PROTECTIVE COVENANTS FOR THE FALLS SUBDIVISION ARTICLE I PURPOSE OF COVENANTS

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1 PROTECTIVE COVENANTS FOR THE FALLS SUBDIVISION ARTICLE I PURPOSE OF COVENANTS 1. General Requirements. It is the intention of Declarant, expressed by its execution of this instrument, that the lands within the Falls Subdivision (the Subdivision ) be developed and maintained as a highly desirable residential area. It is the purpose of these covenants that the present natural beauty, the natural growth and native setting and surroundings of the Subdivision shall always be protected insofar as is possible in connection with the uses and structures permitted by this instrument. ARTICLE II DEFINITIONS 1. Residential Lots. All of the Subdivision lots shall be Residential Lots. 2. Planned Community. The subdivision shall be a Planned Community under the Colorado Common Interest Ownership Act. 3. Recorded Plat. That map recorded at Plat Book 1 at Pages of the records of the Clerk and Recorder of San Miguel County, Colorado (the Plat ) and any Amendments or Replats thereof of all or a portion of said Lands. 4. Common Areas. The subdivision shall include Common Areas within the project, which shall be used for the benefit of more than one Residential Lot and may include, without limitation, roadways, retaining areas, utility easements and facilities including electricity, telephone, water and sewer services. 5. The Colorado Common Interest Ownership Act. To the extent applicable, these Protective Covenants for the Falls Subdivision (the Declaration ) is governed by the Colorado Common Interest Ownership Act (the Act ) C.R.S et seq. ARTICLE III FALLS SUBDIVISION HOMEOWNERS ASSOCIATION 1. Membership in Homeowners Association. All persons or associations who own or acquire the title in fee to any of the lands in the subdivision (other than lands dedicated as public roads, if any), by whatever means acquired, shall automatically become Members of the FALLS SUBDIVISION HOMEOWNERS ASSOCIATION (the Association ), a Colorado nonprofit corporation, in accordance with the Articles of Incorporation of the Association as recorded or filed in the records of the State of Colorado, and as may be duly amended from time to time. Falls Subdivision Covenants 1

2 1.1 Each Residential Lot shall have one (1) vote in the Association. If more than one individual or entity owns a portion of a Residential Lot, a representative of such multiple owners shall be designated. There shall be no fractional voting permitted. 1.2 The Association shall compile and keep up to date at its principal office a complete list of members and their registered mailing addresses. Such list shall also show opposite each member s name the number or other appropriate designation of the Residential Lot owned by such member. Any notice that the Association provides to the owners of matters affecting the Subdivision shall be mailed to the owners registered mailing addresses. 2. Association Easement. The Association shall have the right of access to each Residential Lot from time to time during reasonable hours as may be necessary for the maintenance, repair, or replacement of utility extensions, roads and fence, ditches and irrigation, and at any time for the making of emergency repairs, and shall have a nonexclusive easement as may be appropriate to perform the duties and functions which it is permitted to perform pursuant to this Declaration. Additionally, the Association shall have the right to establish utility easements from time to time for the benefit of owners of Residential Lots within the Subdivision across any of the lands within the Subdivision, subject however to the prior approval of the location of the easements by the Architectural Control Committee, which approval shall not be unreasonably withheld. 3. Owners Association Expenses. The administration of the Association shall be governed by this Declaration, the Articles of Incorporation for the Association, and Bylaws of the Association (the Bylaws ). 4. Duties and Voting of Board. The Board of Trustees of the Association shall have the duties of management, operation, and maintenance of the utilities, roads and fences of the Subdivision, enforcement of the provisions of this Declaration, the Articles and Bylaws of the Association, and the rules and regulations adopted by the Board of Trustees thereunder. 4.1 The Association must prepare an annual budget. 4.2 Subject to the provisions in Article X, Section 4, the Association shall comply with the notice provisions of C.R.S (4), or any other provision of the Act which deals with notice to the owners of matters concerning the Association. 4.3 The Board of Trustees shall be composed of four (4) persons. Subject to the limitations in Article X, Section 4, and in C.R.S (5), (6), and any other relevant provisions of the Act, the Declarant shall appoint the Trustees of the Board. 4.4 The Board of Trustees shall act by majority vote. Falls Subdivision Covenants 2

