issue summary 5-9-11

8/6/2019 Issue Summary 5-9-11

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THE COLONY AT HOLBROOK HOMEOWNERS ASSOCIATION, INC.

Covenants Review Appeal for Amendment

Don Urquhart

5/9/2011

On November 11, 2010, the Board of Directors voted unanimously to approve the replacement of all of the roofs of the

144 Homes in Section 1/1A, to award either a contract of $915,000 to A-1 Roofing of Mt. Sinai, New York or a contract of

$887,000 to Vazac Contracting Corporation of St. James, New York, and to assess each of the 144 Homeowners in Section

1 a total of $6,250 to fund the project.

Citing previous disagreement with the basis of allocation for a siding replacement project in Section 1/1A, several

Homeowners objected to the basis of allocation of the Assessment, arguing that significant variances in roof surface areafor the several models augured for a more equitable per home pro rata share that is a function of roof surface area.

Homeowners Edward J. Waldman and Eileen M. Ryan appealed to the Board of Directors to initiate appropriate action to

so revise the basis of allocation. The Board declined. Edward Waldman and Eileen Ryan hosted a Homeowner meeting on

January 26, 2011 to discuss the matter. Approximately 75 Homeowners attended the meeting. The Board of Directors

firmly maintained their position that they had consulted Association counsel and acted appropriately. Ed Waldman met

with the Board of Directors and requested that they submit the matter to a vote of the membership and that they hold

the execution of the draft contract in abeyance pending the outcome of a member vote. The Board did not submit the

matter to a vote of the membership and executed an agreement with Vazac Contracting Corporation on March 16, 2011.

On March 21, 2011, Ed Waldman, joined by a number of other Homeowners, filed a Summons and Complaint (Index No.

11-08451) in the Supreme Court of the State of New York in Suffolk County. On March 22, 2011, the Honorable William J.

Kent issued an Order to Show Cause. On March 29, 2011, the Board of Directors filed a Verified Answer including a

counterclaim seeking more than $1 million in damages from the plaintiffs.

The principal questions to be answered in this matter are whether the provisions of covenants invest the Board of

Directors with the authority to impose an assessment of nearly $1 million on Section 1/1A homeowners and approve the

roof replacement project without member approval and whether the covenants have been appropriately amended as

regards the separate treatment of Homes in Sections 1/1A, 2 and 3.

Review of the covenants reveals that the Board of Directors exceeded its authority when it executed the roof replacement

project and bound more than 45% of the Associations members to a $900,000 commitment without funding approval by

a majority of the membership and that the covenants are in need of perfection to reconcile fundamental inconsistencies

and contradictions. Notwithstanding the fact that the Appellate Court has lifted the temporary injunction, the Board of

Directors has elected not to proceed with the roof replacement project until the civil action is settled. The plaintiffs

remain confident that the Board exceeded its authority, yet resolved that resolution between the parties would be less

costly, more timely, and more comprehensive and, therefore, in the best interest of the Association.


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Page

Relevant Covenants

Offering Plan

Section Paragraph Summary

IntroductionUpon recording of Declaration, owners responsible for pro rata share of

expenses of operation & maintenance of common areas, roofs, siding, . Introduction Maintenance & repair of common elements includes roofs & siding

The Association A. Declaration Maintenance & repair of common elements includes roofs & siding

The Association D. Expenses of Assoc. Purchasers contribute 2 months dues to working capital fund

The AssociationE. Membership &

Voting RightsOne class of Membership interest.

By-Laws

Article SectionSub-

secSummary

II. Definitions(d) The

PropertiesAll those areas in and subject to the Declaration

III. PurposeAssoc. formed to own & operate common propertie

and provide exterior maintenance of Homes

V. Applicability All present and future members subject to By-Laws

VI. Membership and Voting Rights 1. Membership There shall be one class of Membership interest

VII. Board of Directors 5. Powers

1,2,

7

BOD can determine assessments needed for

maintenance & operation of the Assoc.

