate interest in space as defined in California CIVIL CODE Section 1351(f) and as shown and described as such on the applicable Condominium Plan. The following are Common Area or Association Property and not a part of any Living Unit: Bearing walls, columns, floors, roofs, foundations, central heating, central refrigeration and central air conditioning equipment, reservoir tanks, pumps and other central services, pipes, ducts, flues, chutes, conduits, wires and other utility installations, wherever located, except the outlets thereof when located in the Living Unit and such items as are used exclusively by an Owner and not in common. Each Living Unit shall include any door or window within a perimeter wall, the interior undecorated surfaces of bearing walls and perimeter walls, floors and ceilings, any photo cell sensor porch entry lighting, and the outlets of all utility installations in the Living Unit, including the fire box of any fireplace located in the Living Unit. In interpreting deeds and plans, the then existing physical boundaries of a Living Unit, whether in its original state or reconstructed in substantial accordance with the original plans thereof, shall be conclusively presumed to be its boundaries rather than the boundaries expressed in the deed or plan, regardless of settling or lateral movement of the building and T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -5- regardless of minor variance between boundaries shown on the plan or deed and those of the building. "Living Unit" includes any garage portion thereof as shown on the applicable Condominium Plan. Section 1.20. "Member" shall mean and refer to a person entitled to membership in the Association as provided herein. Section 1.21. "Mortgage" shall mean and refer to a mortgage or deed of trust which encumbers a Condominium. Section 1.22. "Mortgagee" shall mean and refer to a beneficiary under a deed of trust which encumbers a Condominium as well as a mortgagee under a Mortgage. Section 1.23. "Owner" shall mean and refer to the record owner, whether one (1) or more persons or entities, of fee simple title to any Condominium, including contract sellers, but excluding those having such interest merely as security for the performance of an obligation. Section 1.24. "Phase" shall mean and refer to a portion of the Covered Project shown on Exhibit "B" attached hereto as a separate Phase. However, Declarant shall have the right to revise the phasing of the Project from time to time as evidenced either by recordation of a document which revises Exhibit "B" (which Declarant shall have the unilateral right to do) or by Declarant applying for and receiving one or more Final Subdivision Public Reports issued by the California Department of Real Estate which describe revised phasing. The obligation of Condominium Owners to pay dues to the Association and the right of such Condominium Owners to exercise voting rights in the Association shall not commence against the Condominiums within a Phase until the first day of the month following close of the first sale of a Condominium by Declarant in that particular Phase of development. Section 1.25. "Project" shall mean and refer to the Covered Property. Section 1.26. "Real Property" shall mean and refer to that real property located in the City of Carlsbad, County of San Diego, California, described on Exhibit "A" attached hereto. Section 1.27. "Retail Purchaser" shall mean and refer to anyone other than a successive Declarant who purchases a Condominium from Declarant through authority of a Final Subdivision Public Report issued by the California Department of Real Estate. ARTICLE II PROPERTY RIGHTS IN ASSOCIATION PROPERTY AND COMMON AREA Section 2.1. Title to the Association Property. Declarant covenants for itself, its successors and assigns, that Declarant will convey to the Association any Association Property within a Phase of the Covered Property free and clear of all encumbrances and liens, except non-delinquent taxes, easements, covenants, conditions and reservations then of record, including those set forth in this Declaration, prior to the conveyance of the first Condominium in the respective Phase to a Retail Purchaser. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -6- Section 2.2. Owners' Easements of Enjoyment. Subject to the limitations set forth in this Declaration, every Owner of a Condominium shall have a right and easement of enjoyment, use and ingress and egress to and from the Association Property from and after conveyance of the same to the Association. These rights and an Owner's undivided interest in the Common Area shall be appurtenant to and shall pass with the title of each Condominium, subject to the following provisions: (a) The right of the Board to make rules and regulations relating to the operation and use of the Association Property and Common Area, including the right of the Board to restrict use of the recreational facilities to those in possession of Living Units and to those additional persons who are entitled to use. Except for areas where easement rights have been transferred or reserved to the contrary, the Board shall have the right to control the hours of such use and to determine whether such facilities may be used by guests of persons entitled to use. The Association shall have no right to restrict reasonable access to a Condominium by the persons who have the right to possession of the Condominium. (b) The right of the Board to suspend the voting rights of an Owner and right to suspend use of recreational facilities by the Owner and occupants of a Condominium: (i) During the period of time any Association assessment against the Condominium remains delinquent; and/or (ii) For a period of not more than thirty (30) days for any infraction of the Board's published rules and regulations after reasonable written notice and an opportunity for a hearing before the Board which satisfies the minimum requirements of California CORPORATIONS CODE Section 7341 as set forth in the Bylaws. (c) The right of the Board, subject to the limitations stated in the Section below entitled "Approval of First Mortgagees" and subject to the restrictions stated in California CORPORATIONS CODE Section 8724, to transfer less than substantially all of the Association Property. It is specifically intended that the Board have the right to cooperate with Declarant and any Owner in adjusting the boundaries of Exclusive Use Areas or between the Association Property and other portions of the Project. (d) The sole and exclusive right of the Association, acting through its Board, to operate, maintain and control the Association Property and Common Area except as otherwise stated in this Declaration. (e) The right of the Board to grant or dedicate to third parties permits, licenses (which may be irrevocable), and easements over the Association Property and Common Area for utilities, roads and other purposes necessary for the proper operation of the Project; and the right of the Board to convey portions of the Association Property to others in connection with a boundary adjustment requested by an adjacent property owner or public entity. (f) The right of the Board to grant easements and licenses over the Association Property and the Common Area pursuant to this Declaration. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -7- (g) The right of the Association, in accordance with the Articles and Bylaws, to borrow money for the purpose of improving the Association Property and to hypothecate any of all real or personal property owned by the Association. (h) The right of access, ingress and egress over the Association Property and Common Area and the right of installation and use of utilities on the Association Property and Common Area for the benefit of the Condominiums. (i) Declarant's right to construct and market homes and other improvements within the Real Property, including the following rights: • (i) Declarant and its sales agents, employees and independent contractors shall have the right to the non-exclusive use of the Association Property and Common Area for the purpose of maintaining sales offices, parking, signs and flags reasonably necessary to market the Condominiums in the Real Property. Declarant shall have the right, during its marketing of the Real Property, to control those hours in which Declarant, its agents, contractors and potential buyers to have access to the Real Property. These rights of Declarant may be exercised only until close of escrow to Retail Purchasers of all 124 Condominiums planned for the Real Property. (ii) Declarant shall also have a non-exclusive easement over the Association Property and Common Area to provide access and utilities thereto for the purpose of constructing, marketing and utilizing portions of the Real Property owned by Declarant. (iii) Declarant shall have the other rights of Declarant under this Declaration, including those set forth in the Article below entitled "DEVELOPMENT BY DECLARANT". The use of the Common Area and the Association Property by Declarant and its agents shall not unreasonably interfere with the use thereof by the Class A Members of the Association. Declarant shall repair any portion of the Association Property or Common Area which may be damaged by Declarant. Section 2.3. Delegation of Use. Subject to the restrictions stated in this Declaration, any Owner may delegate, in accordance with the Bylaws and the rules and regulations of the Board, the Owner's right of enjoyment to the Association Property and Common Area and facilities to the members of the Owner's family, tenants, guests or contract purchasers who reside in the applicable Living Unit. Each Owner shall be responsible to the Association for any damage to the Association Property and Common Area caused by such Owner or persons to whom Common Area or Association Property rights have been transferred. Section 2.4. Citv Easement. The City shall have an easement over the Association Property for maintenance purposes which may be exercised upon the failure of the Association to maintain the Association Property in accordance with the conditions of approval of the tentative map for Carlsbad Tract No. 98-15, pursuant to Section 7.3 of this Declaration. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -8- Section 2.5. Power of Attorney to Correct Errors. The Association is hereby given a power of attorney to act on behalf of the Owners and their Mortgagees to correct errors in any Condominium Plan by executing on behalf of the affected Owners and Mortgagees an amendment to the applicable Condominium Plan and an instrument to effect any conveyances or partial reconveyances necessary to correct such errors. The power hereby given to the Association is limited as follows: (a) The power may be exercised only to correct errors in a Condominium Plan as evidenced by a written statement which describes the error(s) and which is signed by the engineer who prepared the Condominium Plan or by Declarant. The power hereby given may not be utilized for any other purpose. (b) The power may not be exercised on behalf of an Owner or his or her Mortgagee if the Owner's Living Unit or Exclusive Use Area would be reduced in size by reason of the correction. The power hereby given is coupled with an interest and may not be revoked by an Owner but may be revoked by a Mortgagee. Any such revocation by a Mortgagee shall be by means of its signed statement of revocation recorded with the County Recorder of San Diego County. ARTICLE III MEMBERSHIP AND VOTING RIGHTS IN ASSOCIATION Section 3.1. Each Owner Is A Member. Each Owner of a Condominium shall be a Member of the Association. Membership shall be appurtenant to and may not be separated from ownership of any Condominium. Each Owner is obligated promptly, fully and faithfully to comply with and conform to this Declaration and the Bylaws and the rules and regulations adopted from time to time by the Board and officers of the Association. Membership in the Association shall not be transferred, pledged or alienated in any way, except upon the sale or encumbrance of the Condominium to which it is appurtenant, and then only to the purchaser, in the case of a sale, or Mortgagee, in the case of an encumbrance of such Condominium. Any attempt to make a prohibited transfer is void. In the event the Owner of any Condominium should fail or refuse to transfer the membership registered in the Owner's name to the purchaser of his or her Condominium, the Association shall have the right to record the transfer upon its books and thereupon the old membership outstanding in the name of the seller shall be null and void. Section 3.2. Classes of Voting Membership. The Association shall have two classes of voting membership: (a) Class A. Class A Members shall be all Owners of the Condominiums with the exception of Declarant, and shall be entitled to one (1) vote for each Condominium owned. When more than one person holds an interest in any Condominium, all such persons shall be Members. The vote for such Condominium shall be exercised as they among themselves determine, but in no event shall more than one (1) vote be cast with respect to any Condominium. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -9- (b) Class B. The Class B Member(s) shall be the Declarant and shall be entitled to three (3) votes for each Condominium owned. Section 3.3. Termination of Class B Membership. The Class B membership shall cease and be converted to Class A membership on the happening of either of the following events, whichever occurs earlier: (a) Two (2) years following the date of the first conveyance of record by Declarant of a Condominium to a Retail Purchaser pursuant to the most recent Final Subdivision Public Report issued by the California Department of Real Estate for a Phase of the Project; or (b) Four (4) years following the date of the first conveyance of record by Declarant of a Condominium to a Retail Purchaser pursuant to the original Final Subdivision Public Report issued by the California Department of Real Estate for Phase 1 of the Project. Section 3.4. Commencement of Voting Rights. Voting rights shall be attributable to a Condominium commencing on the date the Association's regular assessments have commenced against the Condominium. ARTICLE IV COVENANT FOR MAINTENANCE ASSESSMENTS TO ASSOCIATION Section 4.1. Covenant for Assessments. The Declarant, for each Condominium owned, covenants, and each Owner of any Condominium by acceptance of a deed to the Condominium, whether or not so expressed in such deed, is deemed to covenant and agrees to pay to the Association: (a) regular assessments, which shall include an adequate reserve fund for periodic maintenance, repair and replacement of the Association Property and Common Area, (b) special assessments, and (c) those other assessments provided for in this Article. The regular and special assessments, together with interest, costs, late charges and reasonable attorney's fees, shall, except as stated in Sections 4.4 and 4.18, be a charge and continuing lien upon the Condominium against which each such assessment is made, the lien to become effective upon recordation of a notice of assessment. Each such assessment, 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 Condominium 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; however, the assessment shall remain a lien on the Condominium. Section 4.2. Purpose of Assessments. The assessments levied by the Association shall be used exclusively to promote the recreation, health, safety and welfare of all the residents in the entire Project and for the improvement and maintenance of the Association Property and Common Area for the common good of the Project, to reimburse the Association for the costs incurred in bringing an Owner into compliance with the Bylaws, this Declaration and the rules and regulations adopted by the Board, and for those other purposes described in this Declaration. The regular assessments shall be determined at least annually by the Board to meet the expenses of the Association, including the establishment of reserve accounts, based T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -10- upon the annual budget adopted by the Board pursuant to the Bylaws. A special assessment is an assessment the Board, in its discretion, determines necessary if the Association's available funds are or will become inadequate to meet the estimated expenses of the Association for a fiscal year. The Board may levy the entire special assessment immediately or levy it in installments over a period the Board determines appropriate. In addition, a special assessment against a particular Owner only may be levied by the Board as set forth in Section 4.4. Section 4.3. Maximum Regular and Special Assessments. The Board shall levy regular and special assessments sufficient to perform the obligations of the Association as provided in this Declaration and the Bylaws. However, the Board shall not increase the assessments during any fiscal year unless the