Morningside Estates Condominium Association Governing Documents including Articles of Incorporation Covenants, Conditions & Restrictions By-Laws Rules & Regulations July, 2013
Preface This is a newly restated version of the Governing Documents of Morningside Estates Condominium. The original declaration was filed on March 21st, 1984, duly registered and is maintained in the Official Records of the Maricopa County Recorder in Book No. 264 of Maps at page 32. This booklet contains all of the intent of the original Articles of Incorporation,* CC&Rs, By-Laws, and Rules and Regulations. We have adopted what we hope is a more readable form of these sometimes complex documents with the express purpose of making them more understandable, so that compliance may be more easily achieved through knowledge. Table of Contents Articles of Incorporation... 3 By-Laws... 31 CC&Rs... 7 Map... Inside Back Cover Overview... 1 Rules & Regulations... 37 Index... 41 The Board of Directors Daniel Cardoza, President Nushka Remec, Secretary Wilson David, Treasurer Nancy McClain, Director Jesse Talman, Director July 1st, 2013 * The Articles of Incorporation herein are those registered at the Maricopa County Recorder s office. Missing Articles and pages are as available.
Governing Documents Architectural Guidelines Articles of Incorporation Bylaws CC&Rs Condominium Plan Declaration Election Rules Rules & Regulations Subdivision or Tract Map Hierarchy of Documents The term governing documents refers to documents that govern a common interest development. Following are general descriptions of governing documents: Architectural Guidelines, like Rules & Regulations, are approved by the board of directors and establish policies and procedures for alterations, modifications and improvements to an owners property. Articles of Incorporation are usually 2 or 3 pages long and state the name of the association and the general purpose for which it was formed. The Articles are filed with Secretary of State. Articles filed after 1995 must contain certain information. For more about Articles, see Corporations Menu. Bylaws establish policies and procedures for the governing of an association. They establish qualifications for the election of directors, their number and term of office, their powers and duties, the appointment of officers, when and how meetings are held, quorum and voting requirements, appointment of committees, etc. The Declaration of Covenants, Conditions & Restrictions ( Declaration or CC&Rs ) describes the rights and obligations of the membership to the association and the association to the membership. CC&Rs generally cover the following: (i) restrictions on the use of property and enforcement powers, (ii) member and association maintenance duties, (iii) lender protection provisions, (iv) assessments obligations and lien/collection rights, (v) duty to insure, and (vi) dispute resolution and attorneys fees provisions. To be effective, CC&Rs must be recorded. A condominium plan is filed by the Declarant prior to the construction of the project and consists of a description or survey map of the project in sufficient detail to identify the common areas and each unit. Condo plans are not used with planned developments because what the individual owns is defined two dimensionally by the tract map. Condominiums, on the other hand, require a three dimensional description of the condominium s air space (see example). Declaration of Covenants, Conditions & Restrictions, see CC&Rs. All associations should adopt election rules to include (i) nomination procedures, (ii) candidate qualifications, (iii) a method of selecting independent third parties as inspectors of election, (iv) rules regarding access to association media during campaigns, (v) rules regarding access to common area meeting space during campaigns, (vi) secret balloting procedures, etc. Rules are established by the board for regulation of matters not fully described in the CC&Rs. Rules typically cover pets, parking, signs and use of recreational facilities. Used in planned developments to show the boundaries and location of each lot and the common areas. Common interest developments have a number of documents controlling the development. Not all documents are created equal--some have more authority than others. Although there may be exceptions, the hierarchy of authority is generally as follows: For property restrictions: 1. State and Federal laws (unless they defer to the CC&Rs) 2. Condominium Plan (for condominiums) or Subdivision Map (for planned developments) 3. Declaration of Covenants, Conditions and Restrictions (CC&Rs) 4. Rules and Regulations For corporate matters: (elections, recalls, meetings, officers and directors, etc): 1. State laws (unless they defer to the bylaws) 2. Articles of Incorporation 3. Bylaws (unless bylaw provisions are found in the CC&Rs) 4. Election Rules Page 1
Conflicts Between Documents: Conflicts between documents can often be resolved by referring to the hierarchy of authority and applying general rules of interpretation. However, statutes and case law may also control particular issues. Boards should seek legal counsel whenever they discover a conflict between their documents, or their documents and statutes. Abbreviations & Acronyms Following is a list of abbreviations and acronyms used in the community association industry. ADA ADR Americans with Disabilities Act Alternative Dispute Resolution AICPA American Institute of Certified Public Accountants. ARC Architectural Review Committee. Also referred to as Architectural Committee Design Review Committee or Environmental Control Committee in some associations. Some older documents refer to it as the Art Jury. CC&Rs Declaration of Covenants, Conditions & Restrictions. CD Certificate of Deposit. An interest-bearing, FDIC insured investments offered by banks and savings & loans. CID Common Interest Development COOP Also Co-Op and Co-Operative. Refers to a Stock Cooperative, one of the forms of common interest developments. CPA CPI FCC Certified Public Accountant Consumer Price Index. Used by many associations during the budgeting process. Federal Communications Commission. FDIC Federal Deposit Insurance Corporation. A federal program that insures checking and savings deposits in member banks up to $250,000 per depositor per banking institution. FHA Federal Housing Administration GAAP Generally Accepted Accounting Principles. A set of rules, conventions, standards, and procedures for reporting financial information. HOA Homeowners Association HUD Housing and Urban Development HVAC Heating, Ventilation and Air Conditioning IDR Internal Dispute Resolution NIC Noise Isolation Class. An over-all measurement of the sound isolation between units in a multi-family dwelling. NOD Notice of Default. Initiates the foreclosure process against a delinquent owner. POA PUD Property Owners Association Planned Unit Development. Used interchangeably with PD. TIC Tenants in Common. Denotes a form of common interest development where ownership is held as tenants in common with an exclusive right to occupy a particular unit. The most common TICs are community apartment projects. Page 2