3 4.5 Subject to the provisions in Article X, Section 4, the Residential owners shall have the power to remove Trustees as set forth in C.R.S (8) and the Bylaws. 4.6 Subject to the provisions in Article X, Section 4, within sixty (60) day s after the Residential Lot owners other than the Declarant elect a majority of the members of the Executive Board, the Declarant shall deliver to the Association all property of the Residential Lot owners and of the Association held by or controlled by the Declarant, including without limitation, the items set forth in Section (9) of the Act and Section 4.14 of the Bylaws. 4.7 No members of the Executive Board and no officer shall be liable for actions taken or omissions made in the performance of such member s duties except for wanton and willful acts or omissions. The Association shall indemnify such trustee or officer, his heirs, executors and administrators against all loss, costs and expense, including attorneys fees, reasonably incurred by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a trustee or officer of the Association, except as to matters to which he shall be finally adjudged in such actions, suit or proceeding to be liable for wanton or willful acts or omissions. In the event of a settlement, indemnification shall be provided only connection with such matters covered by the settlement as to which the Association is advised by counsel that the person to be indemnified has not been guilty of wanton or willful acts or omissions in the performance of his duty as such trustee or officer may be entitled. All liability, loss, damage, costs and expense incurred or suffered by the Association by reason of or arising out of or in connection with the foregoing indemnification provisions shall be treated and handled by the Association as common expenses provided, however, that nothing contained in this Section shall be deemed to obligate the Association to indemnify any member or owner of a Residential Lot who is or has been a trustee or officer of the Association for his share of such common expenses. 5. Assessments. All owners shall be obligated to pay assessments imposed by the Association to meet the common expenses of management, operation, and maintenance of the Subdivision. 5.1 Assessments shall be made equally against each Residential Lot. 5.2 Assessments may include the costs of maintenance and operation of Common Areas, utilities, roads and fences, expenses of management, taxes and special assessments, unless separately assessed, landscaping, irrigation and care of grounds for all lands within the Subdivision, repairs and renovations, trash and garbage collection, wages, snow removal, irrigation and domestic water management fees, expenses and liabilities incurred by the Association under or by reason of this Declaration, payment of any deficit from a previous assessment, creation of a reasonable contingency, reserve or surplus fund, and other costs and expenses relating to the Subdivision. In addition, assessments may include sums due for sewer charges referred to in Article VII paragraph 12. Falls Subdivision Covenants 3

4 5.3 Assessments shall be a personal obligation of each owner, and suit to recover money judgment shall be maintainable without waiving the lien securing the same; 5.4 If any common expense is caused by the misconduct of any Residential Lot owner, the Association may assess that expense exclusively against such owner s Residential Lot. 5.5 If common expense liabilities are reallocated, common expense assessments and any installment thereof not ye due shall be recalculated in accordance with the reallocated common expense liabilities. 5.6 No Residential Lot owner may be exempt from liability for payment of the common expense by waiver of the use or enjoyment of any of the Common Areas or by abandonment of the Residential Lot against which assessments are made. 6. Assessment Lien. 6.1 Assessments chargeable to any Residential Lot shall constitute a lien on such Residential Lot superior to all other liens and encumbrances except: (a) (b) (c) Liens and encumbrances recorded before the recordation of the Declaration; A security interest on the Residential Lot which has priority over all other security interests on the Residential Lot and which was recorded before the date on which the assessment sought to be enforced became delinquent; and Liens for real estate taxes and other governmental assessments or charges against the Residential Lot. 6.2 An assessment lien under this section 6 is superior to the security interests described above in subsection 6.1(b) of this section to the extent of: (a) (b) An amount equal to the common expense assessments based on a periodic budget adopted by the Association which would have become due, in the absence of any acceleration, during the six months immediately preceding institution of an action to enforce the lien, but in no event shall the priority accorded under subsection 6.1(b) to such lien exceed one hundred fifty percent (150%) of the average monthly assessment during the immediately preceding fiscal year multiplied by six; and Attorneys fees and costs being incurred in an action to enforce the lien. Falls Subdivision Covenants 4

