Terra Lago Budget

8/13/2019 Terra Lago Budget

1/31

Terra Lago Communtiy Associationdo Merit / FirstService Residential43-100 Cook Street, Suite 103Palm Desert CA 92211

BUDGET ENCLOSED

197-522BRIAN DAVIES43-277 SENTIERO DrINDIO CA 92203


2/31

DATE May 29, 2013TO: he Membership Terra Lago Community AssociationFROM: The Board of DirectorsRE: 013-2014 Budget Effective July I, 2013

Each year the association's volunteer Board of Directors performs a very careful review of the pastyear's expenses and income to best project the amount to collect from each member in the upcomingfiscal year. When reviewing the budget, the Board considers several factors such as: recurring contractcosts, inflation, utility usage and rates, insurance and appropriate reserve contributions (savings) eachmonth to pay for repair, restoration and/or replacement of common area components as needed.As a result of this review, the Board has determined that assessments can remain the same whilemeeting the association's financial needs in the upcoming fiscal year. The monthly assessment willcontinue to be 291.49 per month for the next fiscal year.What is included in This Budget Packet?

State law and the association's governing documents require the Board of Directors to distribute thefollowing documents annually to each member: A summary of the pro forma budget for the upcoming fiscal year Assessment and Reserve Funding Disclosure Summary Executive Summary pages of the reserve study 5-Year Reserve Projection Model 30-Year Reserve Cashflow Analysis Delinquency Policy Written Notice of Assessments, Foreclosure, and Payment Plans Alternative Dispute Resolution (ADR) procedure Internal Dispute Resolution (IDR) procedure Architectural Submittal and Appeal process Insurance Summary

About the Reserve StudyCalifornia law requires the association's Board of Directors to cause to be conducted a reserve studywith an onsite inspection at least once every three years. Although the law does not require the Boardto perform a reserve study in years two and three, the law does require an annual disclosure to bedistributed to the membership in those years. To ensure that the association's major components areappropriately identified, the Board hires a professional reserve analyst for these services.* TheExecutive Summary in this packet will show whether or not a site inspection was completed this year

as determined by the Board.


3/31

California law also requires the Board to make these disclosures about the association's reserve funds:1) In the upcoming year, the association will fund reserves using the following sources:

Type of FundingRegular AssessmentsSpecial AssessmentsEl BorrowingUse of Other AssetsDeferral of Repairs]lternate Mechanisms

2) The association has a total of 2,058,297.75 in actual accumulated reserve funds asof April 30, 2013. The Board anticipates that the amount will increase to

2,103,821.75 by the end of the current fiscal year. According to the reserveanalyst, the total replacement cost for all major components is 4,394,183.00. Thecurrent reserve fund amount represents 48% of the projected total replacementcost. Although this number usually seems low, the legislature requires the Board to disclose (inboldface type) how much it would cost the association to rebuild all of its major common areacomponents if they were replaced all at once.

3) According to the reserve analyst, at the start of the upcoming fiscal year the association isanticipated to be 132% funded to the ideal funding level . That number represents the amountthe association is anticipated to have on hand to repair or replace major components when theyare scheduled to be repaired or replaced.

4) The Board of Directors has determined to defer or not undertake repairs or replacement of thefollowing major components with a remaining life of 30 years or less (as identified in the reservestudy as having zero estimated remaining life):

Item Item Description Reason for Deferral or Decision to NotUndertake Repairs/Replacement

n/aInsurance InformationThe association carries General Liability insurance in the amount of $11,000,000 which meets theminimum amount specified in California law to ensure that owners are only individually liable for theirproportionate share of special or regular assessments levied to pay any judgments against the associationwhich exceed the limits of the association's insurance.Additional disclosures about the association's insurance policies can be found within this packet,including the name(s) of the insurer(s), the types of insurance, the policy limits, and the amount ofdeductibles (if any).

Other DisclosuresThe Board of Directors does not anticipate that any special assessment will be required during the upcomingfiscal year to repair, replace and/or restore any major components or to provide adequate reserves.


4/31

Copies of board meeting minutes are available upon request throughout the year. Minutes can be releasedto you thirty days following the meeting date and any charges involved for copying and postage for thoseminutes are the responsibility of the requesting owner. If the minutes are not approved by the Board withinthe 30-day period of the request, draft minutes will be provided to you.Please contact our community manager, Julie Reese at 760-834-2483 or via e-mail at [email protected] you have any questions or if you would like to have a copy of the complete pro forma operating budgetprovided to you at the association s expense or a copy of the complete reserve study plan. These documents arealso available for review at 42-900 Logo Vista Blvd, Indio Co 92203 by appointment* The association's board of directors has relied on information, opinions, reports and statements presented to it byvendors, contractors, reserve study specialists, CPA's and/or other professionals and is relying upon this information,financial data and reports pursuant to the California Corporations Code in providing the association membership theinformation contained in this Assessment Reserve Funding Disclosure Summary. The information contained within thereserve study includes assumptions regarding future events based on information supplied to the association's board ofdirectors from said professionals. Some assumptions inevitably will not materialize and unanticipated events andcircumstances may occur subsequent to the date of this Disclosure Summary. Therefore, the actual replacement costand remaining life may vary from the reserve study and the variation may be significant. Additionally, inflation and othereconomic events may impact the reserve study, particularly over a 30-year period of time which could impact theaccuracy of the reserve study and the funds available to meet the association's obligation for repair and/or replacementof major components during the next 30 years. Furthermore, severe weather conditions, earthquakes, floods or otheracts of God, the occurrence of vandalism and other events that are difficult to anticipate cannot be accounted for andare excluded when assessing life expectancy of the components. The reserve study only includes items that theAssociation has a clear and express responsibility to maintain pursuant to the association's CC&Rs.


5/31

TERRA LAGO COMMUNITY2013-2014 Budget

Number of Units: 20

Income

PER UNIT PER MONTH(rounded)PER YEAR

rounded)

Member Assessment 291.49 151,576 1,818,912Other Income 20.58 10,704 128,448

Total Income 312.08 162,280 1,947,360

Reserve Funding 49.66 25,824 309,888

Operating ExpensesUtilities: 26.97 14,025 168,300Landscape Maintenance: 30.75 15,991 191,892Pool/Spa: 3.32 1,725 20,700Common Area: 44.73 23,260 279,120Administration: 75.98 39,511 474,132Lake Maintenance: 9.81 5,100 61,200Community Serices/Events: 68.91 35,833 429,996Extra Section 3: 1.94 1,011 12,132Total Operating Expenses 262.42 136,456 1,637,472Total Reserve Funding 49.66 25,824 309,888Total Operating & Reserves 312.08 162,280 1,947,360

The p ro forma operating budget is available at the business o ffice of the association. Cop ies willbe provided to you upon request at the expense of the association.

TYPICAL OPERATING EXPENSE CATEGORIES GENERALLY INCLUDE:Utilities: electricity, gas, waterLandscape Maintenance: contract maintenance service, replacement of plant material, supplies, sprinkler repair, etc.Common Area: handyman services, pest control, light maintenance, fencing repair, etc.Administration: annual audit, taxes, & licenses, legal service, insurance, management fees, delinquency monitoring, etc.

