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67 <br />6557.03/12309 <br /> <br />Section 10.3 Required Actions Prior to Certain Legal Actions or Proceedings. <br /> <br />(a) Notwithstanding anything in this Declaration to the contrary, except as otherwise <br />provided in this Section 10.3, the Board shall not cause nor permit the Association to institute any <br />significant legal action or proceeding, including any mediation, arbitration or judicial reference <br />proceeding, against Declarant or any person without providing the Owners with at least thirty (30) days’ <br />prior written notice of the Association’s intention to institute such legal action or proceeding. The notice <br />shall describe the purpose of the action or proceeding, the parties to the action or proceeding, the <br />anticipated cost to the Association (including attorney fees) in prosecuting the action or proceeding, the <br />source of funds to prosecute the action or proceeding (reserves or special or annual assessments), and <br />suggested information that should be disclosed to third parties, such as prospective purchasers and <br />lenders, while the action or proceeding is being prosecuted. For purposes of this Section 10.3, <br />“significant legal proceeding” shall mean any action or legal proceeding in which it reasonably could be <br />anticipated that any of the following events could occur: <br /> <br />(1) The levy of a special assessment to fund all or any portion of the action <br />or proceeding; <br /> <br />(2) The expenditure of funds from the Association’s reserves in connection <br />with the action or proceeding in an amount in excess of five (5%) percent of the then current reserves; <br /> <br />(3) The amount of the claim is in excess of twenty-five thousand dollars <br />($25,000); or <br />(4) A material adverse effect on the ability to sell and/or refinance the <br />Condominiums within the Development during the period the action or proceeding is being prosecuted. <br /> <br />Notwithstanding subsection (a) above, if the Board in good faith determines that there is <br />insufficient time to provide prior notice to the Owners as required in this Section 10.3 before the <br />expiration of any applicable statute of limitations or before the loss of any other significant right of the <br />Association, the Board may take the necessary steps to commence the proceeding to preserve the rights of <br />the Association, provided that as soon as is reasonably practical thereafter, and not later than 30 days <br />following the commencement of the proceeding, the Board shall provide the Members with notice as <br />required in this provision. <br /> <br />(b) Pursuant to Civil Code Section 6150, not later than thirty (30) days prior to the <br />filing of any legal proceeding by the Association against the Declarant for alleged damage to the <br />Common Area, alleged damage to the Units that the Association is obligated to maintain or repair, or <br />alleged damages to the Units that arise out of, or is integrally related to, damage to the Common Area or <br />Units that the Association is obligated to maintain or repair, the Board shall provide written notice to each <br />Member who appears on the membership records when the notice is provided. This notice shall specify <br />the following: <br /> <br />(1) That a meeting will take place to discuss problems that may lead to the <br />filing of a civil action. <br /> <br />(2) The options, including civil actions, that are available to address the <br />problems. <br /> <br />(3) The time and place of the meeting. <br /> <br />7.1.K. - Page 71