4 BOD cannot borrow money without member approval

XI. Assessments and Finances

2.Purpose ofAssessments

. . . in particular for the improvement and maintenance of

properties, and facilities related to the use and enjoyment of th

Common Properties and of the Homes

3. Basis of

Assessments

(a) Annual Operating Budget must be approved

(b) Annual Capital Budget must be approved

(d) Pro-rata share 1/316 (# of Homes in all sections)

(e) Emergency assessments must be approved

(f)

1, 2

Working Capital Fund deposits transferred to Capita

Reserve Fund for FUTURE capital improvements.

8. Operating

Account

Cash deposit account for all operational portions of

all monthly and special assessments for all members


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Page

Declaration of Covenants, Restrictions, Easements, Charges and Liens

Article SectionSub-

secSummary

II. Property Subject to ThisDeclaration

2. Additions tothe Properties

Developer authorized to bring additional homes into

scheme by filing supplementary Declaration thatreflects different character of new Homes and is not

inconsistent with scheme.

IV. Property Rights of the

Properties

2. Title to

Common

Properties

The maintenance & repair of the Common Propertie

shall include exterior Home and building

maintenance to all Homes and walkways which will

consist of staining or painting the exterior of the

Homes, buildings and roof repair and replacement t

the Homes and buildings.

V. Development of The Colony at

Holbrook

4.

Encroachments on Lots or

Common

Area

Improperly identified as "Section IV of theDeclaration" for amendment in Paragraph C of the

3rd supplementary Declaration.

VI. Covenant for Maintenance

Assessments

2. Purpose of

Assessments

For improvement, maintenance and repair of

properties, services, facilities and Homes

3. Assessments

At least annually the BOD shall determine the total

amount required, including the operational items

(insurance, repairs, reserves, maintenance, approve

capital improvements and other operational

expenses) and submit budget to members.Pro rata member share = 1/# of Homes subject to

Declaration

IX. Exterior Maintenance1. Exterior

Maintenance

Assoc. to maintain roofs and exterior of each Home

subject to assessment under Declaration.


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Discussion

In its administration of the roof replacement project, the Board of Directors assumed and arrogated

funding/spending authority/discretion that the language of the Associations governing documents

neither provides nor intends.

Funding authorization is codified in the following provisions:

By-Laws Article VII. Board of Directors. Section 5. Powers

By-Laws Article XI. Assessments and Finances. Section 2, Section 3 and Section 8

Declaration Article VI. Covenant for Maintenance Assessments. Section 2 and Section 3

Collectively, these provisions obligate the Board of Directors to at least annually determine the TOTAL

amount of funding needed for operational requirements including repairs, reserves, maintenance,

other operating expenses, and capital improvements approved by the Board, to prepare annual

Operating and Capital budgets within 45 days of the end of the calendar year and to submit both budgets

to the Members for approval including reserves - within 15 to 30 days of their completion. The Board is

also obligated to maintain an Operating Account for the deposit of the operational portion of monthly

and special assessments. These provisions clearly and unambiguously limit the funding authority and

discretion of the Board of Directors and require Member approval beyond specifically enumerated

parameters:

The Operating Budget must include a line item for future Capital improvements. Board

discretion is accorded / Member approval is waived for contingencies up to 5% of the aggregate

budget amount and a marginal increase over the prior year of up to 2% plus the CPI for the

month prior to the completion of the Budget.

The Capital Budget consists of all items for current Capital improvements (Capital improvements

to be commenced during the budget/calendar year). Board discretion is accorded / Memberapproval is waived for projects that cost less than $10,000 and when the aggregate cost of

projects is less than $30,000.

The Board can impose an emergency assessment for expenses not anticipated in the Operating

or Capital budgets; the members must approve the emergency assessment.

The Board of Directors cannot borrow money without member approval.

The Board of Directors exceeded its authority when it anticipated the roof replacement project for no

fewer than two years; failed to include the required funding in the 2010 and 2011 Operating / Capital

Budgets; assessed Section 1 / 1A Homeowners $900,000 (70% of the 2011 Operating Budget; 3,000% of

the 2011 Capital Budget; 68% of the combined 2011 Budgets) without Membership approval; and thenexecuted an agreement with Vazac Construction Co. binding Section 1 / 1A Homeowners to pay Vazac

not less than $877,000.