Copy of TLA Budget Workbook 2013-2014


6/31

EXECUTIVE SUMMARYRESERVE ANALYSIS

TERRA LAGO COMMUNITY ASSOCIATION JUNE 30, 2013

COMPONENTCURRENTREPLACEMENTCOST REMAININGLIFE USEFULLIFE

PROJECTEDRESERVES6/30/13MONTHLYFUNDINGREQUIREMENT IDEALRESERVE

BUILDING ELEMENTSROOFING COMPONENTS;Tile Roofs 5115,600 29 35 $26,081 $257.25 $19,817Skylights 3,875 14 20 1,531 13.92 1,163Category Total $119,475 $27,611 271.17 520,980

PAVED SURFACESStreets - Seal Coat 225,655 1 4 130,233 7,951.83 169,241Streets - Asphalt Overlay 1,743,697 24 30 616,464 3,914.00 348,739Category Total $1,969,352 $746,697 11,865.83 $517,980

FENCES & GATESWROUGHT IRON;Pool Fence 27,720 13 20 12,768 95.83 9,702Pedestrian Gates 1,875 13 20 863 6.50 656OTHER;Masonry W all Repairs 31,779 18 25 11,710 92.92 8,898Trash Access Gates 3,100 13 20 1,428 10.75 1,085Retaining Walls 3,612 13 20 1,664 12.50 1,264ENTRY SYSTEM;Vehicle Entry Gates 46,000 19 20 3,027 188.50 2,300Pedestrian Gates 3,300 19 20 217 13.50 165Access System 5,140 4 10 4,059 22.50 3,084GATE OPERATORS;Swing Type 27,000 11 12 2,961 182.08 2,250Category Total $149,526 $38,698 625.08 529,404

PAINTSTUCCO 50,000 2 8 49,353 27.00 37,500TRIM 38,600 1 4 38,100 41.67 28,950WROUGHT IRON;Fences & Gates 3,802 1 3 3,336 38.83 ,535OTHER PAINTING;Interior Surfaces 26,913 2 8 26,565 14.50 20,185Guard House 775 4 5 204 11.92 155Category Total $120,090 5117,558 133.92 589,325

LIGHTINGLANDSCAPE LIGHTING;Street Lights 68,750 18 25 25,334 201.00 19,250Bollard Fixtures 17,850 3 10 16,444 39.08 12,495Exterior Fixtures 27,750 14 20 10,956 100.00 8,325Park Landscape Fixtures 13,600 3 10 12,529 29.75 9,520Parking Fixtures 56,100 11 18 28,713 207.50 21,817Pocket Park Fixtures 3,000 3 10 2,764 6.58 2,100Category Total $187,050 $96,740 583.91 $73,507

Page 1


7/31



COMPONENTCURRENT

REPLACEMENTCOST REMAININGLIFE USEFULLIFPROJECTEDRESERVES

6/30113MONTHLYFUNDING

REQUIREMENTIDEAL

RESERVELANDSCAPE

GENERAL LANDSCAPE;Parkways 68,000 3 10 62,645 148.75 47,600Pocket Parks 31,000 3 10 28,559 67.83 21,700Recreation Arca 15,500 3 10 14,279 33.92 10,850Masonry Reserve 146,000 13 20 67,251 504.83 51,100Category Total $260,500 $172,734 755.33 $131,250

IRRIGATIONSYSTEM COMPONENTS;Pump System 41,250 8 15 25,334 165.75 19,250Category Total $41,250 $25,334 165.75 $19,250

POOL/SPACOMPONENTS EQUIPMENT;Main Pool - Plaster & Tile 22,700 5 12 17,427 87.92 13,242Main Pool - Gas Heaters 8,400 5 10 5,527 47.92 4,200Main Pool - Filters 3,050 3 10 2,810 6.67 2,135Spa - Plaster & Tile 6,200 1 10 7,344 0.00 5,580Spa - Gas Heater 4,125 3 10 3,801 9.00 2,888Spa - Filter 1,135 3 10 1,046 2.50 795Kiddie Pool - Plaster Tile 10,000 5 12 7,677 38.75 5,833Kiddie Pool - Gas Heater 4,200 3 10 3,869 9.17 2,940Kiddie Pool - Filter 1,150 3 10 1,059 2.50 805Pumps & Motors 3,390 2 5 2,677 29.75 2,034RELATED ELEMENTS;Showers 5,600 13 20 2,579 19.33 1,960Trellis 49,686 14 20 19,617 179.00 14,906Deck Repairs 46,000 23 30 14,125 115.50 10,733Furnishings 15,500 1 5 16,319 0.00 12,400Handicap Lift 5,000 3 10 4,606 10.92 3,500Category Total $186,136 $110,485 558.93 $83,951

RECREATION ROOMSCLUBHOUSE CONTENTS;HVAC Systems 18,000 6 12 11,845 85.50 9,000Appliances 9,000 8 14 5,076 40.83 3,857Cabinets & Counters 25,000 24 30 6,580 63.92 5,000Interior Furnishings 77,400 9 15 40,745 339.42 30,960Audio Equipment 5,140 4 10 4,059 22.50 3,084Televisions 16,775 2 8 16,557 9.08 12,581Flooring 48,224 24 30 12,693 123.33 9,645Carpet 21,068 1 5 22,181 0.00 16,854Rcstrooms Refurbish 22,700 9 15 11,950 99.50 9,080Water Heaters 1,550 I 7 1,749 0.00 1,329Exterior Furnishings 2,250 2 8 2,222 1.17 1,688Category Total $247,107 $135,658 785.25 $103,078

FITNESS FACILITIESFITNESS CENTER;Climbers 11,000 4 10 8,686 48.17 6,600Machines 45,000 9 10 5,922 361.83 4,500Stationary Bikes 10,000 4 10 7,896 43.83 6,000Tread Mills 12,000 4 10 9,476 52.58 7,200Flooring 14,250 10 10 0 118.75 0

Page 2


8/31



COMPONENTCURRENTREPLACEMENTCOST REMAININGLIFE USEFULLIFE

PROJECTEDRESERVES6/30/13MONTHLYFUNDINGREQUIREMENT IDEALRESERVE

TOT LOTS;Safety Pads 8,820 3 10 8,125 19.33 6,174Equipment 45,000 13 20 20,728 155.58 15,750OTHER;Pocket Park Furnishings 10,325 8 15 6,341 41.50 4,818Category Total S156,395 $67,175 841.57 $51,042

AQUATIC RECREATIONLAKE;Aeration System 16,500 8 15 10,134 66.33 7,700Dredging 205,000 18 25 75,542 599.33 57,400Fill Line 72,000 8 15 44,220 289.42 33,600Pump M otors 1,545 1 5 1,627 0.00 1,236Pump Unit 5,365 3 10 4,943 11.75 3,756Pump Unit 7,220 3 10 6,651 15.83 5,054Pumps 9,300 1 5 9,792 0.00 7,440Compressor Pumps 20,400 1 8 23,492 0.00 17,850Repairs & Maintenance 65,000 3 5 34,218 855.08 26,000Auto Fill 30,000 1 25 37,903 0.00 28,800SLIPS/DOCKS;Boat Launch Ramp 5,160 IS 25 1,902 15.08 1,445Dock Surfaces 8,316 18 25 3,064 24.33 2,328Dock Sections 1,025 18 25 378 3.00 287Category Total $446,831 $253,864 1,880.15 $192,896

ACCESS CONTROLGUARDHOUSE;Remodel 7,500 19 20 494 30.75 375Category Total $7,500 $494 30.75 $375

OTHERSIGNS;Monument 12,385 23 30 3,803 31.08 2,890MAILBOXES;Individual 21,000 3 10 19,346 45.92 14,700COMMON AREA;Well Refurbishment 125,000 5 10 82,254 712.42 62,500Bridge - Vehicle 250,000 18 25 92,125 730.92 70,000Contingency (5% ) 94,586 1 1 59,482 2,925.33 94,586Category Total $502,971 $257,010 4,445.67 $244,676

GRAND TOTALS: $4,394,183 $2,050,057 $22,943.31 $1,557,714Less Projected Available ReservesIdeal Reserve Deficiency (Over Funding)*Percent Funded To Ideal ReserveDeficiency (Over Funding) Per Unit*A positive result indicates an Ideal Reserve Deficiency while a (negative balance) reflects an Over F unded C ondition.NOTE: Monthly Funding Requirement is predicated on the Current Reserve Method of funding.NOT E: This schedule reflects summ ary data only, for supporting details and/or additional information pleaserefer to the complete Reserve Study Report evision IPage 3

2,050,057($492,343)

132%($775.34)


9/31

Approximate date assessment will be due: Amount per unit per month:See note below *

TERRA LAGOCOMMUNITY ASSOCIATION

ASSESSMENT AND RESERVE FUNDING DISCLOSURE SUMMARYJUNE 30, 2013

( ) The current regular assessment per ownership interest is $291.49 per month.Note: if assessments vary by size or type of unit please refer to the attached sche dule on page 4.