5 6.3 This section 6 does not affect the priority of mechanics or material men s liens or the priority of liens for other assessments made by the Association. 6.4 If any assessment shall remain unpaid 25 days after the due date thereof, the Association may impose a surcharge of 1.75% of such assessment on the first day of each calendar month thereafter, so long as such assessment shall be unpaid, provided however that the maximum surcharge in one year shall be no greater than twenty-one percent (21%). 6.5 Recording of the Declaration constitutes record notice and perfection of the lien. No further recordation is required. 6.6 The Association s lien may be foreclosed in like manner as a mortgage on real estate. 6.7 Upon such foreclosure the Association s claim shall include the amount of unpaid assessments, penalties thereon, the costs and expenses of such proceedings, the costs and expenses of filing the notice of lien, and reasonable attorneys fees, and the owners shall each be liable for any deficiency. The Association may bid on the Residential Lot at foreclosure sale and hold, lease, mortgage, or convey the same. 7. Statement of Assessments and Liability of Purchasers. The Association shall furnish to a Residential Lot owner or his designee or to a holder of a security interest or its designee upon written request, delivered personally or by certified mail, first class postage prepaid, return receipt requested, to the Association s registered agent, a statement setting forth the amount of unpaid assessments currently levied against such owner s Residential Lot. The statement shall be furnished within fourteen (14) business days after receipt of the request and is binding on the Association, the Board of Trustees, and every Residential Lot owner. If no statement is furnished to the Residential Lot owner or holder of a security interest or their designee, delivered personally or by certified mail, first class postage prepaid, return receipt requested, to the inquiring party, then the Association shall have no right to assert a priority lien upon the Residential Lot for unpaid assessments which were due as of the date of the request. 7.1 The grantee of a Residential Lot shall be jointly and severally liable with the grantor for all unpaid assessments against the tract accrued prior to the conveyance, without prejudice to the grantee s right to recover from the grantor the amounts paid by the grantee therefor. 8. Incorporation into Future Filings. For purposes of administration, maintenance and the sharing of expenses provided for in Paragraph 5 above, the Association may be incorporated into any association created in the future pursuant to the further subdivision of lands now or hereafter owned by Declarant, its successors and assigns adjacent to the Subdivision. Falls Subdivision Covenants 5

6 9. Insurance. Subject to the provisions in Article X, Section 4 of this Declaration, the Association shall purchase and maintain insurance as required by the Act in Section and any other applicable section. The Association shall purchase any additional insurance that it deems appropriate. ARTICLE IV ARCHITECTURAL COMMITTEE 1. Architectural Committee. The Architectural Committee shall mean the Board of Trustees of the Association. The Architectural Committee shall have and exercise all of the powers, duties, and responsibilities set out in this instrument, and may but shall not be required to establish guidelines and requirements for compliance with its authority, including the establishment of costs and fees reasonably related to the processing and evaluation of requests for Committee action. 2. Approval by Architectural Committee. No improvements of any kind, including but not limited to dwelling houses, barns, stables, outbuildings, swimming pools, tennis courts, ponds, driveways and parking areas, fences, walls, garages, antennae, flagpoles, curbs, walks, landscaping, irrigation ditches or structures, and wells shall ever be constructed or altered (including any change in exterior color or materials), on any lands within the Subdivision, nor may any vegetation be altered or destroyed nor any landscaping performed on any tract, unless the complete architectural plans for such construction or alteration or landscaping are approved in writing by the Architectural Committee prior to the commence of such work; no person shall have the right to rely on any verbal approval. In the event the Architectural Committee fails to take any action within sixty (60) days after complete architectural plans for such work have been submitted to it, then all of such submitted architectural plans shall be deemed to be approved. In the event the Architectural Committee shall disapprove any architectural plans, the person or association submitting such architectural plans may appeal the matter to the next annual or special meeting of the Members of the Association, where a vote of at least seventy-five percent (75%) of the votes entitled to be cast at said meeting shall be required to change the decision of the Architectural Committee. 3. Variances. Where circumstances, such as topography, location of property lines, location of trees and brush, or other matters require, the Architectural Committee may, by a two-thirds vote, allow reasonable variances as to any of the covenants contained in this instrument, on such terms and conditions as it shall require; provided that no such variance shall be finally allowed until 30 days after the Architectural Committee shall have mailed a notice of such variance to each Member of the Association. In the event any three Members shall notify the Architectural Committee in writing of their obligation to such variance within said 30-day period, the variance shall not be allowed until such time as it shall have been approved by a vote of at least twothirds of the votes entitled to be cast at an annual or special meeting of the Members of the Association. Falls Subdivision Covenants 6