Articles Of Incorporation of Morningside Estates Condominium Association The undersigned hereby adopts the below-stated Articles of Incorporation for the purpose of forming a non-profit corporation under the laws of the State of Arizona. ARTICLE I NAME The name of the non-profit corporation is: MORNINGSIDE ESTATES CONDOMINIUM ASSOCIATION. ARTICLE II PURPOSE The corporation is organized exclusively and shall be operated exclusively as a homeowners association within the meaning of Section 528{c) of the Internal Revenue Code and, within the purposes contemplated by Section 528{c) of the Internal Revenue Code, and intends to conduct any and all lawful affairs for which corporations may be incorporated under the laws of the State of Arizona. ARTICLE III Incorporation In the corporation s Bylaws there shall be no less than two (2) nor more than nine (9) Directors. The names and addresses of the persons who are to serve as Directors until the first annual election of Directors or until their successors are elected and qualified are: Wolfgang J. Klien Lenn Pritchard 4501 N. 22nd Street, Suite 200 4501 N. 22nd Street, Suite 200 Phoenix, Arizona 85016 Phoenix, Arizona 85016 ARTICLE VI INCORPORATORS The names and addresses of the incorporators are: Wolfgang J. Klien Lenn Pritchard 4501 N. 22nd Street, Suite 200 4501 N. 22nd Street, Suite 200 Phoenix, Arizona 85016 Phoenix, Arizona 85016 * There is at least one page and several Articles missing from the recorded document at the Maricopa County Recorder s office. Page 3
ARTICLE VII MEMBERSHIP The members of the corporation shall be those persons or entities entitled to membership in the Declaration. Voting rights of members are as set forth in the Declaration. ARTICLE VIII INDEMNIFICATION The corporation shall indemnify any person against expenses, including without limitation, attorneys fees. INFORMATION BROCHURE MORNINGSIDE ESTATES CONDOMINIUM For the benefit and convenience of residents of MORNINGSIDE ESTATES CONDOMINIUM, a non-profit corporation known as MORNINGSIDE ESTATES CONDOMINIUM ASSOCIATION ( Association ) has been created to serve as the governing body for the operation and management of the Buildings, the Units and the Common Elements of the condominium project. Buildings means the buildings located or planned to be located on the Property. Common Elements refers to all portions of the Property, except the Units. Units means the individual dwelling units contained in the Buildings. In its initial phase, the project will consist of thirty (30) Units, together with the related Common Elements. Each owner has the right to the use of all Common Elements, subject to reasonable rules and regulations as established by the Owners through the Association. Phase One is the first of two (2) condominium phases planned to completed. The project as planned is to contain fifty-seven (57) units. In the event Phase Two is created, each owner in Phase Two shall become a member of the Association and shall be entitled to exercise the same voting rights as the owners in Phase One. Upon the creation of Phase Two, additional Common Elements shall be created for the purpose of providing related facilities for the benefit of the Association and the owners. All purchasers of condominium units automatically become members of the Association. The individual condominium owners are Class A members and are entitled to one (1) vote for each Unit they own. The developer is the Class B member and is temporarily entitled to three (3) votes for each Unit it owns. This limited number of extra votes allows the developer to fulfill its commitment to complete the original overall concept of the development, according to plans accepted by the governing federal, state and local authorities. The developer s Class B membership terminates and is converted to Class A membership upon the first to occur of the following: 1. Upon the expiration of one hundred twenty (120) days following the first date when the total votes outstanding in the Class A membership equal or exceed the total votes outstanding in the Class B membership; or 2. Three (3) years after the conveyance of the first Unit to an owner. The Association, through its Board of Directors and Officers, shall serve as the governing body for all of the owners for the protection, improvement, maintenance, repair, administration and operation of the condominium project. The Association is responsible for maintenance of the Common Elements, including without limitation lawn care, bookkeeping and accounting functions, sidewalk maintenance and collection of monthly maintenance fees and numerous other matters, as provided in the Declaration, the Articles of Incorporation and Bylaws of the Association. Patios Page 4
and rear yards, which are enclosed by walls and/or gates, and balconies shall be restricted for the exclusive use and benefit of the Unit to which they are appurtenant, and repair and maintenance of such areas, including the gates, shall be the responsibility of the unit owners which enjoy their exclusive use and benefit. Additionally, those unit owners with awnings shall be responsible for the cost of repairs, maintenance and replacement, subject to approval of the Board of Directors of the Association or an architectural committee appointed by the Board. In order to make certain that the necessary bookkeeping is taken care of and to ensure that the grounds, exteriors of Buildings and other Common Elements are maintained in top condition, the Board of Directors is authorized to hire a professional management company. The owners retain ultimate control over the operation and management of the condominium project; through the Board of Directors, whom they elect. The Board of Directors elects officers and, in its discretion, may hire a professional management company to direct the routine, day-to-day matters. For the protection of property values, it is necessary to provide assurance that any additions and changes will conform to and be harmonious with the external design and location of existing structures. Accordingly, no addition or alteration of any kind, including modifications to landscaping, shall be made until plans and specifications of the changes or additions have been submitted to and approved in writing by the Board or by an