(2) Additional regular or special assessments that have already been scheduled to be imposed orcharged, regardless of the purpose, if they have been approved by the board and/or members:

Date Assessment is DueAmount per Unit per

Month Purpose of the Assessment

NA NA NANote: If assessments vary by the size or type of unit please refer to the attached schedule on page 4.

(3) Based upon the most recent reserve study and other information available to the board of directors,will currently projected reserve account balances be sufficient at the end of each year to meet theassociation's obligation for repair and/or replacement of major components during the next 30 years?

Yes o X(4) If the answer to #3 is no, what additional assessments or other contributions to reserves would benecessary to ensure that sufficient reserve funds will be available each year during the next 30 years thathave not yet been approved by the board or members?

* The need for, the amount of, and the timing for additional assessments or other contributions toreserves are directly correlated to and expressly conditioned upon, actual and sometimes unforeseenevents that will occur over the next 30 years, in conjunction with a variety of other factors that will.determine whether improvements can last their estimated useful lives and whether replacement costs havebeen accurately predicted.

A Reserve Study is periodically prepared for the association as mandated and in compliance withCalifornia law to assist in the budgeting for a major repair, refurbishment and/or replacement of associationowned improvements and major components that are expressly identified in the Reserve Study ("MajorComponents") that are properly maintained. While the Reserve Study cannot be used as a guaranty of anyof its budgetary conclusions, it is used by the association as a tool to anticipate and estimate how MajorComponent reserves should be currently funded in an effort to mitigate the need to make additionalassessments in the future.

The Reserve Study relies on a variety of assumptions and predicates concerning each MajorComponent, to generate budgetary estimates, which estimates are based upon industry standards,manufacturer specifications, a program of scheduled maintenance and anticipated environmental conditionsand other conditions affecting wear and tear. These estimates are generally accepted in the practice offormulating reserve studies, and include estimates of replacement value and life expectancies of thecomponents as well as assumptions regarding future events.

PAGE 1 OF 3


10/31


ASSESSMENT AND RESERVE FUNDING DISCLOSURE SUMMARY(CONTINUED)

As a result, any one or more of the statistical components that form the basis of assumptions that areused to project anticipated events and conditions can fail. Therefore the actual replacement cost, useful lifeand remaining life may vary from the Reserve Study and the variance may be significant. In addition it isimpossible to conclude that any mathematically supported and financially prudent funding mechanismadopted by the board of directors and used to fund reserves can guarantee sufficient funds for each MajorComponent for the next 30 years. It is also impossible to provide a "best or reasonable estimate" of theadequacy of reserve funds or the likelihood and/or risk of, magnitude, or timing of additional assessments forthe next 30 years due to the multitude of variables, assumptions and predicates as well as the sheer durationof time. Any such attempt would simply constitute a guess. Additionally, other factors may influence aboard of directors in establishing assessments within the association, which may have little to do with theresults of a Reserve Study.

The Reserve Study relies upon numerous assumptions and predictions and expressly excludes acomprehensive analysis of factors and future events that are essential in determining the structural tolerancesand actual useful life of a component. The Reserve Study findings can easily be invalidated by changes inany of the assumptions or the occurrence of any events typically excluded from the analysis, such as weather,environmental, seismic and geological impacts, quality of construction and installation, possible constructionand/or other manufacturing defects or failures, acts of vandalism, the actual useful life and/or actual wear andtear of a component, the actual replacement cost of a component, economic and inflationary factors or thefuture availability of labor and materials at current or future price estimates. In addition, the Reserve Studydoes not include a co mprehensive analysis or an engineering analysis of Major C ompo nents.

For these reasons, the Reserve Study is not able to accurately predict or even reasonably estimate, whatadditional assessments or other contributions will be necessary to ensure that sufficient reserve funds will beavailable each year during the next 30 years. However, presuming that the association does in fact fund itsreserve accounts at the levels recommended in the Reserve Study, presuming that all of the assumptions andpredicates of those items and components examined by the Reserve Study, as more fully identified anddescribed in the Reserve Study, remain true and correct for the next 30 years, and presuming that thosematters not included within the scope of the Reserve Study analysis, or that are deemed immaterial or areexpressly excluded from the Reserve Study scope of analysis, never become material or relevant over thefollowing 30 years, there is no reason to conclude that over the following 30 years the association will berequired to seek additional assessments or other contributions. Members and prospective homeownerassociation members are referred to the Reserve Study and the Associations' final adopted budget for a morecomprehensive analysis of the foregoing and the likelihood and/or risk that a future assessment can occur.

(5) All major components are included in the reserve study and are included in its calculations.(6) Based on the method of calculation in paragraph (4) of subdivision (b) of Section 1365.2.5, theestimated amount required in the reserve fund at the end of the current fiscal year is $1,557,714, based inwhole or in part on the last reserve study or update prepared by Foresight Financial Services, Inc. as ofJune 30, 2013, Revision 1. The projected reserve fund cash balance at the end of the current fiscal year is$2,050,057, resulting in reserves being 132% funded at this date.(7) Please refer to the "Projected Reserve Fund Balances" provided on the following page (page 3 of 3).NOTE: The financial representations set forth in this summary are based on the best estimates of thepreparer at that time. The estimates are subject to change. At the time this summary was prepared, theassumed long-term before-tax interest rate earned on reserve funds was 1.5% per year, and the assumedlong-term inflation rate to be applied to major component repair and replacement costs was 3.0%

PAGE 2 OF 3


11/31


ASSESSMENT AND RESERVE FUNDING DISCLOSURE SUMM ARY(CONTINUED)

PROJECTED RESERVE FUND BALANCES

APPROVED RESERVE FUNDING PLANYear 2013 2014 2015 2016 2017 2018Required Ideal Reserve * $1,557,714 $1,513,411 $1,756,039 $1,819,891 $2,141,662 $2,037,675Projected Available Reserves $2,050,057 $1,960,501 $2,159,200 $2,172,321 $2,442,265 $2,276,718Percent Funded To Ideal 132% 130% 123% 119% 114% 112%

PRIOR LEVEL OF FUNDING**Year 2013 2014 2015 2016 2017 2018Required Ideal Reserve * $1,557,714 $1,513,411 $1,756,039 $1,819,891 $2,141,662 $2,037,675Projected Available Reserves $2,050,057 $1,960,727 $2,151,352 $2,147,768 $2,392,035 $2,191,483Percent Funded To Ideal 132% 130% 123% 118% 112% 108%

TERRA LAGO COMMUNITY ASSOCIATION UNE 30, 2013 EVISION I

* stimated based on the method of calculation in paragraph (4) of subdivision (b) of Section 1365.2.5 of the Civil Code.** Per Civil Code Section 1365.2.5, based only on assessments already approved and other known revenues prior to the

adoption of the new budget and reserve funding plan.NO1E.: The association's board of directors has relied on information, opinions, reports and statements presented to it by vendors,contractors, reserve study specialists, CPAs and/or other professionals and is relying upon this information, financial data andreports pursuant to Corporations Code 7231 in providing the association membership the information contained in this AssessmentAnd Reserve Funding Disclosure Summary. The information contained within the reserve study includes assumptions regardingfuture events based on information supplied to the association's board of directors from said professionals. Some assumptionsinevitably will not materialize and unanticipated events and circumstances may occur subsequent to the date of this DisclosureSummary. Therefore, the actual replacement cost and remaining life may vary from the reserve study and the variation may besignificant. Additionally, inflation and other economic events may impact the accuracy of the reserve study, particularly over athirty year period of time which could impact the accuracy of the reserve study and the funds available to meet the association'sobligation for repair and/or replacement of major components during the next thirty (30) years. Furthermore, the occurrence ofvandalism, severe weather conditions, earthquakes, floods, or other acts of God cannot be accounted for and are excluded whenassessing life expectancy of the components. The reserve study only includes items that the Association has a clear and expressresponsibility to maintain pursuant to the association's CC&R's. The financial representations set forth in this summary are basedon the best estimates of the preparer at that time. The estimates are subject to change.