Board has complied with the requirements of Subsection (a) of the Section in the Bylaws entitled "Financial Statements" or unless the Board has obtained 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 Section 7510) of Part 3 of Division 2 of Title 1 of the California CORPORATIONS CODE and Section 7613 of the California CORPORATIONS CODE at which a quorum was present or participated. For purposes of this Section, "quorum" means more than fifty percent (50%) of the Owners. Except for assessment increases necessary for emergency situations, the Board may not impose annual increases in regular assessments that are in aggregate more than twenty percent (20%) greater than the regular assessments for the Association's preceding fiscal year nor special assessments which in the aggregate exceed five percent (5%) of the budgeted gross expense of the 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. An emergency situation is any one of the following: (a) An extraordinary expense required by an order of a court; (b) An extraordinary expense necessary to repair or maintain the Project or any part of it for which the Association is responsible where a threat to personal safety in the Project is discovered; (c) An extraordinary expense necessary to repair or maintain the Project or any part of it for which the 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 (c), 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 Association with the notice of assessment. Notwithstanding the above stated limitation against increases in regular assessments: T:\AJH\CH\CARRIlLO\Village B Ph 2\ccrs8FebOO.wpd -1 1 - (i) The Board may increase regular assessments more than twenty percent (20%) if such increase was shown on an Association budget approved by the California Department of Real Estate and if such increase is allowed by California law; (ii) The Board may levy special assessments pursuant to the Section in the Bylaws entitled "Limitation on Expenditure of Reserve Funds"; (iii) Sums assessed against Owners pursuant to the Section below entitled "Non-Lien Assessments (Compliance)" shall not be considered in calculating the increases in assessments; and (iv) Sums assessed against Owners pursuant to the Section below entitled "Sub-metering of Water" shall not be considered in calculating the increases in assess- ments. The due dates of assessments shall be as the Board establishes them. The Association shall, upon demand and for a reasonable charge, furnish a certificate signed by an officer of the Association setting forth whether the assessments on a specified Condominium have been paid. If a certificate states an assessment has been paid, such certificate shall be conclusive evidence of such payment. Section 4.4. Non-Lien Assessments (Compliance). The Association may also impose a special assessment against any Owner to reimburse the Association for costs incurred in bringing an Owner and the Owner's Condominium into compliance with the provisions of the Declaration, the Bylaws and Association rules and regulations, or as a penalty imposed as a disciplinary measure for failure of an Owner or occupants of the Owner's Condominium to comply with such provisions. Such special 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, and the Board shall meet in executive session if requested by the Owner being disciplined and the Owner shall be entitled to attend the executive session. Except to the extent such special assessment is to reimburse the Association for the cost of collecting assessments, the special assessment shall not constitute a lien on the Owner's Condominium and shall be assessed only against the Owner who is or was in non-compliance. The Association shall have lien rights with respect to charges imposed against an Owner which are reasonable late payment fees for delinquent assessments, interest and other charges to reimburse the Association for costs reasonably incurred (including attorney's fees) in its efforts to collect delinquent assessments. Section 4.5. Schedule of Monetary Penalties. If the Association adopts a policy of imposing any monetary penalty, including any fee, on any Owner for violation of this Declaration or the rules of the 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 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. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -12- Section 4.6. Rate of Regular Assessments. Both regular and special assessments shall be levied upon each Condominium at a uniform rate. However, this Section does not apply to the sums payable by reason of Sections 4.4, 4.7, 4.10, 4.11, 4.18 or 4.20. Section 4.7. Rate of Special Assessments for Repairs. Any special assessment to raise funds for the rebuilding or major repair of a portion of the structural Common Area or Association Property shall be levied against each Condominium in the Project against which the Association's regular assessments have commenced. Such special assessments shall be levied upon the basis of the ratio of the square footage of the floor area of the Living Unit of the Condominium to be assessed to the total square footage of the aggregate floor area of the Living Units in all Condominiums to be assessed. Section 4.8. Date of Commencement of Regular Assessments. The regular assess- ments shall commence as to all Condominiums in a particular Phase of the Project on the first day of the month following the conveyance of the first Condominium to a Retail Purchaser in that Phase. Section 4.9. Adjustment of Assessments; Due Dates. The Board shall fix the amount of the regular assessments against each Condominium at least thirty (30) days in advance of each fiscal year but may change the assessment amount on any subsequent occasion. Although the amount of regular assessments (other than special assessments) shall be determined at least annually, commencement of regular assessments against an additional Phase during the marketing period may cause the regular assessment amounts to change. Unless otherwise determined by the Board, regular assessments shall be due and payable in monthly installments on the first day of each calendar month. No notice of regular assess- ments shall be required except for notices of changes in assessment amount or changes in due dates. Written notice of changes in the regular assessments or of any special assessment shall be sent by first class mail to every Owner subject thereto not less than thirty (30) nor more than sixty (60) days prior to the change in assessments or the special assessment becoming due. Section 4.10. Limited Regular Assessments. This Section shall apply only if not all the residential buildings within a Phase have been completed at the time the regular assessments commence against the Phase. Any Condominiums which will be located in a building which is uncompleted at the time regular assessments commence are referred to herein as "Uncompleted Condominiums" and shall be subject to limited regular assessments in lieu of regular assessments as hereinafter provided, unless the Board resolves and Declarant expressly agrees otherwise. For purposes hereof, a Condominium shall be deemed "Uncompleted" if the construction of the structural improvements to the building in which the Condominium is located has not progressed to the point which allows the Condominium to be legally occupied. Should any Phase of the Project include any Uncompleted Condominium at the time assessments commence against such Phase, then: (a) In addition to preparing its usual budget, the Association shall prepare a budget which includes costs and reserves for operation, repair and replacement of all portions of the Association Property then under the jurisdiction of the Association, other than any portion of any building within the Project. Such budget is referred to herein as the "Budget for Non-Building Association Property". T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -1 3- (b) The regular assessments which commence against each Uncompleted Condominium ("Limited Regular Assessments") shall be based only upon the Budget for Non-Building Association Property until the first to occur of (i) completion of the structural improvements of the building in which the Uncompleted Condominium is located (as is evidenced by Declarant's filing a Notice of Completion for such building), or (ii) actual occupancy of such Uncompleted Condominium. An Uncompleted Condominium shall thereafter forever lose its status of being Uncompleted and shall be subject to the same regular assessment as all other completed Condominiums. (c) The Limited Regular Assessments shall be uniform in amount. Limited Regular Assessments, if any, shall commence against each Uncompleted Condominium within a Phase at the same time as regular assessments commence for the Phase, and Limited Regular Assessment shall be in lieu of such regular assessments. (d) The limitations on assessment increases set forth in Section 4.3 shall not apply to increases in assessments against a previously Uncompleted Condominium which result from the conversion of Limited Regular Assessments to regular assessments. (e) Limited Regular Assessments shall be deemed to be regular assessments, as such term is used in this Declaration, for all purposes, except as this Section specifically provides otherwise. The Board shall have the right to disregard this Section provided that Declarant has given its consent to Board's decision to do so. If Limited Regular Assessments are applicable, the non-limited regular assessments will exclude costs of maintenance and reserves for each building containing the Uncompleted Condominiums until non-limited regular assessments commence against such building. Section 4.11. Model Homes. Conveyance of a Condominium which is being used by Declarant 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 Condominiums or other Condominiums within the Phase until: (a) discontinuance of use of such Condominium as a Model Home; or (b) conveyance of any non-Model Home Condominium in the Phase, whichever first occurs. During the period of time commencing on the first day of the month after conveyance of a Condominium being used by Declarant as a Model Home and ending on the date regular assessments commence against such Condominium, Declarant shall be solely responsible to maintain all portions of the Phase in which a Condominium is being used as Model Home. 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 stan- dards. Section 4.12. Effect of Non-Pavment of Assessments: Remedies of the Association. Any assessment made in accordance with this Declaration (including lien and non-lien assessments) shall be a debt of the Owner of a Condominium from the time the assessment is due. Any assessment not paid within fifteen (15) days after the due date shall be delinquent. Any assessment not paid within thirty (30) days after the due date shall bear interest at the T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -14- rate of twelve percent (12%) per annum from thirty (30) days after the due date until paid in full. The Association shall have the right to impose a late charge on unpaid assessments in an amount not exceeding the greater of Ten Dollars ($10.00) or ten percent (10%) of each assessment which is fifteen (15) days delinquent. At any time after any assessments levied by the Association affecting any Condominium have become delinquent, the Board may file for recording in the Office of the County Recorder of the County of San Diego a notice of delinquency as to such Condominium, which notice shall state all amounts which have become delinquent with respect to such Condominium and the costs (including attorney's fees), interest and late charges which have accrued thereon, the amount of any assessments relating to such Condominium which is due and payable although not delinquent, a description of the Condominium with respect to which the delinquent assessments are owed, the name of the record or reputed record Owner of such Condominium, and the name and address of the trustee authorized by the Association to enforce the lien by sale. Such notice shall be signed by an officer of the Association or its authorized agent. Immediately upon recording of any notice of delinquency pursuant to the foregoing provisions of this Section, the amounts delinquent, as set forth in such notice, together with the costs (including attorney's fees), late charges and interest accruing thereon, shall (except as provided in Sections 4.4 and 4.18) be and become a lien upon the Condominium described therein, which lien shall also secure all other payments and/or assessments which shall become due and payable with respect to said Condominium 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 Condominium 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. In the event the delinquent assessments and all other assessments which have become due and payable with respect to the same Condominium, 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. Each assessment lien 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, 2924(b), 2924(c) and 1367 the California CIVIL CODE, and all other applicable statutes, and to that end a power of sale is hereby conferred upon the Association. The Association, acting on behalf of the Condominium Owners, shall have the power to bid for the Condominium 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 maintainable without foreclosing or waiving the lien. Section 4.13. Subordination of the Lien to First Deeds of Trust and First Mortgages. The lien of the assessments, interest, costs, attorney's fees and late charges shall be subordinate to the lien of any first Mortgage upon any Condominium. Sale or transfer of any Condominium shall not affect the assessment lien. However, the sale or transfer of any Condominium 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. However, T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -15- the Association may treat as Common Expenses, assessable against all the Condominiums, any unpaid assessments for which lien rights have terminated. No sale or transfer shall relieve such Condominium from lien rights for any assessments thereafter becoming due. Section 4.14. Estoppel Certificate. The Association shall furnish, upon demand by any person, a certificate signed by an officer of the Association setting forth whether the assessments on a specified Condominium have been paid. A properly executed certificate of the Association as to the status of assessments on a Condominium is binding upon the Association as of the date of its issuance. Section 4.15. Non-Use of Association Property or Common Area. No Owner shall be exempt from personal liability for assessments levied by the Association, nor shall any Condominium be released from the liens and charges of assessments because of the non-use of the Association Property or Common Area nor because of abandonment of the Condominium. Section 4.16. Taxation of Association. In the event that any taxes are assessed against the Common Area, Association Property or the personal property of the Association, rather than against the individual Condominiums, the taxes shall be added to the regular assessments and, if necessary, a special assessment may be levied against the Condominiums 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. Section 4.17. Payment of Assessments By Declarant. Except as specifically stated otherwise in this Article, Declarant shall pay all assessments levied by the Association against any Condominium owned by Declarant at the same time, in the same manner and in the same amount as any other Owner. Section 4.18. Sub-metering of Water. It is currently intended the domestic water will be supplied to the Living Units through master water meters installed within the Project and that water and sewer services will be billed to the Association based on readings from the master meters. However, each Owner will be obligated to reimburse the Association in the amounts reasonably billed by the Association, or its contracting company, for the cost of the water and sewer services supplied to the Owner's Living Unit or Exclusive Use Area based on the reading from the sub-meter which monitors water consumption from the Owner's Living Unit and Exclusive Use Area(s). In billing each Owner, the Association or its contractor shall utilize water consumption information from the sub-meters and the billing information which is provided by the supplier of water and sewer services. Should the supplier of such services charge penalties for excessive water consumption or should the supplier otherwise charge different rates for different levels of consumption, the Association may in any reasonable manner utilize such information in its allocation and determination of reimbursement amounts pursuant to this Section. The Association shall have the right to enter into an agreement with a private water metering service to (a) read the sub-meters, (b) prepare and send the bills and (c) collect sums billed to each Owner