architectural committee appointed by the Board. Any owner may make non-structural alterations, additions or improvements within his Unit without the prior written approval of the Board, but such owner shall be responsible for any damage to other Units or the Common Elements which may result from the work performed. Each owner shall pay a proportionate share of the expenses of the administration and operation of the Common Elements, such as premiums for insurance, the costs of maintenance, repair and replacement, and the establishment of reasonable reserves for emergencies or other proper purposes. The initial maximum monthly assessment is fixed at Sixty Dollars ($60.00). At the beginning of each fiscal year, the Board of Directors may increase the maximum monthly assessment. Since it is important that each owner pay his assessment when due, procedures for the enforcement and collection of assessments have been established. A lien will be created against an owner s Unit for the amount of any delinquent assessment which will include interest at the rate of ten percent (10%) per annum on such amount, together with costs and reasonable attorneys fees. The lien is for the benefit of the Association and may be foreclosed by the Association. Restoration of any building or the Common Elements may be undertaken by the Association without a vote of the owners in the event of partial destruction, condemnation or obsolescence. In the event of any substantial destruction, condemnation or obsolescence, restoration will be undertaken only with the consent of the seventy-five percent (75%) of the owners. In the event less than seventy-five percent (75%) of the owners consent to restoration, the Property shall be sold and condominium ownership shall cease. Whenever restoration is to be undertaken, the Association may collect a special assessment from each owner to cover the costs and expenses of restoration. For the protection of all the mortgagees, seventy-five percent (75%) of all the mortgagees must give their approval as provided in the Declaration before the Association is entitled to partition or subdivide any Unit or the Common Elements, terminate the condominium project, terminate professional management and assume self-management, or amend the Articles, Bylaws or the Declaration. Page 5
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DECLARATION OF HORIZONTAL PROPERTY REGIME and DECLARATION OF COVENANTS, CONDITIONS and RESTRICTIONS This Declaration is made and entered into as of this 21st day of March, 1984, SEG-Southwest Estates Group, Inc., a California Corporation, hereinafter referred to as Declarant. WHEREAS, Declarant is the record owner of that certain Parcel of real property situated in Maricopa County, Arizona more particularly described as follows: Morningside Estates Condominium, Horizontal Property Regime, a subdivision of Air Space, as recorded in Book 264 of Maps, Page 3, Records of Maricopa County, Arizona. WHEREAS, Declarant desires to submit and subject such Parcel to a horizontal property regime pursuant to Title 33, Chapter 4.1 of the Arizona Revised Statutes; and WHEREAS, Declarant desires to establish for its own benefit and for the mutual benefit of all future owners or occupants of the Property, or any part thereof, certain easements and rights in, over and upon said Property and certain mutually beneficial restrictions and obligations with respect to proper use, conduct and maintenance thereof; and WHEREAS, Declarant desires and intends that the unit owners, mortgagees, beneficiaries and trustees under trust deeds, occupants and all other persons hereinafter acquiring any interest in the Property shall at all times enjoy the benefits of, and shall hold their interests subject to the rights, easements, privileges and restrictions hereinafter set forth, all of which are declared to be in furtherance of a plan of development to promote and protect the Property and are established for the purpose of enhancing and perfecting the value, desirability and attractiveness of the Property; NOW, THEREFORE, Declarant hereby submits the Property to a horizontal property regime pursuant to Title 33, Chapter 4.1 of Arizona Revised Statutes and declares, subject to the provisions of Article XXXII herein, that all interests in the Property shall be held subject to the following easements, restrictions, covenants and conditions which shall run with the land and be binding upon the Property and all parties having any right, title or interest in the Property, or any part thereof, their heirs, successors and assigns and shall inure to the benefit of each other thereof. ARTICLE I DEFINITIONS As used herein, unless the context otherwise requires, the following terms shall have the following definitions: Section 1. Association shall mean and refer to the Morningside Estates Condominium Association, an Arizona non-profit corporation. Section 2. Board shall mean the Board of Directors of the Association. Section 3. Buildings mean the buildings located or planned to b e located on the Property which constitute or are to constitute a part of the Property. Buildings planned by Declarant are shown on the Plat attached hereto as Exhibit A and incorporated herein. Page 7
Section 4. Common Elements means all portions of the Property, except the Units. Section 5. Declarant means SEG-Southwest Estate Group, Inc., its successors and assigns in the ownership of the Property for the purpose of the development and sale thereof. Section 6. Declaration means this instrument by which the Property is submitted to a horizontal property regime and certain covenants, conditions and restrictions, as from time to time amended. Section 7. Improvement shall mean the buildings, roadways, parking areas, lighting fixtures, fences, walls, hedges, plantings, planted trees and shrubs, swimming pools and all other structures or landscaping of any type and kind. Section 8. Institutional Holder means a mortgagee which is a bank or savings and loan association, insurance company, mortgage company, or other entity chartered under federal or state laws, or any federal or state agency which owns an obligation, the repayment of which is in whole or in part secured by a Mortgage recorded against the Property or any part thereof. Section 9. Lease means any agreement for the leasing or rental of a Unit. Section 10. Majority or Majority of Owners means the owners of more than fifty percent (50%) of the Units. Section 11. Member shall mean any person, corporation, partnership, trustee or other entity who is a member of the Association. Section 12. Mortgage means any recorded, filed or otherwise perfected instrument given in good faith and for valuable consideration which is not fraudulent conveyance