?AGE 3 OF 3


12/31

PROJECTEDANNUAL APPROVEDRESERVE SPECIALFUNDING ASSESSMENT EAR

CHANGEIN

RESERVEFUNDING

PROJECTEDRESERVE

FUNDBALANCE

$275,544 2013275,320 $0 2014 ($224) $1,960,501283,580 0 2015 8,260 2,159,200292,087 0 2016 8,507 2,172,321300,850 0 2017 8,763 2,442,265309,875 0 2018 9,025 2,276,718319,171 0 2019 9,296 2,541,755328,746 0 2020 9,575 2,888,674338,609 0 2021 9,862 2,983,349348,767 0 2022 10,158 2,799,141359,230 0 2023 10,463 3,034,200370,007 0 2024 10,777 3,246,210381,107 0 2025 11,100 3,656,827392,540 0 2026 11,433 2,942,650404,317 0 2027 11,776 3,187,839416,446 0 2028 12,130 3,426,947428,940 0 2029 12,493 3,809,705441,808 0 2030 12,868 3,759,025455,062 0 2031 13,254 2,972,509468,714 0 2032 13,652 3,285,827482,775 0 2 33 14,061 3,778,008497,259 0 2034 14,483 3,721,248512,176 0 2035 14,918 4,239,033527,542 0 2036 15,365 3,818,933543,368 0 2037 15,826 396,811559,669 0 2038 16,301 75,555576,459 0 2039 16 790 279,935593,753 0 2040 17,294 871,888611,565 0 2041 17,813 1,337,029629,912 0 2042 18,347 761,441648,810 0 2043 18,897 1,342,438

TERRA LA GOCOMMUNITY ASSOCIATION

APPROVED RESERVE FUNDING PLANJUNE 30, 2013

3.0 Projected Annual Increase In Reserve Funding .0 Annual Inflation RateNOTE: This schedule reflects summary data only, for supporting details and/or additional informationplease refer to the complete Reserve Study R eport which is available upon request.

PAGE 1 OF 1


13/31

PERCENT FUNDED PROJECTIONS

CURRENT RESERVE METHOD 2013 2014 2015 2016 2017 2018Projected Ideal Reserve $1,557,714 $1,513,411 $1,756,039 $1,819,891 $2,141,662 $2,037,675Projected Available Reserves 2,050,057 1 960 501 2,159,200 2,172,321 2,442,265 2,276,718

Monthl) Ft $22,.943.31Ideal Reserve Deficiency (Over Funding)* ($492,343) ($447,091) ($403,161) ($352,430) ($300,602) ($239,043)Percent Funded To Ideal 132% 130% 123% 119% 114% 112%

A vsitiv, result indicates an Ideal Reserve Deficiency while a (negative ba ar Oyer Funded C ondlion.

STRAIGHT LINE METHOD 2013 014 015 016 017 018Projected Ideal ReserveProjected Available Reserves

$36,682.40Ideal Reserve Deficiency (Over Funding)*Percent Funded To Ideal

$1,557,714 1,513,411 '.:1,756,039 1,819,891 2,141,662 2,037,6752,050,057 ,126,195 ,483,943 ,649,153 ,063,902 ,035,537

( 492,343) ( 612,784) ( 727,903) ( 829,263) ( 922,239) ( 997,862)132% 40% 41% 46% 43% 49%

A pos esult indicates n Ideai Rervc D eficiency v41ile a (ri,:gatiyetia x n Over Funded t

PRESENT LEVEL OF FUNDING 013 014 015 016 017 018Projected Ideal Reserve 1,557,714 1,513,411 1,756,039 1,819,891 2,141,662 2,037,675Projected Available Reserves ,050,057 ,960,727 ,151,352 ,147,768 ,392,035 ,191,483Monthly Funding $22,962.00Ideal Reserve Deficiency (Over Funding)* $492,343) $447,316) $395,312) $327,877) $250,372) $153,808)Percent Funded To Ideal 32% 30% 23% 18% 12% 08%

i'(.11ates an Ideal Reserve Deficiency w.. OveF Fiind d

PROPOSED LEVEL OF FUNDING 2013 2014 2015 2016 2017 2018Projected Ideal Reserve $1,557,714 $1,513,411 $1,756,039 $1,819,891 $2,141,662 $2,037,675Projected Available Reserves 2,050,057 1,960,501 2,159,200 2,172,321 2,442,265 2,276,718

iWimr/i/v Funditi. $22,943.3.lIdeal Reserve Deficiency (Over Funding)* 1492,343) ($447,091) ($403,161) ($352,430) ($300,602) ($239,043)Percent Funded To Ideal 132% 130% 123% 119% 114% 112%

A pojtiye result indicas an ith:qd Reserve Deficiency while a (negative balance) reflects an Over Funded Cond ition.TERRA LAGO COMAIUNITY ASSOCIATION UNE 30, 2013

Page 4


14/31

PROJECTED RESERVE BALANCES

CURRENTRESERVEMETHOD

STRAIGHTLINE

METHODYEAR

PRESENTFUNDING

LEVELPROPOSEDFUNDING

LEVEL$2,050,057 $2,050,057 2013 2,050,057 $2,050,057

1,960,501 2,126,195 2014 1,960,727 1,960,5012,159,200 2,483,943 2015 2,151,352 2,159,2002,172,321 2,649,153 2016 2,147,768 2,172,3212,442,265 3,063,902 2017 2,392,035 2,442,2652,276,718 3,035,537 2018 2,191,483 2,276,7182,541,755 3,429,785 2019 2,411,822 2,541,7552,888,674 3,897,583 2020 2,703,973 2,888,6742,983,349 4,104,436 2021 2,733,421 2,983,3492,799,141 4,023,318 2022 2,473,124 2,799,1413,034,200 4,351,982 2023 2,620,818 3,034,2003,246,210 4,647,703 2024 2,733,759 3,246,2103,656,827 5,131,712 2025 3,033,161 3,656,8272,942,650 4,480,170 2026 2,195,165 2,942,6503,187,839 4,776,786 2027 2,303,463 3,187,8393,426,947 5,055,645 2028 2,392,121 3,426,9473,809,705 5,465,996 2029 2,610,367 3,809,7053,759,025 5,430,252 2030 2,380,600 3,759,0252,972,509 4,645,502 2031 1,399,884 2,972,5093,285,827 4,946,881 2032 1,503,339 3,285,8273,778,008 5,412,874 2033 1,769,429 3,778,0083,721,248 5,315,108 2034 1,469,760 3,721,2484,239,033 5,776,484 2035 1,727,214 4,239,0333,818,933 5,283,969 2036 1,028,738 3,818,933

396,811 1,772,803 2037 (2,682,182) 396,81175,555 1,345,229 2038 (3,289,912) 75,555

279,935 1,425,355 2039 (3,388,216) 279,935871,888 1,874,431 2040 (3,120,202) 871,888

1,337,029 2,177,364 2041 (3,002,072) 1,337,029761,441 1,419,507 2042 (3,942,469) 761,4411,342,438 1,797,421 2043 (3,745,204) 1,342,438

30 YEAR CASH FLOW SUMMARY

TERRA LAGO COMMUNITY ASSOCIATION UNE 30. 2013 EVISION 1

Page 6


15/31

EXHIBIT A

ASSESSMENT COLLECTION AND FULL PAY POLICY FOR:ANNUAL ASSESSMENTSSPECIAL ASSESSMENTSCAPITAL IMPROVEMENT ASSESSMENTSSPECIAL BENEFIT ASSESSMENTS

1. DUE DATES: All Annual Assessments shall be due and payable, in advance, in equal monthlyinstallments, on the first (1 ') day of each month. Special Assessments, Capital Improvement Assessmentsand Special Benefit Assessments shall be due and payable on the due date specified by the Board in thenotice imposing the assessment or in the ballot presenting the special assessment to the members forapproval. In no event shall a Special Assessment be due and payable earlier than thirty (30) days after it isimposed.2. PAYMENT RECEIPTS / OVERNIGHT PAYMENT LOCATION: wners can request a receipt fromthe Association which shall indicate the date of payment and the person who received it. Any request for areceipt of payment must be submitted directly to the Association's business address (separately from anyactual payment). Overnight payment of assessments may be sent/delivered to the following address:

TERRA LAGO COMMUNITY ASSOCIATIONCf0 Merit Property Management, Inc.1 Polaris Way, Suite 100Aliso Viejo, CA 92656

3. APPLICATION: Payments received on delinquent assessments shall be applied to the Owner'saccount as follows: payment shall be applied to the principal owed first. Payments on principal shall beapplied to the Owner's account by the balance forward payment method, i.e., in reverse order so that theoldest arrearages of the principal are retired first. Only after the principal owed is paid in full shall suchpayme nts be applied to interest, late charges, collection expe nses, adm inistration fees, attorneys' fees, or anyother amount due to the Association which result in continued delinquencies.4. LATE CHARGE: All assessments shall be delinquent if not paid within 15 days after they becomedue and w ill result in the imposition of a late charge of ten percent (10 ) of the delinquent assessm ent or tendollars ($10.00), whichever is greater. Furthermore, the Association shall be entitled to recover anyreasonable collections costs, including attorneys' fees, that the Assoc iation then incurs in its efforts to collectthe delinquent sums.5. INTEREST: If an assessment payment is not paid within thirty (30) days of its original due date,interest may be imposed on all sums due, including the delinquent assessment, collection costs, and latecharges, at an annual percentage rate of twelve percent (12%).6. SECONDARY ADDRESS: Upon receipt of a written request by an Owner identifying a secondaryaddress for the purpose s of assessm ent collection notices, the Asso ciation shall send additional copies of anycollection notices required by this Collection Policy to the secondary address provided. The Owner's noticeof a secondary address must be in writing and mailed to the Association in a manner that shall indicate thatthe Association has received it. The Association shall only send notices to the indicated secondary addressat the point in time the Association receives the written request.7. PAY OR LIEN LETTER: If an assessment payment from the Owner is not paid within thirty 30)days after its original due date (for example, if an Own er fails to pay an a ssessme nt which was du e on June 1

S.iOS-124kCo1Policy109-124.Co1.2009.wpd OLLECTION POLICY


16/31

and the failure to pay continues through July 1, then the June assessment would not have been paid withinthirty days after its original due date), a notice of delinquency (Pay or Lien Letter) shall be sent to the Ownerby regular first-class mail and certified mail, return receipt requested. The Pay or Lien Letter shall provide atleast 30 days' written notice to a delinquent Owner prior to recording an Assessment Lien and further providean itemized statement of the charges owed, including a breakdown of: (a) the principal amount owed; (b) anylate charges with the method of calculation used to determine such charges; (c) any attorneys' fees incurred;and (d) a description of collection practices, including the right of the association to the reasonable costs ofcollection. A copy of the Association's collection policy shall be attached to the Pay or Lien Letter.8. INTERNAL DISPUTE RESOLUTION PROCESS : The Association shall offer to meet and conferwith a delinquent owner to resolve any dispute related to the total amount due from the delinquent Owner tothe Association and/or the Association's Collection Policy ( Meet and Confer Offer ). The Association's Meetand Confer Offer shall either be placed within the Association's Pay or Lien Letter or in a separate writtencommunication to the delinquent Owner. An Owner who wishes to accept the Meet and Confer Offer mustdo so by submitting his/her/its written request to facilitate the meet and confer with the Association, whichwritten request must be received by the Association within twenty (20) days of the date of the Meet and ConferOffer. The Association shall designate a prompt date and time for the meet and confer, at a location that shalleither be the Association's principal office or another convenient location as designated by the Association.The Association shall designate a Board officer, along with it's Community Association Manager to participatein the meet and confer with the delinquent Owner. Prior to recording a lien for delinquent assessments, theAssociation shall participate in any meet and confer so accepted by the delinquent Owner, provided, however,that the Owner's acceptance of the Association's Meet and Confer Offer is made within twenty (20) days ofthe date of the Meet and Confer Offer.9. SHOW CAUSE HEARING: Additionally, a delinquent Owner may be given a written notice (eitherin the Pay or Lien Letter or in a separate written document, as determined by the Board of Directors) of ahearing before the Board of Directors, wherein the Owner shall be invited to show good cause why (a) theOwner's voting privileges; and/or (b) the Owner's privileges for use of the common area/recreational facilities;and/or (c) the Owner's bulk cable television and intemet privileges (hereinafter collectively MembershipPrivileges ) should not be suspended for non-payment of the delinquent assessment(s) ( Show CauseHearing ).

The notice and hearing procedures shall be in accordance with the following:a. Written notice shall be mailed to the Owner not less than ten (10) days prior to the date ofsuch hearing by first class or certified mail at Owner's last known address as shown on the Association's

records. The notice shall set forth the amount of delinquency owed by the Owner and the time, date and placeon which the hearing shall be held;

b. The Board of Directors shall provide an opportunity for the Owner to be heard, orally or inwriting, at the Show Cause Hearing prior to making any determination on the suspension of any MembershipPrivileges;

c. In the event good cause is not shown and the Owner's account has not been brought current,then the Board may suspend any of the Owner's Membership Privileges. Cable television and internetservices shall be reinstated upon the Owner's account being brought current and upon payment to theAssociation of a reinstatement assessment in an amount equal to what the Association is charged by thecable/internet company to facilitate reinstatement of cable/internet service. The Board shall hold the hearingin Executive Session; provided, however, if the Board is requested by a Member to have his/her matter be

Pursuant to a 199 4 C alifornia decision, Park Place Estates Hom eowners Asso ciation, Inc. v. Naber (1994) 29Cal.App. 4th 427, the appellate court held that homeowners have an independent obligation to pay monthlyassessmen ts and do not have a right to set off or withhold payments of assessm ents.SA09-17.41CalPelicy109-124.Co,2009.wpd OLLECT/ON POLICY


17/31

heard in an open Board meeting, then the matter must be heard in an open Board meeting, and not inExecutive Session.d. After the Show Cause Hearing, the Board of Directors shall provide within fifteen (15) dayswritten notice to the Owner of the suspension of any Membership Privileges.

10. SSESSMENT LIEN:a. If the delinquent Owner does not bring his/her account current within the deadline set forth

in the Pay or Lien Letter, the Board of Directors shall approve the recordation of an assessment lien by theAssociation's collection attorney against the delinquent Owner's property. The Board's decision to record theassessment lien shall be by a majority vote of a quorum of the Board members at an open Board meeting.The B oard's action should refer to the Lot/parcel/account num ber of the property that is delinquent, rather thanthe name of the owner. The Assessment Lien shall be recorded in the County Recorder's Office itemizing allsums that are then delinquent, including the delinquent assessment(s), then current monthly assessmentamount which will also accrue and be a part of the lien, interest, late charges, collection costs and reasonableattorneys' fees. Recording this notice creates a lien, which is subject to foreclosure, against the delinquentOwner's property.

b. At the same time, the Association shall advise the Association's collection agent/bankthat it should accept no furthermonies from this delinquent Owner until the assessment lien has beenpaid in full. Owners shall not send any assessment payments to the Association once the matter has beenturned over to the Attorney for collection; such payments shall only be accepted by the law firm. Anypayments delivered to the collection agent shall be forwarded to the attorney's office; the attorney shall thenrelease the lien if payment in full was made by the delinquent Owner. An additional fee for legal expensesshall be charged to the Owner at this stage (pursuant to Civil Code 1366.3(a)).11. RE-FORECLOSURE ACTIONS:

a. The Association shall make a written pre-foreclosure offer to meet and confer with thedelinquent Owner, consistent with the process identified in paragraph 8 herein (except that the timeline forthe delinquent Owner to accept a meet and confer would be thirty (30) days from the date of the Owner'sreceipt of this pre-foreclosure offer) or alternative dispute resolution consistent with Civil Code 1369.510,et.seq. ( IDPJADR Offer ). Owner shall have thirty (30) days from the date of the IDR/ADR Offer to decidewhether or not Owner wishes to pursue dispute resolution or a particular type of alternative dispute resolution(except that binding arbitration is not available to any delinquent Owner if the Association intends to initiatea judicial foreclosure).