on behalf of the Association. Alternatively, the Association may itself do any such billing activities for its reimbursement of amounts applicable to each Condominium. In no event shall the charge for reimbursement for water or sewer services be considered to be a part of the regular assessments. The reimbursement amounts so billed T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -1 6- (whether billed by the Association or a private water metering service) shall be the personal obligation of the persons who owned the Condominium during the period of time the water being billed for was supplied to the Condominium. The charges for water or sewer services shall not constitute a lie"n on the Owner's Condominium. No Owner shall interfere with the reading of such sub-meters nor in any manner change or disconnect such sub-meters. The Association is hereby granted an easement for it or its agents and contractors to read, repair, realign or replace such sub-meters, wherever located. The Association shall have the right to require each Owner to establish an impound account with the Association or with the private water meter reading service in order to provide a deposit from which the Owner's water bill can be payed. The amount of such impound account shall not exceed the Board's good faith estimate of the sums to be billed to the Owner for two (2) month's service; however, the Board shall have the right to require an Owner to increase the deposit up to a sum equal to the Board's good faith estimate of the sums to be billed to the Owner for six (6) month's service in the event Board reasonably determines the increased deposit would be prudent given the Owner's past payment history. Section 4.19. Uncompleted Facilities. The Board may (but shall have no obligation to) exclude from 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 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 4.20. Assessments Levied By City. In the event the City performs maintenance of the Association Property as provided in Section 7.3 (f), the City shall be entitled to reimbursement from the Owners for the actual costs incurred by the City in performing such maintenance. After performing such maintenance, the City shall provide an invoice to the Owners, with a copy to the Association, setting forth the total amount due from each Owner with respect to such maintenance. The invoice will be accompanied with the statement that if the Association fails to pay such invoice in full within the time specified, the City will pursue collection against the Owners in the Project pursuant to the provisions of this Section. If the Association fails to pay such invoice in full within the period specified, the payment shall be deemed delinquent and shall be subject to a late charge in the amount equal to six percent (6%) of the amount of the invoice. Thereafter, the City may pursue collection from the Association by means of any remedies available at law or 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 Owner of each Condominium in the Project for an equal pro-rata share of the invoice plus late charge. If any Owner fails to pay such regular assessments to the City, the City shall have the right to enforce the obligation of an Owner to pay such assessments in the same manner as the Association with regard to regular assessments as provided in Section 4.12 of this Declaration and each Owner hereby vests the City with the right and power to levy such special assessment, to impose a lien upon their respective Condominium and to bring all legal actions and/or to pursue the lien foreclosure procedures against any Owner and his or her respective Condominium for purposes of collecting such special assessment. Each Owner shall be entitled to an offset from the regular assessments otherwise payable to the Association in an amount equal to the amounts paid to the City pursuant to this Section. T:\AJH\CH\CARRlLLO\Village B Ph 2\ccrs8FebOO.wpd -17- Section 4.21. Capitalization of Association. Upon conveyance to a Retail Purchaser of each Condominium in Phase 1 from Declarant, the Retail Purchaser shall contribute to the capital of the Associatio'n an amount equal to two times the then regular assessment for that Condominium as determined by the Board. This amount shall be deposited by the Retail Purchaser into the purchase and sale escrow and disbursed therefrom to the Association at close of escrow. Amounts paid pursuant to this Section are not advance payments of assess- ments and are in addition to and not in lieu of regular and special assessments of the Association. The capital contributions will be the Association's funds and may not be used by Declarant to defray its expenses, construction costs or assessments. The obligation to make capital contributions pursuant to this Section shall apply to each Condominium in Phase 1 only and shall not apply to any Condominium located in any other Phase. This Section shall not apply to any resales of any Condominium. ARTICLE V POWERS AND DUTIES OF ASSOCIATION The Association shall have those powers and duties set forth in its Bylaws. ARTICLE VI USE OF CONDOMINIUMS Section 6.1. Residential Purposes. Each Condominium shall be improved, used and occupied for private, single-family dwelling purposes only, and shall be not be used for any commercial purposes other than home businesses which are allowed by City zoning ordinances. However, Declarant may use any of the Condominiums owned by Declarant as model homes, design centers, construction offices and sales offices until all the Condominiums in all Phases of the Project are sold and conveyed by Declarant to Retail Purchasers. Section 6.2. Lease of Condominium. Each Owner shall have the right to lease the Owner's Condominium provided that such lease is in writing. Each tenant shall be bound by and obligated to the provisions of this Declaration, the Bylaws and the rules and regulations of the Board, and a tenant's failure to do so shall be deemed a default under the lease. No Owner shall lease a Condominium for transient or hotel purposes and no Condominium shall be leased for a term less than twenty-six (26) days. Should the Board so request an Owner to do so, the Owner shall forward an executed copy of a lease to the Owner's Condominium to the Board together with the telephone number and street address of the residence of the Owner. Other than as provided in this Section, there shall be no restriction on the right of any Owner to lease a Condominium. Section 6.3. Use Not to Impair Insurance. No Condominium shall be occupied, improved or used for any purpose or in any manner which shall cause such Condominium or any Condominium to be uninsurable against loss by fire or the perils of the extended coverage endorsement to the California Standard Fire Policy form, or cause any such policy or policies representing such insurance to be cancelled or suspended, or the company issuing the same to refuse renewal thereof or to increase the premium therefor. T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -1 8- Section 6.4. Animals. No animals of any kind shall be raised, bred or kept on the Project except that a reasonable number of dogs, cats or other household pets may be kept, provided that they are 'not kept, bred or maintained for any commercial purpose, nor in violation of any other provision of this Declaration. A "reasonable number" as used in this Section shall ordinarily include no more than an aggregate of two (2) 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 Project must be either kept within an enclosed area (Living Unit, Balcony or Patio) 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 Project 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 6.5. Nuisance. No Condominium shall be used in such manner as to obstruct or interfere with the enjoyment of occupants of other such areas or annoy them by unreasonable noise or otherwise, nor shall any nuisance be committed or permitted to occur in any portion of the Project. 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 6.6. Sign Control. An Owner may place one (1) sign of reasonable and customary dimensions in the window of the Owner's Living Unit to advertise the Condominium . for sale or rent. No other signs may be placed anywhere in the Project without the prior written permission of the Architectural Committee. All signs must conform with applicable City of Carlsbad ordinances. No signs shall be erected or displayed anywhere in the Project except signs placed by authority of the Board. Anything contained in this Declaration to the contrary notwithstanding, Declarant shall have the right to install and maintain in any Condominium owned or leased by it, on the Association Property and Common Area during the sales period set forth in Section 6.1 above, such signs, poles, flags, banners and advertisements as it deems appropriate in connection with its sales program for the sale to the public of Condominiums. Section 6.7. Outside Antennae. There shall be no outside television or radio antennae, masts, satellite dishes, transmitter tower or facility, poles or flag poles (other than poles or flag poles installed and maintained by Declarant in connection with its sales program for the period set forth in Section 6.1 above) constructed, installed or maintained in the Project for any purpose whatsoever without approval of the Architectural Committee. However, in considering whether to approve an antenna or to impose requirements on such approval, the Architectural Committee shall not violate any applicable law or regulation, including, but not limited to any law of the State of California or applicable regulations of the Federal Communications Commission. Section 6.8. No Owner Modification to Association Property or Common Area. Except as otherwise specifically provided in this Declaration, no Owner shall have the right to alter, T:\AJH\CH\CARRILLOWillage B Ph 2\ccrsSFebOO.wpd -1 9- paint, decorate, remodel, landscape or adorn any part of the Association Property or Common Area without the written consent of the Board. Section 6.9. No' Offensive Activity. No noxious or offensive activity shall be carried on in the Project, nor shall anything be done in the Project which may be or become an annoyance or nuisance to the others within the Project. However, construction or repair of improvements made at the Board's instruction or at Declarant's instruction shall be permitted. Nothing shall be done in any Condominium or elsewhere in the Project which will impair the structural integrity of any building. Except as otherwise provided in this Declaration, nothing shall be altered or constructed in or removed from the Association Property or Common Area, except upon the written consent of the Board. All equipment, garbage cans, wood piles or storage piles shall be kept screened and concealed from view of neighboring Condominiums, streets, Association Property and Common Area. All rubbish, trash or garbage shall be regularly removed from each Condominium and shall not be allowed to accumulate in the Project. No fences, hedges or walls shall be erected or maintained in the Project except such as are installed in accordance with the initial construction by Declarant or as provided by the Architectural Committee. No exterior clothes lines shall be erected or maintained, and there shall be no outside drying or laundering of clothes in an Exclusive Use Area or other portion of the Association Property or on the Common Area except in areas (if any) which may be approved by the Board. Section 6.10. Power Equipment. No power equipment, hobby shops or car maintenance (other than emergency work) shall be permitted in the Project except with prior written approval of the Board. Approval shall not be unreasonably withheld and in deciding whether to grant approval the Board shall consider the effects of noise, air pollution, dirt or grease, fire hazard, interference with radio or television reception, and similar objections. Construction or repair of improvements at Declarant's request shall not require such approval. Section 6.11. Use of Association Property and Common Area. Except as otherwise provided in this Declaration, the Association Property and Common Area shall be improved and used only for the following purposes: (a) Affording vehicular passage and pedestrian movement within the Project, including access to the Condominiums; (b) Recreational use by the Owners and occupants of Condominiums and their guests, subject to rules established by the Board; (c) Beautification of the Project and providing privacy to the residents of the Project through landscaping and such other means as the Board shall deem appropriate; (d) Parking of automotive passenger vehicles in areas provided therefor as may be designated and approved by the Board by such persons, upon such terms and conditions as may from time to time be determined by the Board; the rules and regulations of the Board may be enforced by the Board, which shall have the right and power to remove vehicles from the Project at the cost of the vehicle owner and to levy monetary penalties as provided in this Declaration; T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -20- (e) As Exclusive Use Areas to be used in the manner described in this Declaration or a Declaration of Annexation; (f) By Declarant for marketing and construction activities; and (g) Those additional purposes which may be allowed by the Board or as provided in this Declaration. No Owner shall use or interfere with use of the Common Area or Association Property in any manner which shall increase the Association's cost of insurance or which shall result in cancellation of insurance or making insurance unavailable. Section 6.12. Owners Liable for Damage. Each Owner shall be legally liable to the Association for all damages to the Project, including but not limited to, the buildings, recrea- tional facilities and landscaping caused by such Owner, such Owner's guests (or other licensees) or any occupant of such Owner's Living Unit as such liability may be determined under California law. Each Owner shall be responsible for compliance with the provisions of this Declaration, the Bylaws and rules and regulations of the Board by such Owner's licensees and occupants of such Owner's Condominium. Section 6.13. Decorating by Owner. Each Owner shall have the right, at the Owner's sole cost and expense, to maintain, repair, paint, paper, panel, plaster, tile and finish the interior surfaces of the ceilings, floors, window frames, door frames, trim and perimeter walls of the Owner's Living Unit, and the surfaces of the bearing walls and partitions located within the Living Unit. Such Owner shall have the right to substitute new finished surfaces in place of those existing on the ceiling, floors, walls and doors of his or her Living Unit. Windows shall be covered only by drapes, curtains and shades, and shall not be painted or covered by aluminum foil, paper, bed sheets or similar materials. Each Owner shall have the obligation to keep in good repair all items mentioned in this Section. Section 6.14. No Impairment of Structures. No Owner shall make any change to his or her Condominium which would adversely affect the structural integrity of the building. Section 6.15. Exclusive Use Areas. Each Exclusive Use Area shall be appurtenant to the Living Unit it serves. Conveyance of a Living Unit will automatically convey all appurtenant Exclusive Use Areas. No Owner shall make any improvements to an Exclusive Use Area unless such improvements have been approved or pre-approved by the Architectural Committee. Section 6.16. Use of Exclusive Use Areas. Each Owner shall be entitled to use any Exclusive Use Area appurtenant to the Owner's Living Unit for usual and ordinary residential purposes for which such area was designed. (a) Each Owner shall be entitled to the Balcony Exclusive Use Area, if any, which is appurtenant to the Owner's Living Unit for Balcony purposes. Should potted plants be placed on a Balcony, the Owner must take adequate steps to capture water from such potted plants and to prevent any damage to the Common Area or another Living Unit or to prevent unsightly conditions. The Board shall have the right to restrict pots or other items from being placed on top of any fence or railing, or to allow the potted plants to grow on the exterior of a Balcony or other portions of the building. Each T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -21 - Owner shall be responsible to pay for the repairs of any damage which may be caused by the placing of potted plants or other items on the Balcony. (b) Each Owner shall have the right to use his or her Patio for residential patio purposes and an Owner may install such improvements in his or her Patio as are permitted by the Architectural Committee. Each Owner shall be responsible to maintain and repair any subsurface drainage improvements installed by Declarant in the Owner's Patio unless the Association has assumed such maintenance. No Owner shall interfere