7 4. General Requirements. The Architectural Committee shall exercise its best judgment to see that all improvements, construction, landscaping and alterations on the lands within the Subdivision conform and harmonize with the natural surroundings and with the existing structures as to external design, materials, color, siting, height, topography, grade, landscaping and finished ground elevation. The Architectural Committee shall protect the seclusion of each home sit from other home sites insofar as possible and may require landscaping and the planting of specimen trees. 5. Preliminary Approval. Persons or associations who anticipate constructing improvements on lands within the Subdivision, whether they already own lands in the Subdivision or are contemplating the purchase of such lands, may submit preliminary sketches of such improvements to the Architectural Committee shall never be finally committed or bound by any preliminary or informal approval or disapproval until such time as complete architectural plans are submitted and approved or disapproved. 6. Architectural Plans. The Architectural Committee shall disapprove any architectural plans submitted to it which are not sufficient for it to exercise the judgment required of it by these covenants. 7. Architectural Committee Not Liable. The Architectural Committee shall not be liable in damages to any person or association submitting any architectural plans for approval, or to any owner or owners of lands within the Subdivision, by reason of any action, failure to act, approval, disapproval, or failure to approve or disapprove, with regard to such architectural plans. Any person or association acquiring the title to any property in the Subdivision, or any person or association submitting plans to the Architectural Committee for approval, by so doing does agree and covenant that he or it will not bring any action or suit to recover damages against the Architectural Committee, its members as individuals, or its advisors, employees, or agents. 8. Written Records. The Architectural Committee shall keep and safeguard for at least five (5) years complete permanent written records of all applications for approval submitted to it (including one set of all architectural plans so submitted to it (including one set of all architectural plans so submitted) and of all actions of approval or disapproval and all other actions taken by it under the provisions of this instrument. ARTICLE V GENERAL RESTRICTIONS ON ALL LOTS 1. Zoning Regulations. No lands within the Subdivision shall ever be occupied or used by or for any structure or purpose or in any manner which is contrary to the zoning regulations of San Miguel County, Colorado, validly in force from time to time, except as the same may be allowed under said regulations as a nonconforming structure or use. No Residential Lot within the Subdivision shall be further subdivided. 2. No Mining, Drilling, or Quarrying. No mining, quarrying, tunneling, excavating, or drilling for any substance within the earth, including but not limited to oil, Falls Subdivision Covenants 7

8 gas, minerals, gravel, sand, rock, geothermal and earth, except for activities conducted under prior mineral reservations, agricultural, utility, water and septic purposes shall ever be permitted within the limits of the Subdivision. 3. No Business Uses. No lands within the Subdivision shall ever be occupied or used for any commercial or business purpose or for any noxious activity, and nothing shall be done or permitted to be done on any of said lands which is a nuisance or might become a nuisance to the owner or owners of any of said lands. No store, office, or other place of commercial or professional business of any kind; nor any hospital, sanitarium, or other place for the case or treatment of the sick or disabled physically or mentally; nor any public theater, bar, restaurant, or other public place of entertainment; nor any church; shall ever be constructed, altered, or permitted to remain within the Subdivision. Nothing herein shall be deemed to prohibit recreational facilities or activities nor any home occupation provided the same is permitted under the San Miguel County Land Use Code in effect and as amended from time to time and further provided such use does not constitute a nuisance or violate any other provision of these Protective Covenants. 4. Signs. With the exception of one For Rent or For Sale sign (which shall not be larger than 20 x 28 inches) and except for one entrance gate sign of a style and design approved by the Architectural Committee, no advertising signs, billboards, unsightly objects, or nuisances shall be erected, altered, or permitted to remain on any tract in the Subdivision. The above-referenced For Rent or For Sale sign shall only be located, if permitted by the Architectural Committee, within the boundaries of a Residential Lot. 5. Animals. Except as approved by the Architectural Committee, no farm animals or poultry shall be kept on Residential Lots in the Subdivision. Domestic dogs shall be permitted. Any animal which interferes with wildlife within the Subdivision or any adjoining lands thereto shall be subject to removal or destruction by the Architectural Committee upon its finding of such interference or failure of the owner to properly control and/or restrain such animal. 6. Service Yards and Trash. All clothes lines, equipment, campers, boats, trucks, trailers, service yards, woodpiles, or storage piles on any Residential Lot in the Subdivision shall be kept screened by adequate planting or fencing so as to conceal them from the view of neighboring Residential Lots, streets and access roads. All rubbish and trash shall be removed from all Residential Lots in the Subdivision and shall not be allowed to accumulate and shall not be burned thereon except in burners approved by the Architectural Committee as to location, design, materials, and construction, and except at such hours of the day as shall be established by the Architectural Committee. 7. No Discharge of Firearms. The discharge of firearms shall not be permitted on any of the lands in the Subdivision without approval of the Architectural Control Committee. Falls Subdivision Covenants 8