b. Prior to initiating foreclosure, the Board of Directors must, in executive session, approve thedecision to proceed with foreclosure by a majority vote of a quorum of the Board of Directors. The Board shallrecord the Board's executive session decision in the minutes of the next meeting of the Board open to themembers by referencing the lot/parcel/account number of the property that is delinquent.

c. The Board of Directors shall not proceed with any form of foreclosure unless and until theamount of delinquent assessments (exclusive of any accelerated assessments, late charges, fees, costs ofcollection, attorney's fees or interest) equals or exceeds One Thousand Eight Hundred Dollars ($1,800.00)or the assessments have been delinquent for more than twelve (12) months ( Threshold ). Once theThreshold has been met and all other requirements identified above have been completed, the Board mayproceed with foreclosure of the assessment lien pursuant to the Association's governing documents and CivilCode 1367. The procedure used shall be a private foreclosure, pursuant to Civil Code 2924, et seq, andCivil Code 1367. The foreclosure action shall include:

S:109-1244C0IPolity109-124.Col.2009.wpd OLLECTION POLICY


18/31

i A Notice of Default and Election to Sell shall be recorded at the CountyRecorder's Office and a ninety-day reinstatement period shall begin.ii. A Title Report shall be obtained from a title company at a cost of approximately

$350.00 and this shall also be charged to the delinquent Owner.iii. Furthermore, an additional $300.00 attorneys' fees and costs shall be charged at thisstage.

12. f the Association determines that the property is over-encumbered, or otherwise makes adetermination that a lawsuit is appropriate, the Association shall file a personal lawsuit against the delinquentOwner to recover all delinquent assessments owing to the Association. If a lawsuit is necessary to collect thedelinquent assessments from the Owner, all expenses, costs and attorneys' fees in connection with saidlawsuit, including but not limited to pre- and post- judgment costs for filing fees, personal service, witness fees,interest, execution of judgment and/or writ fees shall be recovered from the Owner defendant.13. f the delinquency is still not cured ninety (90) days after the Notice of Default and Election to Sell wasrecorded, the attorney shall proceed to record and publish the Notice of Trustee's Sale. This Notice mustalso be published three (3) times during a three-week period and posted in a public place. At this final stage,there shall be additional publication costs, as well as attorneys' fees of $125.00. If a non-judicial foreclosuresale is completed by the Association against the delinquent Owner's property, the Owner shall have the rightto redeem the property for a period of time up to and including ninety (90) days after the date of the Trustee'sSale.14. hen a delinquent Owner has paid in full all delinquent assessments and charges, the attorney shallprepare a Release of Lien which shall be recorded in the County Recorder's Office of Riverside County,California within 21 days of receipt of the sums necessary to satisfy the delinquent amount and mail a copyof the lien release to the Owner of the residential unit.15. AYMENT PLAN STANDARDS: The Association hereby establishes the following payment planstandards:

a. Payment Within 60 Days: If an Owner can bring himself/herself/itself current within sixty (60)days, inclusive of assessments which accrue within the sixty (60) days of the payment plan, the Associationwill forbear filing an Assessment Lien and the Owner will not incur the Assessment Lien costs if the paymentplan is strictly followed. The payment plan shall include an administrative cost. By agreeing to the 60 daypayment plan, the Owner further agrees that if he/she/it fails to make any of the payments identified in thepayment plan, the Association shall have the right to file an Assessment Lien without recommencing the pre-lien or Pay or Lien Notice process.

b. Payment Exceeding 60 Days: In light of the length of time of this payment plan, paymentplans exceeding sixty (60) days shall require that the Association record its Assessment Lien to establish itselfas a secured creditor. The payment plan shall also include an administrative cost. All costs related to therecordation of the Assessment Lien shall be part of this payment plan. The payment plan would requirepayment of all delinquent assessments amortized over the length of the payment plan, along with allassessments which will accrue during the payment plan. The Association shall further require that the Ownersign a Forbearance Agreement which identifies his/her/its obligations of repayment consistent with thepayment plan and further provides that if there is a default under the payment plan, the Association canproceed with the collection process as particularly identified within the Forbearance Agreement. Paymentplans under this paragraph 15.b should normally not exceed six (6) months.16. EQUEST FOR PAYMENT PLAN: An Owner may submit a written request to the Association fora payment plan consistent with either paragraph 15.a or 15.b above. An Owner can also submit a writtenrequest to meet with the Board to identify which payment plan the Owner chooses, as identified inS:50E.124 \ ColPolicy100-124.Cal.2009.wpd 4 OLLECTION POLICY


19/31

paragraph 15 above. The Board is required to meet with the Owner in executive session within 45 days ofthe postmark of the request for the meeting, if the request is mailed within fifteen days of the date of thepostmark of the Pay or Lien Notice. If there is no regularly scheduled board meeting within the 45 daytimeline, the Board has designated the Assessment Dispute Resolution Committee to meet with the Owner.

SA09-1241ColPollcyl09-124,Col2009.wpd OLLECTION POLICY


20/31

NOTICE ASSESSMENTS AND FORECLOSUREThis notice outlines some of the rights and responsibilities of owners of property incomm on interest developments and the associations that manage them . Please refer to thesections of the Civil Code indicated for further information. A portion of the informationin this notice applies only to liens recorded on or after January 1, 2003. You may wish toconsult a lawyer if you dispute an assessment.

ASSESSMENTS AND FORECLOSUREAssessments become delinquent 15 days after they are due, unless the governingdocuments provide for a longer time. The failure to pay association assessments mayresult in the loss of an owner's property through foreclosure. Foreclosure may occureither as a result of a court action, known as judicial foreclosure or without court action,often referred to as nonjudicial foreclosure. For liens recorded on and after January 1,2006, an association m ay not use judicial or nonjudicial foreclosure to enforce that lien ifthe amount of the delinquent assessments or dues, exclusive of any acceleratedassessments, late charges, fees, attorney's fees, interest, and costs of collection, is lessthan one thousand eight hundred dollars ($1,800). For d elinquent assessments or dues inexcess of one thousand eight hundred dollars ($1,800) or m ore than 12 m onthsdelinquent, an association may use judicial or nonjudicial foreclosure subject to theconditions set forth in Section 1367.4 of the C ivil Code. W hen using judicial ornonjudicial foreclosure, the association records a lien on the owner's property. Theowner's property may b e sold to satisfy the lien if the am ounts secured by the lien are notpaid. (Sections 1366, 1367.1, and 1367.4 of the Civil C ode)In a judicial or nonjudicial foreclosure, the association may recover assessments,reasonable costs of collection, reasonable attorney's fees, late charges, and interest Theassociation may not use nonjudicial foreclosure to collect fines or penalties, except forcosts to repair comm on areas damaged b y a mem ber or a mem ber's guests, if thegoverning documents provide for this. (Sections 1366 and 136 7.1 of the Civil Code)The association must comply w ith the requirements of Section 1367.1 of the Civil Codewhen collecting delinquent assessments. If the association fails to follow theserequirements, it may not record a lien on the ow ner's property until it has satisfied thoserequirements. Any additional costs that result from satisfying the requirements are theresponsibility of the association. (Section 1367.1 of the Civil Code)At least 30 days prior to recording a lien on an owner's separate interest, the associationmust provide the own er of record with certain docum ents by certified m ail, including adescription of its collection and lien enforcement procedures and the m ethod ofcalculating the amount It must also provide an itemized statement of the charges owedby the ow ner. An ow ner has a right to review the association's records to verify the debt.(Section 1367.1 of the Civil Code)If a lien is recorded against an owner's property in error, the person who recorded the lienis required to record a lien release within 21 days, and to provide an owner certaindocuments in this regard. (Section 1367.1 of the Civil C ode) The collection practices ofthe association may be governed b y state and federal laws regarding fair debt collection:Penalties can be imposed for debt collection practices that violate these laws.