with the surface or. any subsurface drainage of his or her Patio as established by Declarant nor shall any Owner install any Patio improvements which would make it impractical to repair or replace subterranean drainage installed by Declarant within such Owner's Patio. All improvements installed by an Owner in his or her Patio shall provide for proper and adequate drainage. (c) Each Owner shall have the right to use his or her Entry for entry into his or her Living Unit and an Owner may install such improvements in his or her Entry as are permitted by the Architectural Committee. Each Owner shall be responsible to maintain and repair any subsurface drainage improvements installed by Declarant in the Owner's Entry unless the Association has assumed such maintenance. No Owner shall interfere with the surface or any subsurface drainage of his or her Entry as established by Declarant nor shall any Owner install any Entry improvements which would make it impractical to repair or replace subterranean drainage installed by Declarant within such Owner's Entry. All improvements installed by an Owner in his or her Entry shall provide for proper and adequate drainage. (d) No Owner shall place any items on his or her Exclusive Use Area which are within the view of another Owner(s) and which the Architectural Committee deems to be unsightly. For example, and not by way of limitation, the Architectural Committee shall have the right to adopt regulations which disallow bicycles from being stored on a Balcony, Patio or Entryway. (e) No Owner shall make any improvements to his or her Exclusive Use Area unless and until the Architectural Committee has approved plans of such improvements showing such detail as the Architectural Committee or its consultant deems appropriate. Any such approval may be conditional. The Architectural Committee shall have sixty (60) days to approve or disapprove such plans from the date the plans, in form required by the Architectural Committee, are received by the Architectural Committee. Failure of the Architectural Committee to approve or disapprove the plans within such sixty (60) day period shall be deemed an approval. The Architectural Committee shall have the right to hire a civil engineer, landscape architect or other expert consultant as the Architectural Committee deems appropriate to evaluate plans and inspect the improvements. The Owner shall be required to pay the cost of such consultant. The Architectural Committee may require an Owner to deposit the estimated cost of such consultant at the time plans are submitted for Architectural Committee approval. (f) Each Owner assumes all risks which may result from improvements he or she makes to his or her Exclusive Use Area(s) and each Owner indemnifies and holds harmless the Association, the Architectural Committee, Declarant and each other Owner from any claim, demands, liabilities, judgments, attorney's fees and other obligations T:\AJH\CH\CARRIUOWillage B Ph 2\ccrs8FebOO.wpd -22- which arise out of or are incurred in connection with the installation, existence or removal of improvements. (g) The Board or Architectural Committee shall have the right to restrict those activities and improvements which it believes would have adverse structural, drainage or maintenance impacts or adverse visual or noise impacts on other Owners. (h) The Board and the Architectural Committee shall have the right to allow Owners to exclusively use portions of the Association Property or Common Area above or below the vertical limits of any Exclusive Use Area. Section 6.17. Garages. Each Owner shall have the right to use any garage portion of the Owner's Living Unit for parking of automotive vehicle(s) (including cars, passenger vans and trucks) and the storage of non-hazardous materials. Neither the Association nor any Owner shall convert any garage to any use which prevents its use for vehicular parking of the number of vehicles used by the Owner. However, nothing herein stated is intended to disallow Declarant from converting garage area to living area. Section 6.18. Outside Parking. The Board shall have the right, but not the obligation, to assign the right to use parking spaces within the Association Property and Common Area (which are. not within an Exclusive Use Area) to one or more Owners for such periods and on such terms as the Board deems appropriate. Should the Board decide to make such assignments, it shall generally do so on a first come, first served basis, but the Board may consider such factors as the Board deems relevant. The Association may charge a fee for assigning the right to use an outside parking space. No dune buggy, boat, trailer, recreational vehicle, mobile home, motor home, van, camper shell which is detached from a vehicle or otherwise mounted on a vehicle, nor truck which (a) is larger than one ton capacity, or (b) 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 within any private street or anywhere else in the Project where visible to other Owners unless the Board expressly allows otherwise. Commercial vehicles shall be permitted within the Project for purposes of making deliveries and similar purposes, provided the same conform to rules which may be established by the Board. No dismantled or wrecked vehicle or equipment shall be parked, stored or deposited within the Project and no vehicle shall be repaired within the Project. Section 6.19. Right of Access. Each Owner shall have the right of reasonable access for egress and ingress to and from such Owner's Living Unit (including, but not limited to the garage portion) and Exclusive Use Areas. Section 6.20. Window Coverings. Unless Declarant has done so, each Owner shall, within one hundred twenty (120) days after close of escrow for his or her Condominium, install window coverings on all windows of his or her Living Unit which are visible from any public or private street. The exterior appearance of such window coverings must be consistent with Section 6.13 and any requirements promulgated by the Architectural Committee. Section 6.21. Sight Distance Corridors. The Association and the Owner of each affected area shall at all times comply with sight distance requirements established by the T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -23- City. Mature vegetation within the sight line area of all intersections shall be no greater than 30" in height or have a canopy no less than 8' in height. No structure, fence, wall, sign or other object over 30 inches above the street level shall be placed or permitted to encroach within the area identified as a sight distance corridor in accordance with City Standards and the conforming mylar tentative map of the Carlsbad Tract 98-15. The applicable Owner or the Association shall comply with these requirements. Section 6.22. City Requirements: Fire Suppression Zones. The Association and each Owner shall at all times comply with the City of Carlsbad requirements, including, but not limited to its fire suppression requirements. The City's fire suppression requirements may include restrictions on the types, materials and locations of improvements within the Project. Section 6.23. Post-Tensioned Slabs. It is anticipated that some or all of the residences within the Project may be constructed with post-tensioned concrete slabs ("System") because of soils conditions. The System involves placing steel cables under high tension in the concrete slab located beneath the residence. Each Owner shall be responsible for determining whether his or her residence has been constructed with a System. Any attempt by an Owner or other person to alter or pierce the foundation (e.g., saw cutting or drilling to install a floor safe) could damage the integrity of the System and/or cause serious injury or damage to persons and property. No Owner shall cut into or otherwise disturb the System. Neither Declarant nor any contractor of Declarant shall be responsible for any damage or injury resulting from or arising in connection with any alteration or piercing of the slab or the foundation of any residence. Each Owner shall hold Declarant harmless from and indemnify Declarant against all claims, demands, losses, costs (including attorney's fees), obligations and liabilities arising out of or in connection with the failure of the Owner to comply with the provisions of this Section. Section 6.24. No Over Irrigation. The Association shall not over irrigate the Association Property or the Common Area or allow irrigation or water delivery systems to fall into disrepair. No Owner shall carelessly use water, allow overflow of water or over irrigate any plants within his or her Entry, Balcony or Patio Exclusive Use Area or Living Unit. The excess water may cause substantial damage to the Project. Section 6.25. Trash Drop Off Locations. Certain portions of the Association Property may be designated as trash container drop off locations by the Board. The residents within the Project are required to place their trash containers at such locations during designated time periods. The Board may adopt rules and regulations regarding the trash container drop off and pick-up policies. The Board may also adopt rules and regulations to designate such Association Property for guest parking spaces on the days such areas are not utilized for container drop off locations. Section 6.26. No Discharging of Toxic Chemicals. 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 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. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -24- Section 6.27. Construction and Sales Activities. The development, construction, marketing and sales activities of Declarant 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 Declaration shall be applied to the development, construction, marketing or sales activities of Declarant or construed in such a manner as to prevent or limit development, construction, marketing or sales activities by Declarant. ARTICLE VII RESPONSIBILITIES OF MAINTENANCE Section 7.1. Maintenance by Owners. Each Owner of a Condominium shall be responsible for the maintenance and repair of: (a) The windows and the interior surfaces of doors enclosing the Living Unit, including the vinyl or metal frames, tracks and exterior screens of glass doors and windows. (b) The interior of the Living Unit and all appliances whether "built-in" or freestanding within the Living Unit. (c) The plumbing, electrical, cable television, water heating systems, heating systems and air conditioning systems (if any), any photo cell sensor porch entry lighting fixtures, and other systems servicing the Owner's Condominium and located either within or without the outside perimeter of the exterior walls, floors and ceilings thereof, so long as those systems are used exclusively by such Owner and not in common. For example, each Owner shall be responsible to maintain any automatic garage door opener for his or her garage. Declarant hereby reserves an easement to allow such systems to be located within the Association Property and Common Area in those locations where installed by Declarant. No Owner may permanently remove the photo cell sensor porch entry lighting fixtures servicing his or her Living Unit. (d) The maintenance and repair of the interior surfaces and drainage systems of any Balcony which the Owner has the exclusive right to use. For example, the Owner shall be responsible for re-surfacing his or her Balcony and shall keep his or her Balcony free from all trash and debris. All drainage systems for a Balcony shall be in good working condition at all times. The Association shall be responsible to paint and maintain both the exterior and interior surfaces of any open railings such as iron or tubular steel railings. (e) The routine maintenance (for example, sweeping and cleaning) of any Exclusive Use Area appurtenant to the Condominium, including the removal of any oil stains on any Balcony which the Owner has the exclusive right to use. An Owner shall also be responsible to maintain, repair and replace when appropriate, any improvements which the Owner makes to his or her Exclusive Use Area. (f) All Patio improvements. All such improvements shall be maintained in good condition and appearance, free from weeds, trash and debris, and all drainage systems for a Patio shall be kept in good working condition at all times. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -25- (g) The interior of any fences and walls which separate the Owner's Patio from Common Area or Association Property. (h) Should a fence or wall exist between two Patios, the cost of maintenance, repair and replacement of such fence or wall shall be shared equally by the Owners of the two adjoining Patios. Section 7.2. Failure to Maintain. In the event an Owner defaults in his or her maintenance or repair obligations, the Board may give written notice of such default, stating with particularity the work of maintenance or repair the Board finds to be required and requesting the same be completed in a reasonable period of time as specified in the notice. In the event the Owner fails to complete such maintenance or repair within the period specified in the notice, the Board may cause such work to be completed and assess the Owner the cost thereof. Section 7.3. Maintenance by Association. The Association shall maintain the Association Property and Common Area (except for those items of maintenance which the Owner is required to perform pursuant to Section 7.1 above). The Association shall be responsible for the maintenance and repair of the structure and exterior of each wall or fence separating the Entries or Patios from Common Area or Association Property. The Association's maintenance obligations include, but are not limited to the following amenities and utilities: Private streets, private sidewalks, private street lights, private storm drains and any other private utilities or amenities. (a) The Association shall maintain any subterranean drainage improvements which are located within an Exclusive Use Area only if such improvements are identified on a Condominium Plan for Association maintenance; otherwise the Owner of the Exclusive Use Area shall be responsible to maintain any subterranean drainage facilities located within such Owner's Exclusive Use Area. (b) The Association shall maintain all concrete terrace drains and other drainage systems (if any) which are located on Association Property or Common Area. (c) All landscaping within the Association Property or Common Area shall be maintained in a healthy and thriving condition, free from weeds, trash and debris. (d) The Association shall maintain any parkways, street mediums or other public areas within or adjoining the Project which the City requires to be maintained by the Association. (e) The Association shall maintain an ongoing program to remove dirt, litter and other debris from the surface of private streets and the recreational area by means of street sweeping and other suitable means which shall be established and enforced. 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. As stated in Section 6.26 above, 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 private, or into any storm drain or storm water conveyance systems. Use and disposal of pesticides, fungicides, herbicides, insecticides, fertilizers and other such chemical T:\AJH\CH\CARRILLO\ViIlage B Ph 2\ccrs8FebOO.wpd -26- treatments must, as prescribed in their respective containers, meet Federal, State, County and City requirements. Best Management Practices shall be used to eliminate or reduce surface pollutants when planning any changes to the landscaping and surface improvements. (f) If the Association fails to maintain all or any portion of the Association Property in accordance with this Article, the City shall be entitled to give written notice to the Association, with a copy to the Owners, setting forth with particularity the work of maintenance or repair which the City finds to be required and requesting that the same be carried out by the Association within a period of thirty (30) days after the Association's receipt of such notice (or such longer time period as the City may specify in such notice). If the Association fails to carry out such maintenance or repair within the period specified above, the City shall have the right, but not the obligation, to cause such work to be completed and shall be entitled to reimbursement of the costs incurred in connection therewith from the Owners, as provided in Section 4.20. Section 7.4. Reimbursement. Each Owner shall reimburse the Association for those costs incurred which result from the Condominium occupants' excessive or neglectful use of the Exclusive Use Area or other portions of the Common Area or Association Property. Section 7.5. Wood-Destroying Pests. The Association shall be responsible for the repair and maintenance of the Association Property and Common Area occasioned by the presence of wood-destroying pests or organisms; provided, however, it shall be the responsibility of each Owner to maintain and repair any improvements which may have been added by such Owner to the Owner's and/or Exclusive Use Area. The Association may cause the temporary, summary removal of any occupant of the Project for such periods and at such times as may be necessary for prompt, effective treatment of wood-destroying pests or organisms. The costs of temporary relocation during the repair and maintenance by the Association shall be borne by the affected Owners and not the Association. The Association shall give notice of the need to temporarily vacate a residence to the occupants and to the Owner, not less than fifteen (15) days nor more than thirty (30) days prior to the date of the temporary relocation. The notice shall state the reason for the temporary relocation, the date and time of the beginning of treatment, the anticipated date and time of termination of treatment, and that the occupants will be responsible for their own accommodations during the temporary relocation. Notice by the Association shall be deemed complete upon either: (a) Personal delivery of a copy of the notice to the occupants, and sending a copy of the notice to the Owner, if different than the occupants, by first-class mail, postage prepaid at the most current address shown on the books of the Association; or (b) By sending a copy of the notice to the occupants at the residence address and a copy of the notice to the Owner, if different than the occupants, by first- class mail, postage prepaid at the most current address shown on the books of the Association. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -27- ARTICLE VIII SEPARATION OF INTERESTS AND PARTITION PROHIBITED Section 8.1. No Separation of Interests. No Owner may sell, assign, lease or convey any portion of his or her Condominium separate or apart from the entire Condominium. Any conveyance, encumbrance, judicial sale or other transfer (voluntary or involuntary) of any portion of his or her Condominium separate or apart from the entire Condominium shall be void. Section 8.2. No Partition. There shall be no termination of the Project and the Common Area of the Project shall remain undivided with no judicial partition thereof except: (a) With the approval, after substantial destruction or condemnation of the Project occurs, of at least sixty-seven percent (67%) of the total voting power of the Association and approval by Eligible Mortgage Holders who represent at least fifty-one percent (51%) of the Condominiums that are subject to Mortgages held by Eligible Mortgage Holders; or (b) With the approval, for reasons other than substantial destruction or condemnation of the Project, of at least sixty-seven percent (67%) of the total voting power of the Association and approval by Eligible Mortgage Holders who represent at least sixty-seven percent (67%) of the Condominiums that are subject to Mortgages held by Eligible Mortgage Holders; or (c) As allowed by California law, including California CIVIL CODE Section 1359, as the same may be amended from time to time. An Eligible Mortgage Holder who receives a written request to give such approvals who does not deliver or mail the requesting party a negative response within thirty (30) days shall be deemed to have given such approval provided such written request was delivered by certified mail or registered mail with "return receipt" requested. Nothing in this Section shall be deemed to prohibit partition of a cotenancy in a Condominium. Section 8.3. Power of Attorney. The Association is hereby granted an irrevocable power of attorney to sell the Project for the benefit of all the Owners thereof when partition of the Owners' interests in the Project may be had pursuant to this Article. The power of attorney herein granted may be exercised upon the vote or written consent of Owners who own at least fifty percent (50%) of the Condominiums in the Project. Such power of attorney may be exercised by any two (2) Members of the Board who are hereby authorized to record a certificate of exercise in the Office of the County Recorder of the County of San Diego, which certificate shall be conclusive evidence thereof in favor of any person relying thereon in good faith. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -28- ARTICLE IX DAMAGE. DESTRUCTION AND CONDEMNATION OF COMMON AREA OR ASSOCIATION PROPERTY Section 9.1. Damage or Destruction. If any portion of the Common Area or Associa- tion Property is damaged or destroyed by fire or other casualty, then: (a) If the cost of repairing or rebuilding does not exceed the amount of available insurance proceeds by more than five percent (5%) of the budgeted gross expenses of the Association, the Board shall contract to repair or rebuild the damaged portions of the Common Area or Association Property. Such repair or rebuilding will be in substantial accordance with the original construction unless it is impractical to do so. (b) If the cost of repairing or rebuilding exceeds the amount of available insurance proceeds by more than five percent (5%) of the budgeted gross expenses of the Association, then: (i) The Board shall obtain at least two competitive bids for the repair or rebuilding not more than forty-five (45) days after such damage occurs; (ii) The Board shall use its best efforts to cause a special meeting of the Members to occur no later than ninety (90) days after such damage occurs. The notice of such meeting shall state that the reason for the meeting is to consider repair or rebuilding the portion of the Project which was damaged and whether to impose a special assessment to repair or rebuild. Such notice shall be accompanied with a summary of the competitive bids for repair or replace- ment. (iii) Unless a majority of the voting power of the Association votes against the Board doing so, the Board shall within one hundred and eighty (180) days after such damage enter into a contract for repair or replacement and impose special assessments therefor pursuant to its Resolution to do so in accordance with Paragraph (c) of Section 4.3 above. For purposes hereof, a "Majority of the voting power of the Association" means: (A) a majority of the voting power of each Class of Members if the two-class voting structure is in effect, or (B) a majority of the total voting power if only one-class voting is in effect. (iv) Nothing herein stated is intended to prevent the Board from repairing or replacing the Common Area or Association Property and imposing a special assessment therefor pursuant to its authority to do so in accordance with Paragraph (a) or (b) of Section 4.3 above. (c) If the Owners vote to not repair or rebuild the Common Area or Association Property, then each Owner (and the Owner's Mortgagee(s) as their respective interests shall then appear) shall be entitled to receive that portion of insurance proceeds equal to the proportion of the decrease in fair market value of the Owner's Condominium T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -29- as compared to the aggregate decrease in fair market values of all the Condominiums in the Project caused by such damage or destruction. Fair market value shall be determined by an MAI (Member Appraisal Institute of the American Institute of Real Estate Appraisers) appraiser selected by the Board and hired by and at the expense of the Association. Should a dispute arise as to the distribution of insurance proceeds, the dispute shall be decided by arbitration by the American Arbitration Association pursuant to its Commercial Rules of Arbitration. (d) If a bid to repair or rebuild is accepted, the Board shall levy a special assessment against each Condominium pursuant to Section 4.7 above for purposes of raising funds for the rebuilding or repair and to make up any deficiency between the total insurance proceeds and the contract price for such repair and rebuilding, and such assessment and all insurance proceeds, whether or not subject to liens of Mortgagees, shall be paid to the account of the Association to be used for such rebuilding. (e) This Article shall not apply to any destruction of a Phase unless and until a Condominium has been conveyed in such Phase. Prior to any such conveyance within a Phase, the Association shall have no right or obligation to insure or repair the improve- ments of such Phase and no Owner but Declarant shall be entitled to the proceeds of any insurance carried by Declarant. Section 9.2. Condemnation. If any portion of the Common Area in any Phase is taken by condemnation, eminent domain or any proceeding in lieu thereof, then all the Owners in all Phases of the Project, and their Mortgagees as their respective interests then appear, shall be entitled to receive a distribution from the award for such taking in the same proportion as insurance proceeds would be distributed pursuant to Subsection (c) of the Section above entitled "Damage or Destruction"; provided, however, that should it be determined to repair or rebuild any portion of the Common Area, such proceeds shall be paid to the Association for that purpose in the same manner and subject to the same terms, conditions and limitations as are set forth above in this Article for repairing damaged or destroyed portions of the Common Area. A decision to repair or rebuild shall be made in the same manner and subject to the same conditions and limitations as provided above in this Article for determining whether to rebuild or repair following damage or destruction. Section 9.3. insurance. The Association shall obtain and continue in effect at least the following insurance: (a) A master fire insurance policy with glass coverage and extended coverage endorsement for one hundred percent (100%) of the current replacement cost of all of the Common Area and Association Property improvements within the Project, 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 one percent (1%) of the policy face amount. The Association shall have no right or obligation to obtain such insurance for a Phase unless and until the first conveyance of a Condominium in such Phase. "Improvements" means and refers to the Association Property and Common Area together with those appliances and improvements located within the Living Units provided by Declarant to the initial Owners of Condominiums and does not include items not provided by Declarant. The form and content of such policy must satisfy the requirements of the Federal National Mortgage Association ("FNMA") T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -30- and the Federal Home Loan Mortgage Corporation ("FHLMC") and shall contain the following endorsements: (i) • An Inflation Guard Endorsement, when it can be obtained. (ii) A construction code endorsement, if there is a construction code provision that would require changes to undamaged portions of the building(s) even when only part of a building is destroyed by an insured hazard (typical endorsements include Demolition Cost Endorsements, Contingent Liability From Operation of Building Laws Endorsement and Increased Cost of Construction Endorsement). (iii) A Special Condominium Endorsement which states the policy shall provide that any insurance trust agreement will be recognized; the right of subrogation against Owners will be waived; the insurance will not be prejudiced by any acts or omissions of Owners that are not under the control of the Association; and the policy will be primary, even if an Owner has other insurance that covers the same loss. (b) A comprehensive general liability and property damage insurance policy with cross liability endorsement, if available, insuring the Association, any manager, the D.eclarant, and the Owners against liability incident to ownership or use of the Association Property and Common Area. 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. The form and content of the comprehensive general liability policy must satisfy the requirements of FNMA and FHLMC. (c) A policy insuring the Association's officers and directors against liability for their negligent acts or omissions while acting in their capacity as officers and directors. The limits of such insurance shall be not less than $1 Million for all claims arising out of a single occurrence. (d) Section 1365.7 of the California CIVIL CODE provides for a partial limitation on the liability of volunteer officers and directors of the Association who reside in a Living Unit, 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 Association in specified amounts. The Association shall maintain general liability insurance and insurance covering individual liability of officers and directors for negligent acts or omissions in amounts which satisfy the requirements of the Code to limit the liability of volunteer officers and directors of the Association. (e) A fidelity bond covering members of the Board, officers and employees of the Association and employees of any manager or managing agent, whether or not such persons are compensated for their services, naming the Association as obligee and written in an amount equal to at least three (3) months' aggregate regular assessments (including reserves) by the Association against all Condominiums then subject to assessment. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -31 - (f) Workers' compensation insurance covering any employees of the Association. (g) A standard all risk of loss perils insurance policy under an extended coverage casualty policy for the full insurable value of all insurable improvements to the Association Property, a policy covering all loss to personalty owned by the Association insured with coverage in the maximum insurable fair market value of such personalty as determined annually by an insurance carrier selected by the Association. Insurance proceeds for improvements in the Association Property and personalty owned by the Association shall be payable to the Association. Insurance premiums for the master policy and other insurance obtained by the Association (other than the cost of indorsements which cover only particular Owners) shall be a Common Expense to be included in the regular assessments levied by the Association. Each Owner shall be responsible to pay any deductible amount for any loss to his or her Condominium. Each Owner may separately insure the improvements not covered by the master fire insurance policy and personal property within the Owner's Condominium. However, no Owner shall insure a Condominium in any manner which would cause any diminution in insurance proceeds from the master policy. Should any Owner violate this provision the Owner shall be responsible to the Association for any such diminution. All insurance policies shall provide that they shall not be cancelable by the insurer without first giving at least ten (10) days prior notice in writing to the Association and the servicer of each first Mortgage which requests such notice, and shall contain a waiver of subrogation by the insurers against the Association, Board and Owners. The Association shall maintain such insurance coverage as may be required by FNMA or FHLMC so long as either FNMA or FHLMC respectively holds a Mortgage on or owns any Condominium. Nothing herein stated shall prevent the Association from obtaining additional amounts of insurance or from adding to the items covered by a master policy. Section 9.4. Mortgagee Approval. Any restoration or repair of the Project, after a partial condemnation or damage due to an insurable hazard, shall be performed substantially in accordance with original plans and specifications, unless other action is approved by Eligible Mortgage Holders of first Mortgages on Condominiums which have at least fifty-one percent (51 %) of the votes of Condominiums subject to Eligible Mortgage Holders' Mortgages. ARTICLE X DAMAGE. DESTRUCTION AND CONDEMNATION OF SEPARATE INTERESTS Section 10.1. Damage or Destruction. In the event of damage or destruction to any Living Unit or Exclusive Use Area improvements which the Owner is obligated to maintain, the Owner shall reconstruct the same as soon as reasonably practicable (unless the Association is not required to repair surrounding damaged Association Property or Common Area pursuant to the terms of Article IX above). The Owner shall be entitled to the benefit from an equitable T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -32- distribution of the master policy of casualty insurance referred to in Article IX above to the extent the distribution covers the damage or destruction of elements of the Condominium which are the obligation of the Owner to repair as provided in this Section. Section 10.2. Condemnation. In the event of any taking of a Living Unit or Exclusive Use Area, the Owner of the Condominium (and such Owner's Mortgagees as their interests may appear) shall be entitled to receive the award for such taking and after acceptance thereof the Owner and the Owner's Mortgagee shall be divested of all further interest in the Project and membership in the Association if such Owner shall vacate the Condominium as a result of such taking