under Arizona law as security for the performance of an obligation, including, without limitation, a deed of trust, but shall not include any instrument creating or evidencing solely a security interest arising under the uniform Commercial Code. Mortgagee means a person secured by a Mortgage, including a beneficiary under a deed of trust and Mortgagor means the party executing a Mortgage. First Mortgage means a Mortgage which is the first and most senior of all mortgages upon the same property. Section 13. Occupant means a person or persons, including an Owner, in rightful possession of a Unit. Section 14. Owner means the record owner, whether one or more persons or entities, of the fee simple title, whether or not subject to any mortgage, to any Unit which is a part of the Property, including a purchaser under an agreement for sale within the meaning of A.R.S. 33-741, but excluding those having such interest merely as security for the performance of an obligation. In the case of the Units, the fee simple title to which is vested of record in a trustee, the trustee shall be deemed Unit owner thereof. Section 15. Parcel means the parcel of real property locate din Maricopa County and legally described above. Section 16. Persons means a natural individual, corporation, partnership, trustee or other entity capable of holding title to real property. Section 17. Plat means the plat of survey of the Property, as hereinbefore and hereinafter more fully described and identified, which is attached hereto as Exhibit A and incorporated herein by this reference. Page 8
Section 18. Property as used in this declaration shall be interchangeable with Parcel. Section 19. Record or Recording refers to the record or the act of recording in the office of the County Recorder of Maricopa County, Arizona. Section 20. Unit means each of the 57 portions of the Property contained or planned to be contained the Buildings which consists or is planned to consist of one or more rooms designed or intended for independent use as a dwelling unit, as shown on Exhibit A attached hereto, and as more fully described in Article II hereof, including the garage appurtenant thereto, a Unit is an apartment within the meaning of Arizona Revised Statutes 33-551.1, and includes an undivided interest in the common Elements as set forth in Article II hereof. Completed Unit shall mean a Unit which is ready for occupancy, as evidenced by a certificate of occupancy or equivalent document from the appropriate governmental authority. Buildings Units Common Elements Interest in the Common Elements ARTICLE II DESCRIPTION OF THE BUILDINGS, THE UNITS AND THE COMMON ELEMENTS Section 1. There are or are planned to be several Buildings in the horizontal property regime. Reference is hereby made to the Plat attached hereto as Exhibit A for a description of the cubic content space contained in or planned for the Buildings and their location or planned location on the Parcel. Section 2. There are or are planned to be a total of 57 Units in the Buildings. Reference is hereby made to the Plat attached hereto as Exhibit A for the description of the cubic content space of each Unit and its location or planned location within the Buildings, Each Unit shall include the space enclosed and bounded by the interior unfinished surface of the ceiling, floor, walls and windows or any extensions thereof together with any plumbing fixtures and lines and electrical equipment and conduits which exclusively serves such Unit; provided, however, that no portion of the roof, bearing walls or other structural components and no pipes, wires, conduits, ducts, flues, shafts or public utility, water or sewer lines situated within such Unit and forming part of any system serving one or more other Units or the Common Elements shall be deemed to be a part of a Unit. Section 3. A description of the Common Elements including in and comprising parts of the Buildings is the description referred to in Section 1 hereof less the descriptions of the Units referred to in Section 2 hereof. A description of the other Common Elements is as set forth in Section 4 of Article I. Section 4. The fractional interest which each Unit bears to the entire horizontal property regime, which interest shall constitute an undivided interest in the Common Elements appurtenant to each such Unit, shall be one thirtieth (1/30th) during Phase One and one fifty-seventh (1/57th) once Phase Two is subjected to this Declaration. ARTICLE III THE ASSOCIATION The Association has been or will be formed to constitute the Council of Co-Owners, as that term is defined in Arizona Revised Statutes 33-551.5. The Association shall serve as the governing body for all of the Owners for the protection, improvements, alteration, expansion, augmentation, disposal, divestment, re-description, maintenance, repair, replacement, administration and operation of the Property, the assessment of expenses, payment of losses, disposition of hazard insurance proceeds received by the Association, and other matters as provided in this Declaration, in the Articles of Incorporation of the Association (hereinafter referred to as the Articles ) and in the Page 9
By-laws of the Association (hereinafter referred to as the By-laws ). The Association shall not be deemed to be conducting a business of any kind, and all funds received by the Association shall be held and applied by it for the Owners in accordance with the provisions of this Declaration, the Articles and the Bylaws. Each Owner shall be a member of the Association. Such membership shall automatically terminate when an Owner ceases for any reason to be an Owner, and any new Owner shall likewise automatically succeed to such membership in the Association. Membership in the Association shall not be transferred, pledged or alienated in any way, except upon sale of the Unit to which is is appurtenant (and then only to the Person to whom such foe simple title is transferred). Any attempt to make a prohibited transfer of a membership will be void and will not be recognized by or reflected upon the books and records of the Association. In the event the Owner of any Unit should fail or refuse to transfer the membership registered in his name upon the sale of his Unit to the purchaser of such Unit, Association shall have the right to record a transfer upon the books of the Association and issue a new membership to the purchaser, and thereupon the old membership outstanding in the name of the seller shall be null and void as the same had been surrendered. Classes of Membership; Voting Rights of Classes Section 1. The Association shall have two classes of voting membership. Class A. Class A members shall be all Owners with the exception of the