PAYMENTSWhen an owner m akes a payment, he or she may request a receipt, and the association isrequired to provide it. On the receipt, the association must indicate the date of paymentand the person who received it The association must inform owners of a mailing address


21/31

for overnight payments. (Section 1367.1 of the Civil Code) An owner may dispute anassessment debt b y subm itting a written request for dispute resolution to the associationas set forth in Article 5 (commencing with Section 1368.810) of Chapter 4 of Title 6 ofDivision 2 of the Civil Code. In addition, an association may not initiate a foreclosurewithout participating in alternative dispute resolution w ith a neutral third party as setforth in Article 2 (com mencing w ith Section 1369.510) of Chap ter 7 of Title 6 ofDivision 2 of the C ivil Code, if so requested by the owner. Binding a rbitration shall notbe availab le if the association intends to initiate a judicial foreclosure.An owner is not liable for charges, interest, and costs of collection, if it is established thatthe assessment was paid properly on time. (Section 1367.1 of the Civil Code)

MEETINGS AND PAYMENT PLANSAn ow ner of a separate interest that is not a timeshare may request the association toconsider a payment plan to satisfy a delinquent assessment. The association must informowners of the standards for payment plans, if any exist. (Section 1367.1 of the CivilCode)The board of directors must meet with an owner w ho makes a proper written request for ameeting to discuss a payment p lan when the own er has received a notice of a delinquentassessment. These payment plans mu st conform with the payment plan standards of theassociation, if they exist (Section 1367.1 of the Civil Cod e)


22/31


23/31

(a) The period provided in Section 1369.530 for response to a Request for Resolution.(b) If the Request for Resolution is accepted, the period provided by Section 1369.540 forcompletion of alternative dispute resolution, including any extension of time stipulated to by theparties pursuant to Section 1369.540. 1369.560. (a) At the time of commencement of an enforcement action, the partycommencing the action shall file with the initial pleading a certificate stating that one or more ofthe following conditions is satisfied:(1) Alternative dispute resolution has been completed in compliance with this article.

(2) One of the other parties to the dispute did not accept the terms offered for alternativedispute resolution.(3) Preliminary or temporary injunctive relief is necessary.

(b) Failure to file a certificate pursuant to subdivision (a) is grounds for a demurrer or a motionto strike unless the court finds that dismissal of the action for failure to comply with this articlewould result in substantial prejudice to one of the parties. 1369.570. (a) After an enforcement action is commenced, on written stipulation of theparties, the matter may be referred to alternative dispute resolution. The referred action isstayed. During the stay, the action is not subject to the rules implementing subdivision (c) ofSection 68603 of the Government Code.

(b) The costs of the alternative dispute resolution shall be borne by the parties. 1369.580. In an enforcement action in which fees and costs may be awarded pursuant tosubdivision (c) of Section 1354, the court, in determining the amount of the award, mayconsider whether a party's refusal to participate in alternative dispute resolution beforecommencement of the action was reasonable. 1369.590. (a) An association shall annually provide its members a summary of the provisionsof this article that specifically references this article. The summary shall include the followinglanguage:

Failure of a member of the association to comply with the alternative dispute resolutionrequirements of Section 1369.520 of the Civil Code may result in the loss of your right to suethe association or another member of the association regarding enforcement of the governingdocuments or the applicable law.

(b) The summary shall be provided either at the time the pro forma budget required bySection 1365 is distributed or in the manner prescribed in Section 5016 of the CorporationsCode. The summary shall include a description of the association's internal dispute resolutionprocess, as required by Section 1363.850.Service of the Request for Resolution shall be by personal delivery, first-class mail, expressmail, facsimile transmission, or other means reasonably calculated to provide the party onwhom the request is served actual notice of the request. A member of the Association may notbe charged a fee to participate in the IDR process.

45


24/31

INTERNAL DISPUTE RESOLUTION POLICYPursuant to the requirements of California Civil Code 1363.820 and 1363.840, theAssociation provides you with this internal dispute resolution ( IDR ) procedure.This Policy will apply to a dispute between the Association and a member involving their rights,duties, or liabilities under the Davis-Stirling Common Interest Development Act, Civil Code1350, et seq.; the California Non-Profit Mutual Benefit Corporation Law, Corporations Code7110, et seq.; or the Governing Documents of the Association. This Policy supplements therequirements for alternative dispute resolution as provided in Civil Code 1369.510, et seq.

1. The party may request the other party to meet and confer in an effort to resolvethe dispute. The request shall be in writing.2. A member of the Association may refuse a request to meet and confer. TheAssociation may not refuse a request to meet and confer.3. The Association's Board of Directors shall designate a member of the Board tomeet and confer.4. The parties shall meet promptly at a mutually convenient time and place, explain

their positions to each other, and confer in good faith in an effort to resolve thedispute.5. A resolution of the dispute agreed to by the parties shall be memorialized inwriting and signed by the parties, including the Board designee on behalf of theAssociation.

An agreement reached under those sections binds the parties and is judicially enforceable ifboth of the following conditions are satisfied:

1. The agreement is not in conflict with law or the governing documents of theAssociation.2. The agreement is either consistent with the authority granted by the Board ofDirectors to its designee or the agreement is ratified by the Board of Directors.

43


25/31

Terra LagoQu ick Tips for a Plan Subm ittalRear yard landscapeOwners must submit plans for Design Review Committee (DRC) review and approval within 4months of the close of escrow.MeetingsThe Terra Lago DRC meets at often as necessary. The DRC will determine the date and time ofthe meeting.Where to submit plansTerra Lago Community Associationc/o Merit Property Management LLC42-900 Lago VistaIndio, CA 92203Attn: Facility AdministratorPlan submittals must include1. Terra Lago property improvement form (Exhibit A).2. Plan and specifications (3 copies). One copy will be returned to the owner. The Terra Lago

will retain two copies.3. Neighbor statement (Exhibit B), 1 copy.4. Photographs (2 copies), where applicable. Photographs will not be returned to the owner.5. Check made payable to Terra Lago in the amount of $75.All forms are included in this packet or can be obtained at Merit Property Management (at theabove address).Important

Read the attached Design Guidelines carefully before submitting plans.Do not assume that property improvements at the model sites will be acceptable to the TerraLago DRC.Owners are required to obtain all necessary permits and approvals from the City of Indio,which is located at 100 Civic Center Mall, Indio, CA 92201 (760) 342-6500 (currentinformation as of 2/06).

The Terra Lago DRC does not require that an owner use a landscape architect or similarprofessional consultant in the preparation of property improvement plans. Please see theDesign Review Coordinator, who is located at Merit Property Management (at the above

address), for assistance.

5 of 24


26/31

TERRA LAGODESIGN GUIDELINES

I. URPOSEThe purpose of these Design Guidelines is to continue the physical character as established by theinitial development of Terra Lago. The intent is to give specific design criteria to owners forsubsequent improvements after the completion of original construction.The Design Guidelines are written to preserve a high quality of appearance, to ensurecompatibility between improvements, and to enhance the overall value of Terra Lago. TheDesign Guidelines are intended to be used by owners and consultants in preparing drawings fordesign, landscape, and other improvements; and by the Design Review Committee (DRC) inreviewing these drawings for conformance with the stated objectives. The DRC reviewsproposed improvements for aesthetic purposes only. It is the owner's responsibility to follow allapplicable federal, state and local building codes. Building permits may be required by the Cityof Indio located at 100 Civic Center Mall, Indio, CA 92201, (760) 342-6500 (current informationas of 2/06).

H. PPLICATION PROCESS I PLAN SUBMITTAL PACKAGEThe owner reviews the Design Guidelines and prepares plans, elevations and cross-sectionsdepicting the proposed new improvements. To expedite the approval of plans, they must includeeach of the items detailed in the following information. Plans that do not contain required detailsmay be returned incomplete and will require that the owner resubmit the plan submittal package.There is no additional cost to resubmit the plan submittal package.Step 1: Improvement plans and detailsApplications are to include:Landscape1. A plot plan that is drawn to scale. 1/8" = 1'0" on 24"x36" sheets is the preferred scale andsize. Plans must be of adequate size to be completely legible.2. Landscape plan and working drawings (if applicable) including the location, type, size and

quantity of all plants proposed. A plant list alone is not sufficient.3. Grading plans (if applicable)Show where the established drainage pattern may be altered by the proposed improvements.Show the location of the bottom of any slope and the top of any slope; drain inlets anddrainlines if applicable. Show the proposed locations of any drain inlets, drainlines andoutlets.