of the Living Unit. In such event the Owner shall grant the Owner's remaining interest in the Common Area appurtenant to the Living Unit-so taken, if any, to the other Owners owning a fractional interest in the same Common Area, such grant to be in proportion to the fractional interest in the Common Area then owned by each. Section 10.3. Mortgagee Approval. Any restoration or repair of the Project, after a partial condemnation or damage due to an insurable hazard, shall be performed substantially in accordance with original plans and specifications, unless other action is approved by Eligible Mortgage Holders of first Mortgages on Condominiums which have at least fifty-one percent (51 %) of the votes of Condominiums subject to Eligible Mortgage Holders' Mortgages. ARTICLE XI CONDEMNATION OF ASSOCIATION PROPERTY In the event the Association Property or any portion thereof shall be taken for public purposes of 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 Association. ARTICLE XII ASSOCIATION'S RIGHT OF ENTRY For the purpose of performing the maintenance of the Association Property and Common Area or for any other purpose reasonably related to the performance by the Board of its responsibilities under this Declaration, the Association's agents or employees shall have the right to enter any Living Unit, Exclusive Use Area or upon any portion of the Association Property and Common Area to effect repairs, improvements, replacements or maintenance as necessary; provided, however, except in case of an emergency, there shall be no entry into a Living Unit or Exclusive Use Area without (a) a court order allowing such entry or (b) the Owner's consent, which consent shall not unreasonably be withheld and shall be presumed if the Owner makes no objection to such entry within three (3) days after the Board delivers notice of its intent to enter. When there is an entrance into any Living Unit or Exclusive Use Area such entrance shall be made with as little inconvenience to the Owner as possible and any damage caused shall be repaired by the Association. T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -33- ARTICLE XIII ADDITIONAL EXCLUSIVE EASEMENTS AND LICENSES The Board shall have the right to grant the following additional easements and licenses: Section 13.1. Common Area Licenses. The Board shall have the right to grant irrevocable licenses for Owners to exclusively use portions of the Common Area adjoining the Owners' Exclusive Use Area, provided that the granting of such licenses would not materially and adversely affect any Owner's use of the Common Area. Section 13.2. Association Property. The Board shall have the right to grant easements for Owners to exclusively use portions of the Association Property adjoining the Owners' Exclusive Use Area, provided that the granting of such easements would not materially and adversely affect any Owner's use of the Association Property. ARTICLE XIV ENFORCEMENT Section 14.1. Enforcement. The Association, Declarant, and/or any Owner shall have the right to enforce against one another, by any proceeding at law or in equity, all restrictions, covenants, reservations, liens and charges now or hereafter imposed by this Declaration. Section 14.2. City Enforcement. The City shall have the right, but not the obligation, to enforce those provisions in this Declaration in which the City has an interest. Section 14.3. No Waiver. Failure by the Association, Declarant, the City or any Owner to enforce any provision of this Declaration shall in no event be deemed a waiver of the right to do so thereafter. ARTICLE XV ADDITIONAL PROVISIONS Section 15.1. Severabilitv. Should any provision in this 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 15.2. Amendments Prior to Escrow Closings. Prior to the date escrow closes for any sale of a Condominium to a Retail Purchaser, this Declaration may be unilaterally amended by Declarant. Section 15.3. Amendments After Escrow Closings. The following provisions shall apply after the close of the first escrow for a sale of a Condominium to a Retail Purchaser. During the period of time prior to conversion of the Class B membership to Class A membership, this Declaration may be amended by an instrument in writing signed by the President or Secretary of the Association certifying that at least sixty-seven percent (67%) of the voting power of each class of Members of the Association have approved the amendment. After conversion T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -34- of the Class B membership in the Association to Class A membership, the Declaration may be amended by an instrument in writing signed by the President or Secretary of the Association certifying that the following have approved the amendment: (a) at least sixty-seven percent (67%) of the total voting power of the Association, and (b) at least sixty-seven percent (67%) of the voting power of Members of the Association other than Declarant. 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. An amendment shall become effective upon the recording thereof by the Office of the County Recorder of the County of San Diego, California. Section 15.4. Mortgagee Approval of Amendment. Anything contained herein to the contrary notwithstanding, no amendment material to a Mortgagee may be made to this Declaration without the prior written consent of Eligible Mortgage Holders whose Mortgages encumber fifty-one percent (51 %) or more of the Condominiums within the Project which are subject to Eligible Mortgage Holder Mortgages. For purposes hereof, any amendments to provi- sions of this Declaration governing any of the following subjects, shall normally be deemed "material to a Mortgagee": (a) Voting rights. (b) Assessment liens and the priority of assessment liens and the right of Eligible Mortgage Holders to approve increases in regular assessments of in aggregate more than twenty-five percent (25%) during any fiscal year from the regular assessments assessed during the previous fiscal year. (c) The right of Eligible Mortgage Holders to approve reductions in reserves for maintenance, repair and replacement of the Association Property and the Common Area. (d) Responsibility for maintenance and repairs. (e) Reallocation of interests in the Common Area or Association Property (including Exclusive Use Area) or rights to its use. (f) Redefinition of boundaries. (g) Convertibility of Living Units into Common Area or Association Property and vice versa. (h) Annexation and deannexation. (i) Hazard or fidelity insurance requirements. (j) Imposition of any restrictions on the leasing of Condominiums. (k) Imposition of any right of first refusal or similar restriction on the right of a Condominium Owner to sell, transfer or otherwise convey the Owner's Condominium. T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -35- (I) Section 15.15. (m) Restoration or repair of the Project (after a hazard or partial condemna- tion) in a manner other than specified herein. (n) Any action to terminate the legal status of the Project after substantial destruction or condemnation occurs. (o) Any provision which, by its terms, is specifically for the benefit of the first Mortgagees, or specifically confers rights on first Mortgagees. An Eligible Mortgage Holder who receives a written request to approve amendments (including additions) who does not deliver or mail to the requesting party a negative response within thirty (30) days, shall be deemed to have approved such request provided that such written request was delivered by certified mail or registered mail, with "return receipt" requested. There shall be no amendment to or revocation of the provisions of Section 2.4, 4.20, 7.3 (f) or 14.2 without the prior written consent of the City. Section 15.5. Extension of Declaration. Each and all of these covenants, conditions and restrictions shall terminate sixty (60) years following the recordation of this Declaration, of Restrictions with the Office of the County Recorder of the County of San Diego, after which date they shall automatically be extended for successive periods of ten (10) years unless all the Owners have executed and recorded at any time within six (6) months prior to said sixty (60) 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 writing in which it is agreed that said restrictions shall terminate at the end of said sixty (60) year period or at the end of any such ten (10) year period. Section 15.6. Annexation: Reservation of Easements. (a) If Declarant should develop portions of the Real Property which are not initially a part of Covered Property, such additional lands or any portion thereof may be annexed to this Declaration and thereby be added to and included within the Project and the Covered Property and thereby become subject to the jurisdiction of the Association by action of Declarant without the assent of Members of the Association. Annexation may be accomplished by the recording of a Declaration of Annexation which requires Owners of Condominiums therein to be Members of the Association. Any such area may be deannexed anytime prior to the first conveyance of a Condominium in such area by Declarant executing, acknowledging and recording a Declaration of Deannexation for such area. (b) Annexation of any additional portion of the Real Property to the Covered Property is subject to the following requirements: (i) Recordation of a Declaration of Annexation identifying the specific land to be annexed; T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -36- (ii) Declarant shall be obligated to pay the Association, concurrently with the closing of the escrow for the first sale of a Condominium in a Phase of the annexed area, appropriate amounts for reserves for replacement or deferred maintenance of Common Area or Association Property improvements in the annexed area necessitated by or arising out of the use and occupancy of Condominiums under a rental program, if any, conducted by Declarant which has been in effect for a period of at least one (1) year as of closing of escrow for the first sale of a Condominium in the annexed area; (iii) The Condominiums to be constructed in the area to be annexed shall be substantially consistent with the Condominiums in the initially Covered Property in structure type and quality of construction, if so required by FNMA. This Subsection (iii) is intended to benefit FNMA only and its requirements may be waived by FNMA; (iv) Annexation shall not result in there being more than 124 Condominiums in the Project; and (v) The Declaration of Annexation shall not change the provisions herein set forth (including, but not limited to, those pertaining to voting rights and assessments) but may impose additional restrictions, easements and covenants on the area being annexed. (vi) The DVA shall have the right to reasonably determine that the annexation is in substantial conformity with the overall development plan, if any, approved by the DVA; (c) Declarant reserves the right to construct on the portions of the Real Property annexed to this Declaration, Condominiums of those sizes, price ranges, floor plans, architectural styles and designs as Declarant may, in its sole discretion, determine. Such sizes, price ranges, floor plans, architectural styles and/or designs need not be consistent with any previous or other Phase except as required by FNMA pursuant to Subsection (c)(iii) above. Among other things, but not as a limitation, Declarant may construct on the Real Property annexed hereto, lower or higher priced Condominiums, higher density or lower density residences, attached or detached residences. Moreover, Declarant shall not be obligated to complete the future Phases at all or in any particular order and has the right to change the Association Property and the numbers of Condominiums in a Phase, subject to the limitations stated in Subsection (b) above. (d) The Declaration of Annexation shall contain (i) a description of the property to be annexed, and (ii) a statement that the property to be annexed shall be subject to this Declaration. (e) Declarant hereby reserves reciprocal cross-easements in and to the Association Property (other than Exclusive Use Areas) and Common Area in all Phases of the Project for the benefit of the Owners of Condominiums in all other Phases of the Project. These cross-easements shall not benefit or burden a Phase until (i) such Phase has become subject to this Declaration and (ii) a Condominium has been conveyed to a T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -37- Retail Purchaser in such Phase; provided, however, each Owner of a Condominium shall at all times be provided with ingress and egress to such Owner's Condominium. (f) As'an alternative method of annexation, pursuant to a two-thirds (2/3) majority of the voting power of its Members, or the written assent of such Members, excluding the voting power or written assent of Declarant and the approval of the DVA, the owner of any property who desires to add it to the scheme of this Declaration and to subject it to the jurisdiction of the Association, may file of record a Declaration of Annexation. (g) Declarant hereby reserves in favor of- each Condominium and the Association Property in each Phase which is subject to this Declaration an appurtenant non-exclusive easement to use any drainage systems installed anywhere within the Real Property for the purposes of accepting drainage from such Association Property or Condominium regardless of whether the drainage system is located within a Phase which is within the Covered Property. Section 15.7. Enforcement Litigation. Except as provided in Section 15.26 below, in the event the Association, Declarant or any Owner shall commence litigation to enforce any of the covenants or restrictions contained in this Declaration, the prevailing party in such litigation shall be entitled to costs of suit and such attorney's fees as the Court may adjudge reasonable and proper. The "prevailing party" shall be the party in whose favor a final judgment is entered. Section 15.8. Encroachment Easements. Easements are hereby reserved in favor of the Owner of each Condominium and the Association over all adjoining Condominiums, the Association Property and Common Area for the purpose of accommodating any minor encroachments due to engineering errors, errors in original construction, repair, settlement or shifting of any building, or any other cause. There shall be easements for the maintenance of said encroachments as long as they shall exist, and the rights and obligations of Owners shall not be altered in any way by said encroachments, settlement or shifting; provided, however, that in no event shall an easement for encroachment be. created in favor of an Owner if the encroachment occurred due to the willful misconduct of any Owner. In the event any portion of a structure in the Project is partially or totally destroyed and then repaired or rebuilt, each Owner agrees that minor encroachments over adjoining Condominiums, Association Property or Common Area shall be easements for the maintenance of said encroachments so long as they shall exist. Section 15.9. Provisions Apply to All Condominiums. The provisions of this Declaration apply to all Condominiums which have been made subject to this Declaration, including any unsold Condominiums which may be owned by Declarant. Declarant shall have the same rights and assumes the same duties as any other Owner with respect to unsold Condominiums, except as expressly stated otherwise. Section 15.10. DVA Approval. So long as there is a Class B membership in the Associa- tion, and during the period of time that the DVA is the guarantor of a Mortgage encumbering a Condominium, the following actions will require the prior approval of the DVA: Deannexation of additional property from the Real Property, any mergers or consolidations of the T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -38- Association, any special assessment, and a material amendment to the Declaration, a draft of which shall be submitted to and approved by the DVA prior to recordation. Section 15.11. FrfA Approval. The Federal Housing Authority ("FHA") shall have the same approval rights as are provided to the DVA in this Declaration during such period of time as FHA is insuring a Mortgage encumbering a Condominium within the Project or owns a Condominium within the Project. Section 15.12. Special Responsibilities of Association. In the event that the improve- ments to be installed by Declarant to the Association Property or Common Area have not been completed prior to the issuance by the California Department of Real Estate of a Final Subdivision Public Report covering a Phase and in the further event that the Association is the obligee under a bond to secure performance by the Declarant 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 the obligations under the bond. If the 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 not less than five percent (5%) of the total voting power of the Association, the