To Board of Directors of Santa Teresa Swim & Racquet Club "May 27, 1999"

From: JOSEPHINE A. LIVINGSTONE (bylaw & CC&R�s Committee Member)

SUBMITTED : FOR BOARD ACTION for next regular Board Meeting.

ACTION: .... Recommendations for Bylaws & CC&R's

Also I am requesting that my letter of information be entered into the minutes of the next Board meeting along with the Recommendations as a matter of record. Thank you.

LETTER OF INFORMATION: as follows.......

I attended a sub-committee meeting on May 11, 1999 to study the issue of having a Reserve. I was the only member to volunteer and attend along with two Board members. At that time it was brought to my attention that the Board because of the advice of a consulting attorney named Jeffrey A. Barnett, was considering re-writing our By-laws and CC&R�s to comply with the Davis-Stirling Common Interest Development Act of 1986.

The consulting attorney suggested in his recomendations that the proposed changes of the CC&R�s and By-laws be voted on as ONE lSSUE--putting our Membership in compliance with the Davis-Stirling Act.

He also would draft the Ballot so the Board could distribute it to the members along with a special letter from his office, directed to the Members of our club--recommending their approval of the documents. I find this proceedure to be highly irregular for us and very intimidating for our Members.

He recommended the assessment provision in Article 7 of our CC&-R�s to be replaced with the current statutory restrictions on assessment increases WITH and WITHOUT membership approval!!!

Our present assessment provision requires our Membership to vote on all assessments; as it should be ... And is govern by our By-laws.

He wanted to put lease controls on our houses. This is out of order!!! There are more recommendations that would put us under the Davis-Stirling Act and give the Boards more control of the Membership.

He also indicated if the Board was unable to obtain the necessary membership votes on these changes--he stated the Davis-Stirling Act & Corporation Code contained procedures to petition the Superior Court for approval of the Documents.

And, should this procedure be required, a separate fee proposal and engagement letter would be sent to our Board for payment.

This is a waste of our membership�s, monies and it should NOT be done. This club has been operating under our own CC&R�s and By-Laws for 33 years with no problem. It does not make sense to incure $4,000 and more of unnecessary expenses to have them rewritten by an attorney.

I proceeded to call the Attorney and I asked him if we are under the Davis-Stirliiig Act--his reply was. "I don�t know." I then told. him to read #11 of our CC&R�s and asked him how he thought he could re-write and change our CC&R�s with a 35 year clause in it; He did not have an answer for me.

With this in mind, I then consulted with members of the Tax Assessor�s office, the County Recorder's office and State Assemblyman Cuneen's office.

The Tax Assessor's office advised me that we did NOT come under the Davis-Stirling, Act, nor should we even consider letting anyone put us under those rules because it is NOT beneficial to the Membership and it severely limits Membership control.

It is used by Condominium projects and planned developments such as "the Villages" and community apartment projects. He also said a lot of money dissappears thru legal fees, litigation and you lose a lot of control of your monies. I was advised to warn the membership and the Board of it.

I also spoke with Janice at the County Recorder's office, and explained we belong to the Rancho Santa Teresa Swim and Racquet Club and have an attachment to our Deeds as part ownership of the club. 1 read to her #11 of our CC&R's and asked her to explain what it meant. She said you have a 35 year clause on your CC&R�s and it does exactly what it states.

She also told me any attorney or persons can re-write any CC&R�s, but in your case there is the 35 year clause and, if he writes in Restrictions that are invalid or otherwise it will be pre-empt by State and/or Federal laws. For example, the Federal laws allow the use of antennas.

Then, Stacy Morgan and Bob Hines in Assemblyman Cuneens' office did the research for me by checking out the Calif. Civil Code: Sections 1350 thru l376, which cites the Davis,-Stirling Common Interest Act. As a favor for me, they called Sacramento and talked to Dan Garrett who is the legislative Iiaison to the Dept. of Real Estate.(916)227-0772 According to Dan Garrett he could find nothing in the Calif. Civil Codes Section 1350 thru 1376 to indicate that we had to comply to the Davis-Stirling Act. I was advised to ask my Board if they had something else that they are reading, copy it, and send it to him and he would evaluate it for me.

I also asked Cuneen's office what recourse if any, does our Membership have should our Board decide to proceed with the changes using the Attorney to re-write our CC&R�s and. By-Laws and Ballots to put us in compliance with the Davis-Stirling Act.

I was told to ask ourselves this, Does it take away any of the rights you have now? And is it in the Best Interest of the Membership? If not, an Injunction can be filed to stop it. Thank you.

Because of the 35 year termination clause in our CC&R�s Article #11 which has only 2 years and 4 months left, IT IS MY RECOMMENDATION TO OUR BOARD TO DO THE FOLLOWING:

1. LEAVE THE BYLAWS AS WRITTEN. THEY WORK for now and they were voted on by the Membership.
2. DO NOTHING TO OUR CC&R�s. They are part of our deeds and should remain as filed when our houses were purchased.
3. SET UP A COMMITTEE TO STUDY THE IMPLICATIONS OF #11 OF OUR CC&R's REGARDING THE TERMINATION OF RESTRICTIONS for the year Oct. 200l.

Once we understand what exactly is involved and what our options under our CC&R�s are, we can start the process of informing the Membership so they can participate and so they can make an educated decision and Vote on the future of the Club.

4. SET A TIME LIMIT ON THESE STUDIES. HAVE MANY OPEN HEARINGS (meetings)
5. THEN GO FOR THE VOTE.
6. WAIT UNTIL WE KNOW WHAT DIRECTION THE MEMBERSHIP HAS CIIOSEN, THEN SPEND THE NECESSARY MONEY ON THE LEGAL ADVICE IF NECESSARY.
7. IN THE MEANTIME MAKE SURE THE BOARD KEEPS ALL EXTRA MONIES FROM DUES AND OTHER INCOME IN A SAFE RESERVE ACCOUNT AT A BANK WITH F.D.I.C. INSURED.

THANK YOU,

respectfully submitted: JOSEPHINE A. LIVINGSTONE
(committee member) (408)225-4727.