4. The nature, kind, shape, dimensions, materials, color, finish and location of proposedimprovements must be illustrated on the plan.

5. A description of the materials to be used, including the proposed color scheme. Attach actualsamples or literature if available.6. A dimensioned hardscape plan showing new and existing paving, walls, fences, pool, patiocovers, drainage, and construction details for all structures accurately described as tomaterials and complete dimensions.

7. Outdoor lighting plan. All outdoor lighting must be low voltage and/or utilize 60-wattmaximum bulbs. All exterior light fixtures must be ornamental and submitted for review.

6 of 24


27/31

Roof plan / Floor plan for room additionsI. how plan of all existing and new roofs, with pitches and overhangs noted.2. New materials should match existing. If not, provide material board.3. Indicate all walls, columns, openings, windows, doors and any condition or feature that will

affect the exterior design of the residence.4. Indicate exterior landscape or other details affected.5. Floor plans (if applicable) which show the overall dimensions and area of the improvements,and which reflect the design concept.6. Elevations of all sides affected by proposed addition/alteration; including materials, colorsand dimensions. All drawings should clearly distinguish between what exists vs. what isproposed.7. Provide photographs of existing structure (all sides affected by change).

Other Information

I If proposed improvements require access over the common area or covered property for thepurposes of transporting labor or materials, written permission for such access shall berequired from the Terra Lago (Community Association). Any such requests must be filedwith the DRC prior to the commencement of construction.

2. View obstructions: Each owner acknowledges that any construction or installation byDeclarant, any Guest Builder, Community Association or any sub-association may impair theview of such owner and hereby consents to such impairment. Each owner acknowledges thatthere are no guaranteed views within the Terra I.ago, and no lot or condominium is assuredthe existence or unobstructed continuation of any particular view unless a SupplementalDeclaration specifically provides otherwise.

3. No owner shall alter any landscaping, and/or otherwise change any common area, owned andmaintained by the Community Association.4. Color samples of all paint or stain are required to be submitted to the DRC when they deviate

from the original color scheme assigned to the existing residence.5. Any color changes must be compatible with the neighboring homes, and requires approval

from the DRC.6. The DRC may require an additional fee for complex improvements that require extensive

review by the Community Association's design review consultant. The owner will beadvised of the cost prior to the commencement of the review.

7. Additional information or documentation, which may be deemed necessary by the DRC inreviewing the request, will be requested from the owner in order to complete the designreview process.

8. The DRC approval is based on the completeness and clarity of the drawings. Inadequate orunclear information may cause the DRC to deny the application or deem the applicationincomplete.

7 of 24


28/31

9. Contractor signs are not allowed to be placed on any portion of a homeowner's lot orCommunity Association common area, with the exception of security or alarm notificationsigns.

Step 2: Fees and FormsApplications are to include:1. The Community Association property improvement form (Exhibit A, both copies) must besigned and completed by owner.2. 3 copies of all plans and specifications, (per Step 1).3. Neighbor statement Exhibit B), 1 copy.4. Photographs (2 copies), where applicable.5. A required $75 fee, payable to Terra Lago. This fee will cover the cost of review on initial

standard improvements.6. Completed application package to be submitted to the following address:

Terra Lago Community Associationdo Merit Property Management LLC42-900 Lago VistaIndio, CA 92203Attn: Facility Administrator

FORMS AND HOW TO USEProperty Improvement Form: All application submittal packages must include a signed andcompleted property improvement form (Exhibit A).Neighbor Awareness Statement: It is the intent of the DRC that the owner's neighbors benotified of any improvements, which may impact the use and enjoyment of the neighbor'sproperty. Neighbor approval or disapproval of a particular improvement shall only be advisoryand shall not be binding in any way on the DRC's decision.Applicable NeighborsAdjacent neighbor: means all neighbors with adjoining property lines to the owner.Facing neighbor: eans the three (3) neighbors most directly across the street.Impacted neighbor: means all neighbors in the immediate surrounding area, which would beaffected by the construction of an improvement.Owner must show the drawings to applicable neighbors and request their signatures on theneighbor statement (Exhibit B). Signature of this form does not constitute neighbor approval ofthe improvements.

8 of 24


29/31

Notice of Completion: Once an owner receives approval from the DRC and the appropriatepermits have been obtained from the City of Indio, construction may commence. Upon completionof the approved improvement(s), a Community Association notice of completion Exhibit C) mustbe forwarded to the Design Review Coordinator, who is located at Merit Property Management (atabove address).

III. ABOUT THE REVIEW PROCESSThe DRC meets on at least a monthly basis to review plans. The members of the DRC shall setthe date and time of the meetings.The DRC will review each submittal package for completeness and consistency with the DesignGuidelines.The DRC will approve or deny the submittal. Approval may be given with conditions.CC&R Article 3, Section 3.3.5Any photos required by the DRC will not be returned to the owner.

IV. AFTER THE REVIEW PROCESSConstruction must proceed consistent with the approved drawings. All deviations must besubmitted for review and approval by the DRC prior to commencement of work.All work must be performed in a manner consistent with the construction standards of theresidence, and with the design and appearance of the community.Within thirty (60) days after construction is completed, the owner is required to submit a noticeof completion (Exhibit C) to the DRC.

V. APPEAL PROCEDURENo persons have the right to appeal an approved application, so long as the Declarant has theright to appoint and remove DRC members.CC&R Article 3, Section 3.10.

9 of 24


30/31

TERRA LAGO HOMEOWNERS ASSOCIATIONINSURANCE NOTIFICATION

CIVIL CODE 1365

Effective January 1, 1997, the California Civil Code was amended to require that associations prepareand distribute summaries to the general membership of specific insurance policies carried.This summary of the association's policies of insurance provides only certain information, asrequired by Section 1365 of the Civil Code, and should not be considered a substitute for thecomplete policy terms and conditions contained in the actual policies of insurance. Anyassociation member may, upon request and provision of reasonable notice, review theassociation's insurance policies and, upon request and payment of reasonable duplicationcharges, obtain copies of those policies. Although the association maintains the policies ofinsurance specified in this summary, the association's policies of insurance may not cover yourproperty, including personal property or, real property improvements to or around yourdwelling, or personal injuries or other losses that occur within or around your dwelling. Evenif a loss is covered, you may nevertheless be responsible for paying all or a portion of anydeductible that applies. Association members should consult with their individual insurancebroker or agent for appropriate additional coverage. There are several disclosures that theassociation is required to make to its members. For a list of those disclosures, please seeCalifornia Civil Code 1363.005 at www.leginfo.ca.gov or you can request a list from yourcommunity manager.The information provided is only a summary of the identified insurance policies. The actual termsand conditions of the policies will control whether the Association has coverage for a particularclaim, the limits of available insurance for the claim, and who is responsible to pay any deductible orretention.The Association's property manager and the Association's Board members are not able to provideyou with individual advice or recommendations concerning your own insurance needs. If you havequestions concerning your current insurance coverage or additional coverage that may be available toyou as a member of a homeowners association, please contact your insurance agent.

Insurance Summary TERRA LAGO HOMEOWNERS ASSOCIATIONAgent: LABARRE/OIESNEE

Policy Type Limits of Liability Deductible arrier Exp. DateD & 0 $1,000,000 1000 LIBERTY MUTUAL 4/28/2014FIDELITY $2,500,000 10000 NOVA 4/28/2014LIABILITY $1,000,000 0 QBE 4/28/2014PROPERTY $4,681,000 5000 QBE 4/28/2014UMBRELLA $10,000,000 0 GREENWICH 4/28/2014WORKERS COMP $1,000,000 0 REPUBLIC INDEMNITY 4/28/2014

Thursday May 02 2013 age 1 af


31/31

Page intentionally left blank