9 ARTICLE VI RESTRICTIONS ON RESIDENTIAL LOTS 1. Number and Location of Buildings. Except for buildings or structures in place on the date of recording these Covenants, no buildings or structures shall be placed, erected, altered, or permitted to remain on any Residential Lot other than: (a) (b) (c) One detached single-family dwelling house; and One guest or caretaker house (if permitted and approved under local zoning regulations); and One attached or detached garage. 1.1 No dwelling house, building or other structure shall be placed, erected, altered, or permitted to remain on any Residential Lot at any site or location other than as specifically permitted in writing by the Architectural Committee and in accordance with recommendations of soil and geologic studies for each Residential Lot as required by San Miguel County. Each Residential Lot owner shall be responsible for the construction of the driveway which provides said Residential Lots with access. 1.2 Prior to issuance of residential building permits, all Town of Telluride conditions concerning sewer lines referred to in Article VII, paragraph 12, shall be satisfied with respect to any Residential Lot for which a building permit is sought. All construction activity within Residential Lots within the Subdivision shall be limited to the hours between 7:00 a.m. and 7:00 p.m. The design of individual sewage disposal systems shall be reviewed and approved by the San Miguel County Environmental Health Department prior to the issuance of a building permit for the Residential Lot within the Subdivision for which said building permit is sought. 2. Dwelling House to be Constructed First. No guesthouse, caretaker house, garage, or other building shall be constructed on any Residential Lot until after commencement of construction of the dwelling house on the same Residential Lot. All construction and alteration work shall be prosecuted diligently, and each building, structure, or improvement which is commenced on any Residential Lot shall be entirely completed within 18 months after commencement of construction. 3. Towers and Antennae. No towers or radio or television antennae or satellite transmission receiving antennae shall be erected on any Residential Lot without approval of the Architectural Committee and shall be fully screened from view from adjacent properties. 4. Trees and Landscaping. No trees or brush growing on any Residential Lot shall be felled or trimmed no shall any natural areas be cleared, graded or formal lawn areas constructed, or landscaping performed on any Residential Lot without the prior written permission of the Architectural Committee. Falls Subdivision Covenants 9

10 5. Tanks. No tanks of any kind shall be erected, placed, or permitted upon any Residential Lot unless buried or if located aboveground, the location and screening shall be as determined by the Architectural Committee. 6. Used or Temporary Structures. No used or previously erected or temporary house, structure, house trailer, or nonpermanent outbuilding shall ever be placed, erected, or allowed to remain on any Residential Lot, except, to the extent permitted by all applicable County regulations, during construction periods, and no dwelling house shall be occupied in any manner prior to its completion. 7. Exterior Lighting. All exterior lights and light standards on Residential Lots shall be approved by the Architectural Committee for harmonious development and the prevention of lighting nuisances to other lands in the Subdivision. 8. Off-Street Parking. No dwelling house shall be constructed on any Residential Lot unless there is concurrently constructed on the same tract adequate off-street parking areas for at least four automobiles. 9. Dust Control. Each owner shall be responsible for ongoing dust control on any driveway within any Residential Lot. The Association shall take reasonable steps on insure minimal dust pollution results from roads within the Subdivision, and such roads shall be treated as necessary with magnesium chloride or other dust suppressants approved by the San Miguel County Environmental Health Department. The Association shall have the right to treat private driveways and assess the costs thereof against the respective owner if such owner fails to fulfill his responsibility for his individual dust control. 10. Weed Control. The Association shall be responsible to implement and follow a program of noxious weed control which shall address, in particular, the control and elimination of Canadian thistle and other undesirable weeds. The Association shall have the right to enter upon any Residential Lot and conduct a weed control program within the area of such Residential Lot lying outside of the building envelope shown on the Plat. 11. Road Damage. Each owner of a Residential Lot is responsible for any damage caused to the roadways within the Subdivision during the construction of improvements upon such owner s property by any vehicle or equipment belonging either to said owner or to any person or entity using the roads within the Subdivision while engaged in any activity benefiting said owner. Metal treads or other lugged tread or tired vehicles are not permitted to drive across the roads within the Subdivision; however, such equipment may access lands within the Subdivision on a trailer or flatbed vehicle as may be appropriate provided any damage resulting therefrom is repaired and paid for as provided hereinabove. Each owner shall also be responsible for any damage caused by utility cuts in roads, washouts, and runoff damage caused by failure to install culverts properly and in a timely manner as may be necessary in connection with the construction of improvements upon or any other uses made by such owner to his Residential Lot. The Falls Subdivision Covenants 10