Board shall call a special meeting of the Members of the 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 the Members of the Association, excluding the vote of Declarant, to take action to enforce the obligations under the bond shall be deemed to be the decision of the Association, and the Board shall thereafter implement the decision by initiating and pursuing appropriate action in the name of the Association. Section 15.13. Limitation of Restrictions on Declarant. Declarant is undertaking the work of construction of residential Condominium dwellings and incidental improvements within the Project. The completion of that work, and the sale, rental and other disposal of said Condominium dwellings is essential to the establishment and welfare of the Project as a residential community. In order that Declarant's work may be completed and the Project may be established as a fully occupied residential community as rapidly as possible, nothing in this Declaration shall be understood or construed to: (a) Prevent Declarant, its contractors or subcontractors from doing in the Project whatever is reasonably necessary or advisable in connection with the completion of such work; or (b) Prevent Declarant or its representatives from erecting, constructing and maintaining on any part of the Project such structures as may be reasonable and necessary for the conduct of its business of completing such work and establishing the T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -39- Project as a residential community and disposing of the same in parcels by sale, lease or otherwise; or (c) Pr6vent Declarant from conducting on any part of the Project its business of completing such work, and of establishing a plan of Condominium ownership and of disposing of Condominiums in the Project by sale, lease or otherwise; or (d) Prevent Declarant from maintaining such signs within the Project as may be necessary for the sale, lease or disposition of Condominiums; provided, however, that the maintenance of any such sign shall not unreasonably interfere with the use by any Owner of such Owner's Condominium. The rights of Declarant provided in Subparagraphs (a) through (d) above may be exercised during the period of time commencing when the Condominiums are first sold or offered for sale to the public and ending when all Condominiums have closed escrow. Section 15.14. Owners' Compliance. Each Owner, tenant or occupant of a Condominium shall comply with the provisions of this Declaration, the Bylaws, decisions and resolutions of the Association or its duly authorized representative, as lawfully amended from time to time, and failure to comply with any such provisions, decisions, or resolutions shall be grounds for an action to recover sums due, for damages, or for injunctive relief. All agreements and determinations lawfully made by the Association in accordance with the voting percentages established in this Declaration or in the Bylaws, shall be deemed to be binding on all Owners of Condominiums, their successors and assigns. Section 15.15. 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 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 Association Property, and first Mortgagees making such payments shall be owed immediate reimbursement thereof from the 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 Association. Section 15.16. Mortgagee 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 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 15.17. Approval of First Mortgagees. Unless at least sixty-seven percent (67%) of the first Mortgagees (based on one vote for each first Mortgage owned) have given their prior written approval, the Association shall not be entitled to: (a) By act or omission seek to abandon or terminate the Project. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -40- (b) Change the pro rata interest or obligations of any Condominium in order to levy assessments or charges, allocate distribution of hazard insurance proceeds or condemnation awards, or determine the pro rata share of ownership of each Condominium in the Common Area. (This Subsection is not intended to require approval of First Mortgagees to the annexation of additional Phases to the Project or to the sale of Condominiums in such additional Phases.) (c) Partition or subdivide any Condominium. (d) By act or omission, seek to abandon, partition, subdivide, encumber, sell or transfer the Association Property. The granting of easements for public utilities or for other public purposes and other easements allowed by this Declaration shall not be deemed a transfer within the meaning of this Subsection nor shall non-material boundary adjustments be deemed a transfer within the meaning of this Subsection. (e) Restoration of the project (after hazard damage or partial condemnation) in such a manner other than specified in this Declaration. Any restoration or repair of the Association Property or Common Area after partial condemnation or damage due to an insurable event, shall be performed substantially in accordance with this Declaration and original plans and specifications unless other action is approved by Eligible Mortgage Holders, Insurers or Guarantors which have at least sixty-seven percent (67%) of the votes of Condominiums subject to Eligible Mortgage Holders, Insurers or Guarantors. When Owners are considering termination of the legal status of the project for reasons other than substantial destruction or condemnation of the project, Eligible Mortgage Holders, Insurers or Guarantors which have at least sixty-seven percent (67%) of the votes of Condominiums subject to Eligible Mortgage Holders, Insurers or Guarantors must agree. (f) Use hazard insurance proceeds or proceeds from other third parties for losses to or claimed defects in any portion of the Association Property or Common Area for other than the repair, replacement or reconstruction of such Association Property or Common Area. (g) When professional management has been previously required by any Eligible Mortgage Holder, Insurer or Guarantor, whether such entity became an Eligible Mortgage Holder, Insurer or Guarantor at that time or later, any decision to establish self- management by the Association shall require the prior consent of at least sixty-seven percent (67%) of the voting power of the Association and the approval of Eligible Holders, Insurers or Guarantors of Mortgages on Condominiums which have at least fifty- one percent (51 %) of the votes of Condominiums subject to Eligible Mortgage Holders, Insurers or Guarantors. This paragraph (g) applies only if the Project contains 50 or more Living Units. Section 15.18. Notice to Eligible Mortgagees. Upon written request to the Association identifying the name and address of the Eligible Mortgage Holder, Insurer or Guarantor and the Condominium number or address, any Eligible Mortgage Holder, Insurer or Guarantor will be entitled to timely written notice of: T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -41 - (a) Any condemnation loss or any casualty loss which affects a material portion of the Project or any Condominium on which there is a Mortgage held, insured or guaranteed by such Eligible Mortgage Holder, Insurer or Guarantor. (b) Any delinquency in the payment of assessments or other default by an Owner subject to a Mortgage held, insured or guaranteed by such Eligible Mortgage Holder, Insurer or Guarantor 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 Association. (d) Any proposed action which would require the consent of a specified percentage of Eligible Mortgage Holders, Insurers or Guarantors as specified above. Section 15.19. Documents to be Available to Mortgagees. The Association shall make available to Owners and Mortgagees, and holders, insurers or guarantors of any Mortgage, current copies of this Declaration, the Bylaws, other rules concerning the Project and the books, records and financial statements of the Association. "Available" means available for inspection, upon request, during normal business hours or under other reasonable circumstances. If the Project consists of fifty (50) or more Condominiums, the Association must provide an audited statement for the preceding fiscal year if an Eligible Mortgage Holder or Eligible Mortgage Insurer or Guarantor of a first Mortgage submits a written request for it. If the Project consists of less than fifty (50) Condominiums and no audited statement is available, the Eligible Mortgage Holder or Eligible Mortgage Insurer or Guarantor may have an audited statement prepared at its expense. Any such financial statement so requested shall be furnished within a reasonable time following such request. Section 15.20. Mortgagee Protection. A breach by an Owner of any of the covenants, conditions and restrictions contained herein shall not affect, impair, defeat or render invalid the lien, charges or encumbrance of any first Mortgage made for value which may then exist on any Condominium; provided, however, that in the event of a foreclosure of any such first Mortgage, or if the holder of the note secured by such first Mortgage acquires title to a Condominium in any manner whatsoever in satisfaction of the indebtedness, then the purchaser at the foreclosure sale shall, upon acquiring title, become subject to each and all of the covenants, conditions and restrictions contained herein, but free from the effects of any breach occurring prior thereto. Section 15.21. Conflicts. In the event of any conflict between any of the provisions of this Article and any of the other provisions of this Declaration, the provisions of this Article shall control. Section 15.22. Provisions of Civil Code Section 1360. Section 1360 of the California CIVIL CODE provides as follows: "(a) Subject to the provisions of the governing documents and other applicable provisions of law, if the boundaries of a Living Unit are contained within a building, the owner of a Living Unit may do the following: T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -42- (1) Make any improvements or alterations within the boundaries of his or her Living Unit that do not impair the structural integrity or mechanical systems or lessen the support of any portions of the common interest development. (2) Modify a unit in a condominium project, at the owner's expense, to facilitate access for persons who are blind, visually handicapped, deaf or physically disabled, or to alter conditions which could be hazardous to these persons. These modifications may also include modifications of the route from the public way to the door of the unit for the purposes of this paragraph if the unit is on the ground floor or already accessible by an existing ramp or elevator. The right granted by this paragraph is subject to the following conditions: (A) The modifications shall be consistent with applicable building code requirements. (B) The modifications shall be consistent with the intent of otherwise applicable provisions of the governing documents pertaining to safety or aesthetics. (C) Modifications external to the dwelling shall not prevent reasonable passage by other residents, and shall be removed by the owner when the unit is no longer occupied by persons requiring those modifications who are blind, visually handicapped, deaf or physically disabled. (D) Any owner who intends to modify a unit pursuant to this paragraph shall submit his or her plans and specifications to the association of the condominium project for review to determine whether the modifications will comply with the provisions of this paragraph. The association shall not deny approval of the proposed modifications under this paragraph without good cause. (b) Any change in the exterior appearance of a Living Unit shall be in accordance with the governing documents and applicable provisions of law." Section 15.23. Documents to be Provided to Prospective Purchasers. (a) By Owners. Each Owner shall, as soon as practicable before transfer of title to his or her Condominium or execution of a real property sales contract therefor (as defined in CIVIL CODE Section 2985), provide the following to the prospective purchaser those items which Civil Code Section 1368 requires be provided to the prospective purchaser. As of the date of this Declaration, Civil Code Section 1368 requires the following items be provided: (i) A copy of this Declaration, the Association's Articles and Bylaws, and the Condominium Plan for the Phase which describes the Condominium offered for sale; T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -43- (ii) The statement required by CIVIL CODE Section 1368(2), if applicable (i.e., if an age restriction becomes applicable); (iiij A copy of the Association's most recent financial statement distributed pursuant to CIVIL CODE Section 1365; (iv) A true statement, in writing, from an authorized representative of the Association, as to the respective amounts levied upon the Owner's Condominium which are unpaid on the date of the statement. The statement shall also include true information on late charges, interest and costs of collection which, as of the date of the statement, are or may be made a lien upon the Owner's Condominium pursuant to CIVIL CODE Section 1367. (v) A copy of the preliminary list of defects provided to each Owner pursuant to Civil Code Section 1375 if such that Section requires the list to be provided. (vi) Any change in the Association's current regular and special assessments and fees which have been approved by the Board but have not become due and payable as of the date of the disclosure required by this Section. (b) By the Association. Upon written request to the Association it shall, within ten (10) days of mailing or delivery of the request, provide an Owner with a copy of the requested Association items specified in (i), (ii), (iii) and (iv) above. The Association may charge a fee for this service which may not exceed the cost to prepare and reproduce the requested items. Section 15.24. Easement to Inspect and Test. Declarant reserves easements to enter any portion of the Project, including the interior of any residence and Exclusive Use Area to inspect those areas and to conduct destructive testing referred to in California CIVIL CODE Sectionl 375(d). However, Declarant shall notify the Association, with respect to Association Property which is to be inspected and the Owner of the Exclusive Use Area or Living Unit to be inspected of at least three (3) 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 Association and Owner, respectively, the opportunity to specify which date and time is acceptable to the Association and Owner. Should the Association or 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 Association or Owner, respectively. 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 15.25. Association Property and Common Area Inspection. In addition to its other inspection and testing rights set forth in this Declaration, Declarant may, at its election, notify the Board that (i) Association Property and Common Area landscaping and related improvements for a particular Phase, or some portion thereof, have been completed and (ii) T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -44- Declarant is requesting the inspection provided for in this Section. Within fifteen (15) days after Declarant gives such notice, Declarant shall select an independent and qualified landscape architect to perform the inspection. Each person selected or appointed pursuant to this Section is referred to collectively as the "Expert". Declarant shall pay the reasonable compensation of the Expert. Promptly upon the selection of the Expert as provided above, the Expert shall inspect the improvements as to which Declarant has given notice of completion and requested inspection. One representative of the Declarant and one representative of the Board may accompany the Expert during the inspection. The inspection shall be limited to a visual inspection, and improvements shall not be uncovered. The Expert shall not be responsible for identifying latent deficiencies. Promptly after the inspection is completed, the Expert shall submit a written report (the "Report") to Declarant and the Board specifying the respects, if any, in which the improvements do not substantially conform to the plans and specifications therefor and are defective, and if there are no such deficiencies, the Report shall state that the improvements conform to the plans and specifications therefor. The Report shall constitute conclusive and binding evidence that, except as otherwise provided therein and except for latent deficiencies, if any, the improvements have been constructed in substantial accordance with the plans and specifications therefor, and thereafter Declarant shall have no further liability, duty or obligation with respect to such improvements, except to remedy any deficiencies specified in the Report and except with respect to latent deficiencies, if any, and the separate repair obligations of Declarant under express written warranty, if any. Declarant shall correct any deficiencies specified in the Report, and the Expert shall reinspect such improvements within thirty (30) days after Declarant's request. Such reinspection shall be performed in the same manner as provided for the first inspection. Promptly after the reinspection is completed, the Expert shall submit another written report (the "Reinspection Report") to Declarant and the Board specifying the deficiencies specified in the Report which have not been corrected, if any, and if all such deficiencies have been corrected the Reinspection Report shall state that the improvements substantially conform to the plans and specifications therefor. The Reinspection Report shall constitute conclusive and binding evidence that, except as otherwise provided therein and except for latent deficiencies, if any, the improvements have been constructed in substantial accordance with the plans and specifications therefor, and thereafter Declarant shall have no further liability, duty or obligation with respect to such improvements, except to remedy any deficiencies specified in the Reinspection Report, and except with respect to latent deficiencies, if any, and the separate repair obligations of Declarant under express written warranty, if any. Additional inspections and Reinspection Reports shall be made, if necessary, all in accordance with and with the same effect as provided hereinabove. Within ten (10) days after all deficiencies have been corrected, as evidenced by a Report or Reinspection Report, the Board shall be deemed to have accepted the improve- ments in writing and shall release in writing any and all rights under any and all payment and performance, labor and material, and completion bonds pertaining to the improvements. No amendment may be made to this Section without the written consent of Declarant. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -45- Section 15.26. Definitions. The following words will have the following meanings for purposes of this Article: (a) "Construction Defect Dispute" shall mean and refer to any dispute between an Owner or the Association and Declarant or between an Owner or the Association and any employee, agent, partner, contractor, subcontractor or material supplier of Declarant which dispute relates to the use or condition of the Real Property or any improvements to the Real Property. Construction Defect Disputes include, but are not limited to, disputes regarding boundaries, surveys, soils conditions, grading, design, specifications, construction, installation of improvements or disputes which allege breach of implied or express warranties as to the condition of the Real Property. (b) "ConstructionParty" refers to Declarant, or any director, officer, partner, employer, subcontractor or agent of Declarant. (c) "Claimant" refers to any party (including any Owner or the Association) who intends to make a claim for Construction Defect against a Construction Party. Section 15.27. Dispute Notification and Resolution Procedure. Any Construction Defect Dispute shall be subject to the following provisions: (a) Notice. Any Claimant with a claim against a Construction Party shall notify the Construction Party in writing of the claim, which writing shall describe the nature of the claim and the proposed remedy (the "Claim Notice"). (b) Right to Inspect and Right to Corrective Action. Within a reasonable period after receipt of the Claim Notice, which period shall not exceed sixty (60) days, each Construction Party and the Claimant shall meet at a mutually-acceptable place within the Real Property to discuss the claim. At such meeting or at such other mutually- agreeable time, each Construction Party and its/their representatives shall have full access to the property that is subject to the claim for the purposes of inspecting the same. The parties shall negotiate in good faith in an attempt to resolve the claim. If a Construction Party elects to take any corrective action, the Construction Party and its representatives and agents shall be provided full access to the property subject to the claim to take and complete corrective action. (c) Civil Code Sections 1368.4 and 1375. Nothing contained herein shall be deemed a waiver or limitation of the provisions of California CIVIL CODE Section 1368.4. If the claim is subject to the provisions of CIVIL CODE Section 1375 as it may be amended from time to time, compliance with the procedures of CIVIL CODE Sections 1375 (b), (d) and (e) shall satisfy the requirements of Sections 15.27 (a) and 15.27 (b) above. (d) Mediation. If the parties cannot resolve the claim pursuant to the procedures described in subsection (b) above, (including, if applicable, CIVIL CODE Section 1375 procedures) the matter shall be submitted to mediation pursuant to the mediation procedures adopted by the American Arbitration Association or any successor thereto or to any other entity offering mediation services that is acceptable to the parties. No person shall serve as a mediator in any dispute in which the person has any financial or personal interest in the result of the mediation, except by the written consent of all T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -46- parties. Prior to accepting any appointment, the prospective mediator shall disclose any circumstances likely to create a presumption of bias or to prevent a prompt commencement of the mediation process. (i) Within ten (10) days of the selection of the mediator, each party shall submit a brief memorandum setting forth its position with regard to the issues that need to be resolved. The mediator shall have the right to schedule a pre-mediation conference and all parties shall attend unless otherwise agreed. The mediation shall be commenced within ten (10) days following the submittal of the memoranda and shall be concluded within fifteen (15) days from the commencement of the mediation unless the parties mutually agree to extend the mediation period. The mediation shall be held in the county in which the Real Property are located or such other place as is mutually acceptable to the parties. (ii) The mediator has discretion to conduct the mediation in the manner in which the mediator believes is most appropriate for reaching a settlement of the dispute. The mediator is authorized to conduct joint and separate meetings with the parties and to make oral and written recommenda- tions for settlement. Whenever necessary, the mediator may also obtain expert advice concerning technical aspects of the dispute, provided the parties agree and assume the expenses of obtaining such advice. The mediator does not have the authority to impose a settlement on the parties. (iii) Prior to the commencement of the mediation session, the mediator and all parties to the mediation shall execute an agreement pursuant to California EVIDENCE CODE Section 1152.5(e) or successor statute in order to exclude the use of any testimony or evidence produced at the mediation in any subsequent dispute resolution forum, including, but not limited to, court proceedings, reference proceedings or arbitration hearings. Pursuant to California EVIDENCE CODE Sectionl 152.5(a), the agreement shall specifically state that evidence of anything said or of any admission made in the course of the mediation is not admissible evidence, and disclosure of any such evidence shall not be compelled in any civil action in which, pursuant to law, testimony can be compelled to be given. Unless the document provides otherwise, no document prepared for the purpose of, or in the course of, or pursuant to, the mediation, or copy thereof, is admissible evidence; and disclosure of any such document shall not be compelled in any civil action in which, pursuant to law, testimony can be compelled to be given. (iv) Persons other than the parties, the representatives and the mediator may attend mediation sessions only with the permission of the parties and the consent of the mediator. Confidential information disclosed to a mediator by the parties or by witnesses in the course of the mediation shall not be divulged by the mediator. All records, reports, or other documents received by the mediator while serving in such capacity shall be confidential. There shall be no stenographic record of the mediation process. (v) The expenses of witnesses for either side shall be paid by the party producing such witnesses. All other expenses of the mediation, including T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -47- required traveling and other expenses of the mediator, and the expenses of any witnesses, or the cost of any proofs or expert advice produced at the direct request of the mediator, shall be borne equally by the parties unless they agree otherwise'. Each Owner covenants that each shall forbear from commencing any litigation against the Construction Party without complying with the procedures described in this Section. Section 15.28. Judicial Reference of Certain Disputes. Any Construction Defect Dispute against a Construction Party shall be submitted to general judicial reference pursuant to California CODE OF CIVIL PROCEDURE Sections 638(1) and 641-645 or any successor statutes thereto, and all parties shall cooperate in good faith to ensure that all necessary and appropriate parties are included in the judicial reference proceeding. A Construction Party shall not be required to participate in the judicial reference proceeding should such Construction Party reasonably determine that not all necessary and appropriate parties will or can be legally compelled to participate. The following provisions apply to any such judicial reference: (a) The parties waive their right to a jury trial. (b) The parties shall share equally in the fees and costs of the referee, unless the referee orders otherwise. The parties shall bear their own attorneys' fees. (c) The general referee shall have the authority to try all issues, whether of fact or law, and to report a statement of decision to the court. The parties shall use the procedures adopted by Judicial Arbitration and Mediation Services ("JAMS") for judicial reference (or any other entity offering judicial reference dispute resolution procedures as may be mutually acceptable to the parties), provided that the following rules and procedures shall apply in all cases unless the parties agree otherwise: (i) The proceedings shall be heard in San Diego County; (ii) The referee must be a retired judge or a licensed attorney with substantial experience in relevant matters; (iii) Any dispute regarding the selection of the referee shall be resolved by JAMS or the entity providing the reference services, or, if no entity is involved, by the court with appropriate jurisdiction; (iv) The referee may require one or more pre-hearing conferences; (v) The parties shall be entitled to conduct all discovery as otherwise provided in the California CODE OF CIVIL PROCEDURE, and the referee shall oversee discovery and may enforce all discovery orders in the same manner as any trial court judge; (vi) A stenographic record of the trial shall be made, provided that the record shall remain confidential except as may be necessary for post-hearing motions and any appeals; T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -48- Section 16.3. Failure to Complete Project. In the event all Phases of the Covered Property are not constructed as originally intended by Declarant and a building has not been constructed in one or more Building Envelopes ("Undeveloped Building Envelopes"), Declarant may convey by quitclairrt deed to the Association, the Undeveloped Building Envelopes within the Covered Property then owned by Declarant. Upon the conveyance of an Undeveloped Building Envelope to the Association, the Living Units and Common Area which have not then been constructed shall thereafter be Association Property, and the applicable Condominium Plan(s) may be amended by Declarant in accordance with this Declaration. Within sixty (60) days following any such conveyance, Declarant shall at Declarant's expense clean-up any debris from the Undeveloped Building Envelope so conveyed. Section 16.4. Right of Declarant to Redesign Project. Declarant reserves the right in its sole discretion, but subject to any necessary City approvals, to redesign any portion of the Project other than Living Units and Common Area which have been conveyed by Declarant to others. The redesign may alter the boundaries of any improvement, adjust the location of the Building Envelopes and Association Property, change the elevation and appearance of improve- ments, and change the location of the amenities. However, in no event shall the redesign result in more than one hundred twenty-four (124) Living Units being constructed within the Project. Section 16.5. Amendment to Condominium Plants). The Condominium Plan covering a Building Envelope may be amended or revoked by a document signed and acknowledged by the then owners of the Building Envelope and by their Mortgagees. For example, until the conveyance of a Condominium within a Building Envelope, amendment of the applicable Condominium Plan covering just that Building Envelope shall require the signature only of Declarant as the owner of the Building Envelope and of the Mortgagees whose Mortgage encumbers the Building Envelope. Section 16.6. Power of Attorney. Each Mortgagee of a Mortgage and each Owner of a Condominium by accepting a Mortgage or deed to a Condominium, shall be deemed to have constituted and irrevocably appointed Declarant as his attorney-in-fact, for himself and each of his optionees, grantees, licensees, trustees, receivers, lessees, tenants, judgment creditors, heirs, legatees, devisees, administrators, executors, legal representatives, successors and assigns, whether voluntary or involuntary, and thereby to have conveyed a power of attorney coupled with an interest to Declarant as his attorney-in-fact to effect the redesign of all or any portion of the Project in accordance with the limitations and requirements set forth in this Article; and further: (a) To prepare, execute, acknowledge and record any map or record of survey required or permitted by the provisions of the Subdivision Map Act of the State of California in effect on the date of the recording of this Declaration and as thereafter enacted or amended, and any ordinances, rules and regulations of applicable govern- mental entities and authorities having jurisdiction over the Project in effect on the date of the recording of this Declaration and as thereafter enacted or amended, or which may be required or permitted by any title insurer, and in connection therewith, to perform all conditions, undertake any obligations and execute all agreements and documentation required or permitted by any federal, state and local governmental entities and authorities; to appear before any such governmental entities and authorities; and to execute, acknowledge and deliver any improvement agreements and bonds and post deposits securing the performance of any such conditions and obligations. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd -50- securing the performance of any such conditions and obligations; and do all other things now or hereafter permitted or required by any such governmental body and any such laws and regulations. (g) To prepare, execute, acknowledge and record any deeds, waivers, releases, reconveyances or other documentation which may be permitted or required to clear title to any Condominiums in the Project. (h) . To do any and all things necessary or desirable under the circumstances to effect and accomplish the purposes of this Article. Section 16.7. Indemnification of Owners on Exercise of Power of Attorney. Declarant shall indemnify and hold each Owner free and harmless from all liabilities, including attorney's fees, which are incurred as a direct result of the execution by Declarant of any improvement agreements or bonds, or both, in connection with the exercise by Declarant of the power of attorney set forth in Section 16.6. Section 16.8. Limitation on Amendment. This Article may not be amended without the written approval of Declarant attached to the instrument of amendment. IN WITNESS WHEREOF, the undersigned, being Declarant herein, has executed this instrument the day and year first hereinabove written. CONTINENTAL RESIDENTIAL, INC., a California corporation, d/b/a Continental Homes By_ Title By_ Title T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd -52- 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) T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd Exhibit "A" The Real Property Lots 1 arid 2 of CITY OF CARLSBAD TRACT 98-15 RANCHO CARRILLO VILLAGE "B", according to Map thereof No. , filed with the County Recorder of San Diego County, California on , 2000. T:\AJH\CH\CARRILLO\Village B Ph 2\ccrs8FebOO.wpd Exhibit "B" Phasing of the Project (Page 1 of 2) Phase 1 2 3 4 5 6 7 No. ofDU's 14 18 18 20 17 18 19 Lot No. 1 1 1 1 1 2 2 T:\AJH\CH\CARRILLOWillage B Ph 2\ccrs8FebOO.wpd