Declarant and, except as hereafter provided in the case of election of directors, shall be entitled to one vote for each Unit owned. When more than one person holds an interest in any Unit, all such persons shall be members. The voting or such Unit shall be exercised as such persons among themselves determine, but in no event shall more than one vote be cast with respect to any Class A Unit. If any Owner or Owners cast a vote representing a certain Unit, it will thereafter be conclusively presumed for all purposes that such Owner or Owners were acting with the authority and consent of all other Owners of the same Unit. Class B. The Class B member shall be the Declarant and shall be entitled to three (3) votes for each Unit owned. The total votes which the Declarant shall be entitled to cast may be cast in such proportion on any matter as Declarant may determine. Each Class B membership shall cease and be converted to a Class A membership, without further act or deed, upon the happening of any of the following events: (a) Upon the conveyance by Declarant of any particular Unit to an Owner, other than in connection with an assignment by Declarant of all or substantially all of its rights under this Declaration (including a pledge or assignment by Declarant to any lender as security), with respect tot he particular Unit or Units so sold or otherwise disposed of; or (b) With respect to all remaining Class B memberships, upon the first to occur of the following: (i) Upon the expiration of One Hundred Twenty (120) days following the first date when the total votes outstanding in the Class A membership equal or exceed the total votes outstanding in the Class B membership, or (ii) Three years after the conveyance of the first Unit to a Unit Owner other than Declarant. If any lender to whom declarant has assigned, or hereafter assigns, as security all or substantially all of its rights under this Declaration succeeds to the interest of Declarant by virtue of said agreement, the Class B memberships shall not be terminated thereby, and such lender shall hold the Class B memberships on the same terms as such were held by Declarant pursuant hereto. so long as any Class B memberships remains outstanding, the Class A members shall not be entitled to cast any vote with respect to the election of directors. Page 10
Qualifications of Directors Board s Determination Binding Action by Owners Additional Provisions in Articles of Incorporation and Bylaws of the Association Section 3. Each director shall be an Owner or the spouse of an Owner (or if an Owner is a corporation, partnership or trust, a director may be an officer, partner or beneficiary or such Owner). If a directors shall cease to meet such qualifications during his term, he will thereupon cease to be a director, and his place on the Board shall be deemed vacant. the requirements of this section shall not apply to directors elected as a result of any of the votes cast by the Class B member. Section 4. In the event of any dispute or disagreement between any Owners relating to the Property, or any question of interpretation or application of the provisions of this Declaration, the Articles or the Bylaws, the determination thereof by the Board shall be final and binding on each and all of such Owners. Section 5. To the extent permitted by law, all actions required to be taken by the Owners, acting as a Council of Co-Owners for the Property, shall be taken by the Association acting as such Council of Co-Owners, by and through its directors and officers, such actions to include, without limitation, adoption or ratification of the Bylaws and rules and regulations for the horizontal property regime created hereby. Section 6. The Articles and Bylaws may contain any provision not inconsistent with law or with this Declaration relating to the conduct of the affairs of the Association and the rights and powers of its directors, officers, employees, agents and members. ARTICLE IV USE OF COMMON ELEMENTS There shall be appurtenant to each Unit a non-exclusive right and easement to use the Common Element sin common with all other persons entitled to use the Common Elements as may be required for the purposes of access ingress and egress to an from, and the use, occupancy and enjoyment of the Units and the Common Elements for their intended purposes as provided herein, such right and easement shall extend to each Occupant and the agents, servants, tenants, family members and invitees of each Owner. Such right and easement shall be subject to such limitations, restrictions, rules and regulations as may from time to time be promulgated by the Board, and shall be subject to and governed by the provisions of this Declaration, the Articles and Bylaws. The Board shall have authority to lease, convey easements or grant concessions consistent with the overall character and use of the Property with respect to parts of the Common Elements to change the character, description and use thereof, subject tot he provisions of this Declaration, the Articles and the Bylaws. Any funds received by the Association leases, concessions or other resources shall be held and used for the benefit of the members of the Association pursuant to such rules, resolutions or regulations as the Board may adopt or prescribe. Notwithstanding any other provision hereof and to the contrary, Declarant shall be entitled to exclusive access to and occupancy of all or any portion of any Unit until such time as the construction thereof has been completed and the particular Unit has been conveyed to an Owner by Declarant, and Declarant shall be entitled to non-exclusive access to an occupancy of all or any portion of the Common Elements until such time as all Units have been conveyed to Owners by Declarant. ARTICLE V MANAGEMENT AGREEMENTS All powers, duties and rights of the Association or its Board, as provided by law and herein, may be delegated to a managing agent under a management agreement. Any management agreement will be terminable by the Association for cause upon thirty (30) days written notice thereof, and the term of any such agreement may not exceed one (1) year, provided, however, that any such agreement may be renewable for successive one year periods. Page 11