11 Board of Trustees shall have the right to establish, implement and enforce an impact fee system to allocate costs for road damage and general wear and tear on the roads within the Subdivision upon terms and conditions which said Board deems best in the interests of the Members of the Association. Such impact fee system may include charges based upon per vehicle, per load, per ton, or per trip calculations. Said system may also deny access to the Subdivision to any vehicle for which said impact fee has not been paid. The Board may also implement and enforce weight limits on the roads within the Subdivision. 12. Sanitary Systems. No sewerage disposal system, sanitary system, cesspool, or septic tank shall be constructed, altered, or allowed to remain or be used on any Residential Lot unless fully approved as to design, capacity, location, and construction by all proper public health agencies of the State of Colorado and the County of San Miguel and also by the Architectural Committee. Sewer service shall be provided on site but subject to connection to the public sewer system at such time as the public sewer system is available pursuant to the PRE-ANNEXATION AND UTILITY CONNECTION AGREEMENT FOR THE FALLS PROJECT, dated September, 1990 and recorded in the records of the San Miguel County Clerk and Recorder at Book 470, Pages , and the FIRST AMENDMENT TO THE PRE-ANNEXATION AND UTILITY CONNECTION AGREEMENT FOR THE FALLS PROJECT, dated December 15, 1992 and recorded in the records of the San Miguel County Clerk and Recorder at Book 503, Pages 1 7 (collectively, the Annexation Agreement ) which generally provides for the connection of the Residential Lots on-sit septic sewer systems to the Town s sewer system and payment therefor as an obligation of the Association and individual lot owners. The terms of the Annexation Agreement shall be binding upon the Association and all owners of Residential Lots. [Recorded Original has no Article VII.] ARTICLE VII EASEMENTS AND LAND RESERVED 1. Utility Easements Reserved. Declarant hereby reserves to itself, its successors and assigns, perpetual easements fifteen (15) feet in width: 1) on each side of the boundary line along the entire perimeter of each Residential Lot and other tracts and all other easements described on the recorded Plat of the Subdivision, for the purpose of constructing, maintaining, operating, replacing, enlarging, and repairing electric, telephone, water, irrigation, sewer, gas, and similar lines, pipes, wires, ditches, and conduits. 2. Easements for Private Roads. In addition to the easements and reservations set forth on the Plat, Declarant hereby reserves to itself, its successors and assigns perpetual easements across all roads within the Subdivision giving access to the Residential Lots in the Subdivision as shown on the Plat or as may hereafter be established by the Declarant, together with the right of the Declarant to permit the use of said easements by owners of lands adjacent thereto for motorized, vehicular and other access and for the placement of Falls Subdivision Covenants 11

12 utilities as may be necessary to serve future development on said lands, or as may hereafter be established by Declarant; provided that no such private road not shown on the Plat as of the date of recording thereof shall ever be constructed or used without the prior written permission of the Architectural Committee. ARTICLE IX ENFORCEMENT 1. Enforcement Action. The Architectural Committee shall have the right to prosecute any action to enforce the provisions of all of these covenants by injunctive relief, on behalf of itself and all or part of the owners of lands within the Subdivision. In addition, each owner of land within the Subdivision and the Association shall have the right to prosecute any action for injunctive relief and for damages by reason of any violation of these covenants. 2. Limitations on Actions, In the event any construction or alteration or landscaping work is commenced upon any of the lands in the Subdivision in violation of these covenants and no action is commenced within 120 days thereafter to restrain such violation, then injunctive or equitable relief shall be denied, but an action for damages shall still be available to any party aggrieved. Said 120-day limitation shall not apply to injunctive or equitable relief against other violations of these covenants. No bond shall be required to be posted by any party seeking to enforce these Covenants against the owner of a Residential Lot, and all of said owners of Residential Lots hereby waive the requirement of posting a bond in such action. ARTICLE X GENERAL PROVISIONS 1. Covenants to Run. All of the covenants in this instrument shall be a burden on the title to all of the l ands in the Subdivision, and the benefits thereof shall inure to the owners of all of the lands in the Subdivision, and the benefits and burdens of all said covenants shall run with the title to all of the lands in the Subdivision. 2. Termination and Amendment of Covenants. The covenants contained in this instrument shall terminate unless extended by Amendment, on or before November 1, 2040, or at the time of final and intentional corporate dissolution of the Association, whichever date shall first occur. These covenants and/or the Plat may be amended by the owners of seventy-five percent (75%) of the Residential Lots in the Subdivision and all of the first lien holders on such Residential Lots. A properly certified copy of any resolution of amendment shall be placed of record in San Miguel County, Colorado, not more than six months after the date of said amendment. If these covenants are amended, then they shall continue in effect, as amended, for so long thereafter as may be stated in said amendment. Falls Subdivision Covenants 12

