1. VIALFOTHERINGHAMur CHRISTOPHER M. 'TINGEY. ALS) 1.800.684.4111 x211 Fax 503.598.7758 coita@veiawcon Ado t prt in Washington Oregon Taho Unb April 7, 2016 pue722.00 Homeowners Creekside Homeowners Association Inc. Re: Legal Opinion Concerning CGC Option 1 Dear Homeowner: This office represents the Creekside Homeowners Association Inc. (“Association”). In order to facilitate discussion and to clarify certain issues before next week’s meeting, the Association’s Board of Directors (“Board”) has asked me to prepare this letter explaining certain legal issues surrounding the proposed vote(s) scheduled to occur at the May 3, 2016 Owners’ Special Meeting. Please direct any questions regarding this letter or the meetings to the Association’s community manager, Nancy LaVoie, via e-mail at naneyl@communitymgt.com. Background In February 2016, the owners of the Creekside Golf Club (“CGC”) sent a letter to all homeowners within the Association informing the homeowners that because of CGC’s financial situation, CGC might have to close its doors. In that same letter, the owners of CGC presented the homeowners with three “options,” and asked the homeowners to petition the Board to call a special meeting of the homeownets to vote on these options. The three options presented were: (1) Have the homeowners vote to increase Association assessments by $60.00/month per Lot, which the Association would then tase to pay for a social membership for each homeowner in CGC; (2) have the Association purchase the golf course from its current owners; ot (3) do nothing and watch as CGC was closed and possibly sold toa land developer. To be clear, the Board had no part in the preparation or concept of CGC’s letter and proposed options. In early March 2016, the Board received a petition from more than thirty percent (30%) of the homeowners requesting a special meeting of the homeowners to vote on the first option presented by the owners of CGC (“Option 1”). On March 31, 2016, the Board mailed notice of the 2016 Owners’ Special Meeting (“Special Meeting”) to be held on May 3, 2016, beginning at 7:00 p.m. at Sprague High School, Simultaneously, the Board mailed notice of a special Board meeting scheduled for April 12, 2016, beginning at 7:00 p.m., also at Sprague High School. The sole purpose of the Board meeting is to provide a forum for answering owners’ questions surrounding the vote to be held at the Meeting, ‘Northwest HOA Law Center, 17355 SW Boones Fersy Road, Suite A, Lake Oswego, OR 97035 503.684.4111 Intermountain West HOA Law Center, 602 Fast 300 South, Salt Lake City, UT’ 84102, 801.355.9594 ‘Northwest HOA Law Centet, Boise 12828 LaSalle Street, Suite 101 Boise, ID 83713 208.629.4567 Southwest HOA Law Center, 2333 W University Drive, #C103 Tempe, AZ, 85281 480.448.1331 Website: wos.vElaw.com,April 7, 2016 Letter to Owners of Creekside Homeowners Association Page 2 ‘The Board understands that the discussion at the Board meeting will likely include questions related to Option 1, as well as the continued value of the golf course within the confines of the Creekside Community (“Community”). Homeowners might even tequest to vote on the Option 1 issue that evening. However, the April 12 meeting is a Board mecting and not an Owners’ meeting, no vote can or will be called that evening on the CGC’s Option 1 for an increase in the maximum annual assessment. Finally, there have been many questions about whether the Special Meeting wil still be held on May 3, 2016, in light of CGC’s announcement that it will close its doots on April 30, 2016. CGC’s announcement has no beating on the Special Meeting. For the reasons set forth below, the Special Meeting will proceed as noticed, beginning at 7:00 p.m. on May 3, 2016, at Sprague High School sussion Prior to holding the Special Meeting, the Board has had to determine the parameters of the Special ‘Mecting. In doing so, three fundamental questions presented themselves (1) Arc homeowners voting on Option 1 as presented by CGC’s owners or are homeowners simply voting on an inctease in the Association’s maximum annual assessments? (2) Does the Board have the authority to spend assessment funds for a social membership in the CGC for all homeowners? (3) Ifthe Board lacks the authority to spend assessments on a social membership in the CGC, what, if anything, can be done to give the Board the authority to spend, allocate or use such assessments? ‘The Declaration of Covenants, Conditions and Restrictions of Golf Course Estates at Creekside Declaration”) and Bylaws of Golf Course Estates at Creekside Homeowners Association, Inc. (“Bylaws”) provide the answers to all three questions. ‘The Declaration provides that the amount of the annual assessment the Association may levy against any Lot within the Association is capped in any calendar yeat, (Decl, Art. XI, Sect. 4.A). Te further states that the Board “may each year increase the maximum annual assessments . .. by not mote than five percent above the maximum assessment for the previous year. . ..”" This five percent (5%) increase may be done without a vote of the homeowners. (Decl., Att. XT, Sect. 4.B). Lastly, the Declaration also states that “the maximum annual assessment may be increased above five percent by avote of 2/3 of... of members voting in petson or by proxy, at an annual meeting or special meeting. duly called for this purpose.” (Decl, Art. XI, Sect. 4.0). While the Declaration requires a homeowner vote to exceed the maximum annual assessment above five percent (5%) above the maximum assessment for the