ARTICLE VI PATIOS, REAR YARDS, BALCONIES AND AWNINGS Patios and rear yards, which are enclosed by walls and/or gates, and balconies shall be restricted for the exclusive use and benefit of the Unit to which they are appurtenant. Repair and maintenance of such areas, including the gates, shall be the responsibility of the unit owners which enjoy their exclusive use and benefit. With respect to those units which have awnings, the owners of the units to which the awnings are attached shall be responsible for the cost of repair, maintenance and replacement; however, any alteration or replacement to an existing awning shall be made only after approval of the Board or an architectural committee appointed by the Board. ARTICLE VII COMMON ELEMENT MAINTENANCE EXPENSES Each Owner other than Declarant shall pay his proportionate share of the expenses of the administration an operation of the Common Elements and any other expenses relating to the administration and operation incurred in conformance with this Declaration, the Articles and the Bylaws, including by way of illustration, but not limitation, the cost of maintenance and repair of the Common Elements and any and all replacements and additions thereto, and reasonable reserves for contingencies, replacements or other proper purposes (hereinafter referred to as the Common Expenses ). The Association shall maintain a reasonable reserve for replacement of the Common Elements and, for a period of one (1) year from and after the conveyance of the first Unit to an Owner by Declarant, shall maintain a working capital fund equal to at least two (2) months stated Common Expenses of the Association. The proportionate share of such Common Expenses payable by each Owner other than Declarant shall be in the proportion that interest in the Common Elements appurtenant to the particular Unit as provided in Section 4 of Article II herein bears to the interest in the Common Elements appurtenance to all the Units. Payment of the Common Expenses, including any prepayment thereof required by any contract for the sale of a Unit, shall be in such amounts, at such times and in such manner as may be provided in the Articles and Bylaws or determined by the Board, provided, however, the Board shall assess all of the Completed Units and all of the Owners for each Owner s proportionate share of the Common Expenses commencing upon the first day of the first month immediately following (i) the completion of the first Unit as evidenced by the issuance of a certificate of occupancy for such Unit by the City of Phoenix, Arizona, (ii) the occupancy of the first Unit or (iii) the expiration of thirty (30) days from the conveyance of the first Unit to a Unit Owner other than Declarant, whichever occurs first. Payment of each Owner s share of the Common Expenses, together with a late charge determined by the Board not exceeding ten percent (10%) of the amount of such payment, costs, and reasonable attorneys fees, shall constitute the personal obligation of the person who was the Owner of such Unit at the time such payment became due. The personal obligation for delinquent payments shall not pass to an Owner s successor in title unless expressly assumed by him, provided, however, that the personal obligation shall survive any voluntary or involuntary transfer of a Unit with respect tot the Owner of the Unit at the time such payment became due. If any Owner shall fail or refuse to make any such payment when due, the amount thereof, together with a later charge determined by the Board not exceeding ten percent (10%) of the amount of such payment, costs and reasonable attorneys fees, shall constitute alien on such Owner s Unit and on any rents or proceeds therefrom; provided, however, that such lien shall be subordinate to the lien of a recorded First Mortgage on the applicable Unit, acquired in good faith and for value, except for the amount of the unpaid Common Expenses which accrues from and after the date on which the First Mortgagee acquires title to or comes into possession of he applicable Unit, and any lien for unpaid assessments and other charges prior to such date shall upon such date automatically terminate and be extinguishment of such lien shall not in any way affect the personal obligation of he Owner of the Unit at the time the payment giving rise to such lien became due. Any person Page 12
acquiring an interest in any Unit shall upon giving written notice to the Board be entitled to a statement from the Association setting forth in such statement, except for assessments and other charges which accrue or become due after the date thereof. The lien provided for in this paragraph may be foreclosed by the Association in any manner provided or permitted for the foreclosure of real property mortgages or deeds of trust in the State of Arizona. Notwithstanding anything contained in this Article VII to the contrary, Declarant shall pay to the Association for each Completed Unit owned by Declarant the assessments which would have been charged for each such Unit if it had been sold and made subject to the assessments contemplated herein. ARTICLE VIII MORTGAGES Each Owner shall have the right, subject to the provisions hereof, to make separate Mortgages of his Unit. No Owner shall have the right or authority to make or create or cause to be made or created any Mortgage, or other lien or security interest, on or affecting the Property or any part thereof, except to the extent of his Unit, the interest in the Common Elements appurtenant to such Unit and such Owner s interest in the Association. ARTICLE IX INSURANCE REQUIREMENTS GENERALLY The Association shall obtain and maintain in full force and effect at all times certain casualty, liability and other insurance as hereinafter provided. All such insurance shall be obtained, to the extent possible, from responsible companies duly authorized to do insurance business in the State of Arizona with a rating in Best s Insurance Guide (or any comparable publication) of at least A-AAAA (or any comparable rating). All such insurances, to the extent possible, shall name the Association as the insured, in its individual capacity and also either as attorney-in-fact or trustee for all Owners. The Board shall increase the amounts thereof as it deems necessary or appropriate. To the extent possible, such casualty insurance shall: (1) Provide for a waiver of subrogation by the insurer as to claims against the Association, its directors, officers, employees and agents and against each Owner and each Owner s employees, agents and invitees, and against each Mortgagee of all or any part of the Property or of any Unit, and any other person for whom the Association, any Owner or Mortgagee may be responsible; (2) Provide that any no other insurance clause in the insurance policy shall exclude any policies of insurance maintained by any Owner or Mortgagee of all or any part of the Property or any Unit and that the insurance policy shall not be brought into contribution with insurance maintained by the Owner or Mortgagee of all or any part of the Property or any Unit; (3) Contain a standard without contribution mortgage clause endorsement in favor of the Mortgagee of any Unit or all or any part of the Property; (4) Provide that the policy of insurance shall not be terminated, cancelled or substantially modified without at last thirty (30) days prior written notice to the Association and to each Owner and to each Owner and to each Mortgagee covered by any standard mortgage clause endorsement; and, (5) Provide that the insurer shall not have the option to restore the premises if condominium ownership of the Units and Property is to be terminated or the Units and Property are to be sold as an entirety. Page 13