13 3. Severability. Should any part or parts of these covenants be declared invalid or unenforceable by any court of competent jurisdiction, such decisions shall not affect the validity of the remaining covenants. 4. Repeal of the Act. In the event that the Act is repealed, the provisions of the Act immediately before its repeal shall control this declaration. However, to the extend that the Bylaws of the Association differ from the Act as repealed, the provisions of the Bylaws shall control. 5. Paragraph Headings. The paragraph headings in this instrument are for convenience only and shall not be construed to be a part of the covenants contained herein. 6. Transfer Assessment. A real estate transfer assessment to be used for the purpose of transportation shall be payable to San Miguel County upon each sale, transfer or conveyance of each Residential Lot, except that the real estate transfer assessment shall not apply to the bulk sale of Lots 1 through 4 by the Declarant. The amount of the assessment shall be limited to three-quarters of one percent of the sale price of each Residential Lot, provided however that the transfer assessment shall be subject to the following exemptions: (a) (b) (c) (d) (e) Any transfer wherein the United States, or any agency or instrumentality thereof, the state, any county, city and county, municipality, district or other political subdivision of this state, is either the grantor or grantee; Any transfer by gift of real property, where there is no consideration other than love and affection or charitable donation; Any transfer by document, decree or agreement partitioning, terminating or evidencing termination of a joint tenancy, tenancy in common or other co-ownership in real property; however, if additional consideration or value is paid in connection with such partition or termination, the tax shall apply and be based upon such additional consideration; Any transfer of title or change of interest in real property by reason of death, pursuant to a will, the law of descent and distribution, or otherwise; Transfers made pursuant to reorganization, merger or consolidation of corporations or by a subsidiary to a parent corporation for no consideration other than cancellation or surrender of the subsidiary s stock, or transfers made to a corporation, partnership, joint venture, business trust or other association or organization is owned by the persons by whom such transfer was made and if such owners have the same relative interests in the association or organization as they had in the real property immediately prior to the transfer and there is no consideration other than their respective interests in the new association or organization; Falls Subdivision Covenants 13

14 (f) (g) (h) (i) (j) (k) Transfers to make effective any plan confirmed or ordered by a court of competent jurisdiction in an equity receivership proceedings; Any transfer made and delivered without consideration for the purpose of confirming, correcting, modifying or supplementing a transfer previously made; making minor boundary adjustments; removing clouds on titles; or granting rights of way easements or licenses; Any decree or order of a court of record quieting, determining or resting title, including a final order awarding title pursuant to a condemnation proceedings; Any transfer of cemetery lots; Any lease of any real property (or assignment or transfer of any interest in any such lease), provided that the terms and conditions of such lease do not constitute a taxable lease, as defined in this Chapter, of the property; Transfers to secure debt or other obligation or releases other than by foreclosure of real property which is security for a debt or other obligation; (l) An executory contract for the sale of real property of less than three (3) years duration, under which the vendee is entitled to or takes possession thereof without acquiring title thereto, or any assignment or cancellation of any such contract; (m) (n) (o) (p) (q) Any transfer that is made pursuant to a valid and legally enforceable contract for sale entered into between the seller and purchaser prior to December 31, 1992; A transfer under foreclosure or power of sale, or a voluntary conveyance in lieu of foreclosure, whereby the secured party takes back the property or the property is redeemed. However, a purchaser at a foreclosure sale who holds no security interest or redemption rights in the property, and who acquires title to the property upon expiration of all redemption periods, is required to pay the tax; Transfers pursuant to a decree of separation or divorce; Transfer to intermediaries for no consideration for a period not to exceed six (6) months; Transfers to a trust if the donor has the same relative interest in the trust as he or she had prior to the transfer; or if there is no consideration other than Falls Subdivision Covenants 14

15 love and affection or charitable donation. Transfers for such a trust conveying or releasing the property from the trust are also exempt where there is no consideration. If the Board of County Commissioners impose a real estate transfer assessment payable on the sale, transfer or conveyance of real property in San Miguel County, the amount of the assessment paid hereunder shall be credited against the total amount payable pursuant to such assessment. In the event the Residential Lots become annexed to the Town of Telluride, the obligation to pay the assessment shall be subject to any exemptions on transfers provided for by the Town of Telluride s ordinance establishing its Real Estate Transfer Assessment as adopted and in effect on the date of such annexation. There shall be no amendment to this Section 6 of Article X of the Declaration without prior approval therefor by the County Commissioners of San Miguel County. - - END - Falls Subdivision Covenants 15