previous year, neither the Declaration, not the Bylaws endow homeowners with authority to direct how assessments may be used, allocated oF otherwise spent. Rather, both the Declaration and Bylaws give that authority specifically to the Board.April 7, 2016 Letter to Ownets of Creekside Homeowners Association Page 3 “Article V of the Bylaws outline the powers and duties of the Board. The powers assigned to the Board include determining and setting the annual budget for the Association; fixing assessments for each Lot and providing homeowners notice of the amount of the assessment; collecting assessments; suspending voting rights for homeowners who are delinquent in paying their assessments; directing the financial affairs for the Association; dealing with and paying for maintenance of Association property, including common property; establishing late charges for non-payment of assessments; and “exercising all other powers necessary and proper for the administration and operation of the [Alssociation.” ‘The Declaration limits the purposes for which the Board may levy assessments. "Those purposes ate to “promote the health, safety and welfare of the owners and occupants, and to enhance the livability of Golf Course Estates at Creekside and the value of lots and living units therein, and to pay the ‘common expenses of the [Alssociation.” (Decl, Att. XI, Sect. 2). ‘The Declaration specifies what items are considered as “common expenses” of the Association. Id, ‘Common expenses include costs for maintaining common property, insurance, costs for funding reserves, and administrative expenses. Id. ‘The Declaration also provides that a common expense includes “aJny other items agreed upon as common expenses by owners.” Id. However, unlike, for ‘example, the two-thirds voting threshold for exceeding the maximum anmual assessment, the Declaration does not specify any voting thteshold by which homeowners may agree that an item is to be included as a common expense. Without such a specific voting requirement, by defnult then, a change in definition of what is a common expense requires a seventy-five percent (75%) vote of homeowners through an amendment to the Declaration. (Decl, Art. XVI, Sect. 1) Based on the provisions of the Declaration and Bylaws, it is cleat that the homeownets will not be voting at the Special Meeting on “Option 1” as presented by CGC. Instead, homeowners will only be voting on whether to increase the maximum annual assessments of the Association greater than five percent (5%) above the maximum assessment for 2015. Likewise, the Declaration and Bylaws make it clear that if the vote to increase assessments $60.00/month pet Lot passes, as proposed under Option 1, ptesented by CGC, then only the Board will determine how the assessment inctease is used. ‘The Board does not have the authority to use the ‘money to purchase social memberships for each homeowner because that use of assessment funds does not satisfy the stated purposes for assessment funds as outlined in the Declaration. In my legal opinion, a social membership in CGC does not promote the health, safety and welfate of the owners and occupants of the Community. ‘This level of membership does nothing for the safety or welfare of the homeowners of other occupants of the Community. Additionally, the exercise facilities and services being offered under the social membership are too limited to handle use by all homeowners and occupants of the Community to promote the health of the Community. A social membership providing limited use in CGC also does not enhance the livability of the Community ot the value of Lots within the Community. Finally, social membership in CGC also does not cuttently qualify as a “common expense” of the Association, In order to make a change to the Declaration authorizing the Board to use, allocate, ot spend assessments for the purpose requested by CGC would require an amendment to the Declaration, AnApril 7, 2016 Letter to Owners of Creekside Homeowners Association Page 4 amendment would have to be approved by a vote of seventy-five percent (75%) of all homeowners within the Association, Conclusion In summaty, the Board will be conducting an informational meeting at 7:00 p.m. on April 12, 2016, at Sprague High School. ‘The only purpose of the April 12 meeting is to facilitate discussion within the Community regarding the golf course issue. ‘On May 3, 2016, at 7:00 p.m., a special meeting of the homeowners will occur. Votes will be taken at that time on whether to increase the maximum annual assessment allowed. Homeowners will not have any opportunity to determine how that money is spent; that is a function solely reserved to the Board. If, and only if, the $60,00/month per Lot assessment increase is approved at the May 3 Special Meeting, the Board will send out a proposed amendment to the Declaration to the homeowners for a vote. ‘The proposed amendment to the Declaration would authorize the Boand to spend assessment money for social membership ot other similarly negotiated purposes. However, until such a proposed Declaration amendment is adopted, the Board will not be levying an assessment or spending assessment money as requested by CGC for the Option 1 purpose because the Board does not have the legal authority under the Declaration or Bylaws to do so. ‘The Board looks forward to conversation and dialogue with the Community on April 12, and with resolving angst in the Community over assessments and the relationship with CGC at that time. Very truly yours, VIAL FOTHERINGHAM LLP CMT aja