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7.1.L. - Page 80 <br /> considers appropriate and subject to such Member approval as may be required by Section 6.6, the Board <br /> will establish an annual regular assessment for the forthcoming fiscal year. Each annual regular assessment <br /> may include a portion for reserves as described in Section 6.3. <br /> If the Board for any reason fails to take the appropriate steps to establish the annual regular <br /> assessment for the next fiscal year,the annual regular assessment for the preceding fiscal year shall continue <br /> in effect subject to the Board's right at any time during the next fiscal year to adjust the assessment pursuant <br /> to the procedures described herein. <br /> 6.3 Reserves, Reserve Accounts and Reserves Study. Each annual regular assessment shall <br /> include a portion for reserves in such amount as the Board in its discretion considers appropriate to meet the <br /> cost of the future repair, replacement or additions to the Major Components as described in Section 5.10.1 <br /> that the Association is obligated to maintain and repair. For all purposes in this Declaration and in the <br /> Bylaws, reserve accounts shall mean: (i)the funds that the Board has identified for the foregoing purposes <br /> ("Regular Reserve Funds") and (ii) the funds received and not yet expended or disposed from either a <br /> compensatory damage award or settlement to the Association from any Person for injuries to property, real or <br /> personal arising from any construction or design defects (the"Construction Reserve Funds"). Construction <br /> Reserve Funds shall be separately itemized from funds designated as Regular Reserve Funds. <br /> Reserve funds shall be deposited in a separate account; and the signatures of at least two persons, <br /> who shall either be members of the Board or one officer who is not a member of the Board and a member of <br /> the Board, shall be required to withdraw monies from the reserve account. Reserve funds may not be <br /> expended for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation <br /> involving the repair, restoration, replacement, or maintenance of, Major Components that the Association is <br /> obligated to maintain. <br /> Notwithstanding the foregoing, the Board may authorize the temporary transfer of money from a <br /> reserve fund to the Association's general operating fund to meet short-term cash-flow requirements or other <br /> expenses in accordance with the requirements of Civil Code section 5515. <br /> If the Board elects to use reserve funds or to temporarily transfer money from the reserve fund to pay <br /> for litigation,the Association shall provide general notice pursuant to Civil Code section 4045 of the decision <br /> and the availability of an accounting of these expenses. The Board shall distribute a written accounting of this <br /> expense to the Members on at least a quarterly basis,with the first accounting to be delivered no later than <br /> the 30th day following the Board's decision to use reserve funds for litigation, either directly or through a <br /> transfer to operating funds. In any proposed litigation in which the amount in controversy is expected to <br /> exceed$25,000,the first accounting shall include a description of expenses paid to date, a description of the <br /> principal terms and conditions of any contract with any Person providing services in connection with the <br /> litigation, including attorneys and expert witnesses, a good faith estimate of the total legal fees, expert fees <br /> and other litigation costs that may be incurred, and a sample disclosure that Members should provide <br /> prospective purchasers, lenders and other parties that have obtained or may obtain an interest in the Owner's <br /> Condominium regarding the litigation. In each subsequent accounting, the information required in the first <br /> accounting shall be appropriately updated. <br /> At least once every three years,the Board shall cause to be conducted a reasonably competent and <br /> diligent visual inspection of the accessible areas of the Major Components that the Association is obligated to <br /> repair, replace, restore or maintain as a part of a study of the reserve account requirements of the <br /> Development if the current replacement value of the Major Components is equal to or greater than one-half of <br /> the gross budget of the Association, excluding the Association's reserve account for that period. The Board <br /> shall review this study annually and shall consider and implement necessary adjustments to the <br /> Board's analysis of the reserve account requirements as a result of that review. <br /> The study, at a minimum, shall include: <br /> CLSS\51643\927586.5 26 June 16,2014 <br />