16 FIRST AMENDMENT TO PROTECTIVE COVENANTS FOR THE FALLS SUBDIVISION WHEREAS, DALE J. DYER AND BONNIE M. DYER (collectively, the Declarant ) previously surveyed, subdivided and platted into lots certain real property in San Miguel County, Colorado, as shown on the plat of FALLS SUBDIVISION (the Subdivision ) recorded in Plat Book 1, Page 1403 of the records of San Miguel County, Colorado (the Plat ) and on an Insubstantial Amendment to Lot 2 recorded in Plat Book 1, Page 1540; and WHEREAS, the Declarant previously subjected the Subdivision to certain Protective Covenants for the Falls Subdivision (the Covenants ), recorded at Book 504, Page 483, of the records of San Miguel County, Colorado; and WHEREAS, pursuant to the Covenants, at Article III, Paragraph 2, The Falls Subdivision Homeowners Association, Inc. (hereinafter referred to as the Dedicator or the Association ) is authorized to create easements for certain purposes across lands within the Subdivision. The relevant language from the Covenants is as follows: Additionally, the Association shall have the right to establish utility easements from time to time for the benefit of owners of Residential Lots within the Subdivision across any of the lands within the Subdivision, subject however to the prior approval of the location of the easements by the Architectural Control Committee, which approval shall not be unreasonably withheld; and WHEREAS, the Association has, in connection with the initial infrastructure necessary to provide utility services to Residential Lots within the Subdivision, previously exercised the authority granted to it in Article III, paragraph 2, of the Covenants, and has established utility easements across lands within the Subdivision for the benefit of owners of Residential Lots; and WHEREAS, sufficient utility access has been established to the Residential Lots, and the Association no longer requires the power to establish utility easements without the consent of the owner of the Residential Lot affected by any such utility easements; and WHEREAS, Article X, paragraph 2, of the Covenants provides that the Covenants may be amended by the owners of seventy-five percent (75%) of the Residential Lots in the Subdivision (the Owners ) and all of the first lien holders on such Residential Lots (the Lien holders ); and WHEREAS, the Owners and the Lien holders desire to amend the Covenants. NOW, THEREFORE, the Owners and the Lien holders hereby amend the Covenants as follows: Falls Subdivision Covenants 16

17 1. The second sentence of Article III, paragraph 2, of the Covenants is hereby amended and restated in its entirely to read: Additionally, the Association shall have the right to establish utility easements from time to time for the benefit of owners of Residential Lots within the Subdivision across any of the lands within the Subdivision, subject however to: (a) the prior written consent of the owner of each Residential Lot across which any such utility easement is proposed to be established, and (b) the prior approval of the location of the easements by the Architectural Control Committee, which approval shall not be unreasonably withheld; nothing contained herein shall retroactively affect or diminish the validity of any utility easements previously established by the Association or any ratification or further acts or documents necessary to evidence such previously created easements or not such ratification or further acts or documents are undertaken after the date of this Amendment. FURTHERMORE, the Owners and the Lien holders hereby agree as follows: 1. This instrument may be signed in any number of counterparts, each of which shall constitute an original signed copy, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page of this instrument. 2. Capitalized terms used herein but not defined in this instrument shall have the respective meanings ascribed to them in the Covenants. Signed by Owners and Lien holders Falls Subdivision Covenants 17

18 I, Buzz Fedorka, hereby certify that: SECRETARY S CERTIFICATE 1. I am the duly elected Secretary of The Falls Subdivision Homeowners Association, Inc., a Colorado nonprofit corporation (the Association ); and 2. The Protective Covenants for the Subdivision (the Covenants ), recorded at Book 504, Page 483, of the records of San Miguel County, Colorado, provide, in Article X, paragraph 2, that the Covenants may be amended by owners of seventy-five percent (75%) of the Residential Lots in the Subdivision and all of the first lien holders on such Residential Lots; and 3. The First Amendment to Protective Covenants for the Falls Subdivision, attached hereto as Exhibit A (the Amendment ) has been executed by seventy-five percent (75%) of the owners and first lien holders of Residential Lots within the Falls Subdivision (the Subdivision ); and 4. The Amendment has been adopted in compliance with the Covenants and therefore the Covenants have been duly amended in accordance with the terms set forth in the Amendment. [Signed by Buzz Fedorka on November 22, 1994.] Falls Subdivision Covenants 18