Such public liability and property damage insurance may provide for coverage of any cross liability claims of Owners against the Association or other Owners and of the Association against Owners without right of subrogation. Any insurance policy may contain such deductible provisions as the Association deems consistent with good business practice. Certificates of insurance coverage or copies of insurance policies shall be issued to and at the expense of each Owner and each Mortgagee who makes or on whose behalf written request is made to the Association for any such certificate or copy. Casualty Insurance Public Liability and Property Damage Insurance Workmen s Compensation and Employer s Liability Insurance Fidelity Bonding Insurance by Owners Section 1. The Association shall obtain and maintain casualty insurance covering the Property and each Unit exclusive of the personal property contained therein, but including all wall and floor coverings, cupboards, cabinets, fixtures and built-in appliances installed in each Unit covering loss or damage by fire and such other hazards as are covered under standard extended coverage policies, for not less than ninety percent (90%) of the replacement cost of the Property, including each Unit, as determined on an annual basis by an appraisal made in accordance with the rules and regulations of the Board of Underwriters or like board or body recognized and accepted by the insurance company or companies writing such insurance, and a National Flood Insurance Association Standard Flood Insurance Policy, unless such insurance is not available or the Association determines that the Property is not located within a flood hazard area. The cost of obtaining and maintaining the insurance required by this Article shall constitute a Common Expense for which each Owner and each Unit shall be specially assessed on an annual basis. Section 2. The Association shall obtain and maintain comprehensive public liability and property damage insurance coverage liability for bodily injury, including death, and liability for property damage occurring in, upon or about the Common Elements. Each Owner and the Association shall be insured with respect to such liability arising out of the ownership, maintenance, repair or operation of the Property and the Common Areas. The limits of liability for such coverage shall not be less than $1,000,000.00 for each injury or death and $5,000,000.00 for each occurrence with respect to bodily injury and $250,000.00 for each occurrence with respect to property damage. The cost of obtaining and maintaining the insurance required by this Article shall constitute a Common Expense for which each Owner and each Unit shall be specially assessed on an annual basis. Section 3. The Association shall obtain and maintain workmen s compensation and employer s liability insurance as may be necessary to comply with applicable law. The cost of obtaining and maintaining such insurance shall be a Common Expense. Section 4. The Association shall obtain and maintain bonds covering all persons or entities which handle funds of the Association, including without limitation any professional manager employed by the Association and any of such professional manager s employees, in amounts not less than fifty percent (50%) of the estimated annual budget of the Association from time to time. The cost of obtaining and maintaining such bonds shall be a Common Expense. Section 5. Each Owner shall be free to obtain such additional or other insurance as he deems desirable, including insurance covering his furnishings and personal property, including by way of illustration, but not limitation, any additions, alterations and improvements he may have to his Unit, and covering personal liability of himself and his employees, agents and invitees and any other persons for whom such Owner may be responsible. Any insurance policy obtained by an Owner must not diminish or adversely affect or invalidate any insurance or insurance recovery under policies carried by the Association and must, to the extent possible, contain a waiver of the rights of subrogation by the insurer as to any claim against the Association, its officers, directors, agents and employees and against other Owners and their employees, agents and invitees and against any Mortgage of all or any part of the Property or any Unit or other person for whom the Association or any such Owner or Mortgagee may be responsible. Page 14
Receipt and Application of Insurance Proceeds Other Insurance by the Association Definitions Section 6. Except in a case where a Mortgagee or any other person shall have the legal right to receive insurance proceeds directly, all insurance proceeds and recoveries under policies maintained by the Association shall be paid to and received by independent financial institution or title company selected by the Association authorized to act as escrow agent for the benefit of the Association, the Declarant, all Owners and all Mortgagees of any Unit or all or may part of the Property as their respective interest may appear. The Association through its Board shall have the right, acting alone, to adjust or settle any claim by it under any insurance maintained by it. Such funds shall be disbursed by said escrow agent in accordance with the following priorities, subject to such evidence of application as such escrow agent shall require, and shall be applied by the Association first, to the Owners or persons whom the Association determines are legally or equitably entitled thereto and, second, the balance, if any, to the Owners in proportion to their respective interests in the Common Elements. Notwithstanding any provision contained herein to the contrary, the rights of and lien priority of any First Mortgagee shall not be affected by any loss, damage or destruction and shall continue in any insurance proceeds payable with respect to the Unit subject to such Mortgage in accordance with the provisions of such Mortgage. Section 7. The Association shall also have the power and authority to obtain and maintain other and additional insurance coverage, including but not limited to casualty insurance covering personal property of the Association, fidelity bonds or insurance covering employees and agents of the Association and insurance indemnifying officers, directors, employees and agents of the Association. Notwithstanding any other provisions of this Declaration, the Association shall continuously maintain in effect such casualty, flood and liability insurance and fidelity bonds meeting the insurance and fidelity bond requirements for condominium projects established by Federal National Mortgage Association and Government National Mortgage Association, so long as either is a Mortgagee or Owner of a Unit, except tot he extent that such coverage is not available or has been waived in writing by Federal National Mortgage association or Government National Mortgage Association. The cost of obtaining and maintaining such additional insurance coverage shall be a Common Expense. ARTICLE X DESTRUCTION, CONDEMNATION, OBSOLESCENCE AND RESTORATION OR SALE OF PROPERTY. Section 1. As used herein, the following terms shall have the following definitions: (a) Substantial destruction shall exist whenever the Board determines that, as a result of any casualty, damage to or destruction of the Property or any part thereof, the excess of estimated costs of restoration (as herein defined) over available funds (as herein defined) is fifty percent (50%) or more of the estimated restored value of the Property (as herein defined). Partial destruction shall mean any other casualty, damage to or destruction of the Property or any part thereof. (b) Substantial condemnation shall exist whenever the Board determines that a complete taking of the Property has occurred or that a taking of part of the Property by condemnation or eminent domain has occurred and that the excess of the estimated costs of restoration over available funds is fifty percent (50%) or more of the estimated restored value of the Property. Partial condemnation shall mean any other such taking by eminent domain or by grant or conveyance in lieu of eminent domain. (c) Substantial obsolescence shall exist whenever the owners of seventy-five percent (75%) of the Units determine by vote that the Property or any part thereof has reached an undesirable state of obsolescence or disrepair. Partial obsolescence shall mean any state of obsolescence or disrepair which does not constitute substantial obsolescence. (d) Restoration, in the case of any casualty, damage or destruction, shall mean restoration of the Property to a condition the same or substantially the same as the condition in which the Page 15
Restoration of the Property Sale of the Property Authority of Association to Restore or Sell Special Assessments for Restoration Property existed prior to the casualty, damage or destruction; in the case of condemnation, shall mean restoration of the remaining portion of the Property to an attractive, sound and desirable condition; and in the case obsolescence, shall mean the restoration of the Property to an attractive, sound and desirable condition. (e) Restored value of the property shall mean the value of the Property after restoration as determined by the Board (f) Available funds shall mean any proceeds of insurance or condemnation awards or payments in lieu of condemnation received by the Association and any uncommitted reserves of the Association other than amounts derived through special assessments. Available funds shall not include that portion of insurance proceeds or condemnation awards or payment sin lieu of condemnation legally required to be paid to any part of the Property or of any Unit, or that portion of any condemnation award or payment in lieu of condemnation paid to the Owner of a Unit for the condemnation or taking of that Owner s individual Units. Section 2. Restoration of the Property shall be undertaken by the Association without a vote of the owners in the even t of partial destruction, partial condemnation or partial obsolescence but shall be undertaken in the event of substantial destruction, substantial condemnation or substantial obsolescence only with the consent of the owners of seventy-five percent (75%) of the Units and the unanimous consent of all institutional holders. Section 3. In the event of substantial destruction, substantial condemnation or substantial obsolescence, the Property shall be sold unless consent to restoration has been obtained from seventy-five percent (75%) of the Unit Owners and all institutional holders. In this event of such sale, ownership under this Declaration shall terminate and the proceeds of sale and many insurance proceeds, condemnation awards or payment in lie of condemnation shall be distributed by the Association to each Owner. In such event, the form of ownership shall be converted to a tenancy in common with each former Owner owning an equal and undivided interest in the Property. Such payments shall be made to Owners or, as to Units which are subject to a mortgage of record at the time of such payment, jointly to such Owner and such mortgagee as their interests may appear. Section 4. The Association is hereby irrevocably appointed as attorney-in-fact, and as such attorney-in-fact for each Owner, shall have full power and authority to restore or to sell the Property and each Unit and the improvements thereon whenever restoration or sale, as the case may be, is undertaken as hereinabove provided. Such authority shall include the right and power to enter into any contracts, deeds or other instruments which may be necessary or appropriate for restoration or sale, as the case may be. Any other provision of this Article to the contrary notwithstanding, the Property shall not be removed from the Horizontal Property Regime, to which the Property is herein submitted, in any manner which is contrary to the provisions of Chapter 4.1 of Title 33 of Arizona Revised Statutes. Section 5. Whenever restoration is to be undertaken, the Association may levy and collect assessments from each Owner equally, payments to be made over such period as the Association may determine, to defray the costs and expenses of restoration to the extent not covered by available funds. Such special assessments together with interest at the maximum rate permitted by law from the date such special assessment becomes due, costs and reasonable attorneys fees, shall be secured by a lien against the Unit of each such owner in the same manner as the lien for assessments provided for hereinabove. Notwithstanding any other provisions in this Declaration, in the case of substantial obsolescence, any such special assessment shall not be a personal obligation of any such Owner who did not vote in favor of or consent to restoration, but, if not paid, may be recovered only by foreclosure of the lien against the Unit of such Owner. Page 16