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In a letter dated January 26, 2011, and executed by each Director, the Board proffered the argument that

The cost for any townhouse maintenance or replacement work comes from the Townhouse

Maintenance Reserve Fund and not The Colonys Operating or Capital Budget . . . This argument does

not reconcile with the language of Article IV. Covenant for Maintenance Assessments Section 3.

Assessments of the Declaration that provides, in relevant part:

The Board shall determine the total amount required, including the operationalitems such as insurance, repairs, reserves, maintenance and other operating

expenses, as well as charges to cover any deficits from prior years and

capital improvements approved by the Board [emphasis added].

It is noted that the 1989 Offering Plan anticipated that the useful life of the roofs would be twenty years

(ending in 2009); in its March 29, 2011 Verified Answer to the Summons and Complaint filed by Plaintiff

Ed Waldman, the Board of Directors acknowledged that it began contemplating replacement of the roofs

when it began receiving reports of roof leaks prior to 2010. The Boards argument that it intended to

fund the project from a Townhouse Reserve is a distinction without a difference. Whether the funding

source was intended to be reserve, operating, or capital, the Board was obligated to include the

amount in the annual Budget submission for Homeowner approval.

Closer examination/discussion of the Boards argument is warranted.

Operating Budget Implications:

The Board of Directors has posited that the replacement of Section 1 / 1A roofs is not a Capital

improvement. While there is considerable evidence to the contrary, to the degree that there is any

validity to this claim, the scope of work codified in the Vazac agreement constitutes the maintenance,

repair and replacement of property of the Homes that is anticipated in Article VI of the Declaration and

Article XI of the By-Laws and is required to be included in the annual Operating Budget and approved by

the Members.

The Board of Directors acknowledged anticipating the replacement project for no fewer than two years.

Inasmuch as annual Operating Budgets are required to include reserves and future Capital

improvements, the Board of Directors was obligated to include the funding estimates for this clearly

anticipated project in the 2010 Operating Budget yet failed to do so.

Capital Budget Implications:

While the Board of Directors has argued that the replacement of Section 1 / 1A roofs is not a Capital

improvement, considerable evidence to the contrary exists:

Paragraph 37 of the Vazac agreement executed by Colony HOA President Steve Kay on March 16, 2011,

expressly stipulates: The Colony has provided a capital improvement certificate to Contractor prior

to the execution of this Contract and said certificate is specifically incorporated into this contract by

reference and is considered a "contract document".

A New York State Department of Taxation and Finance Certificate of Capital Improvement (Form ST-124)

executed by Colony HOA President Steve Kay on March 16, 2011, describing the capital improvement to

be performed as Replacement of 144 roofs, together w/the installation of new ridge ventilation system

to 30 Buildings, consisting of 144 Townhouses in Sections 1 + 1A AT THE Colony @ Holbrook


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Homeowners Association, Inc. is appended to the executed Vazac agreement. A copy of same is

herewith enclosed.

The very contract for the roof replacement work explicitly codifies the Capital nature of the project. The

language of the guidelines of the Certificate of Capital Improvement establishes mutually exclusive

options: either the work to be performed is a Capital Improvement or the HOA President improperly

completed and submitted the form.

The Boards inclusion of an air hockey table and a refrigerator in the 2011 Capital Budget and the

exclusion of the replacement of the roofs of 144 Homes stretches plausibility beyond reason.

The following guidelines excerpted from the Certificate of Capital Improvement (Form ST-124) are

instructive:

If a contractor gets a properly completed (that is, no required entries on the form are left blank) Form ST-1

24, Certificate of Capital Improvement, from the customer within 90 days after rendering services, the

customer bears the burden of proving the job or transaction was a capital improvement (that is, was not

taxable to the customer).

A capital improvement to real property is defined in section 11 01 (b)(9) of the Tax Law and Sales Tax

Regulation section 527.7(a)(3), as an addition or alteration to real property that:

(a) substantially adds to the value of the real property or appreciably prolongs the useful life of

the real property,and

(b) becomes part of the real property or is permanently affixed to the real property so that

removal would cause material damage to the property or article itself,and

(c) is intended to become a permanent installation.

The work performed by the contractor must meet all three of these requirements to be considered a

capital improvement. This certificate may not be issued unless the work qualifies as a capital

improvement [emphasis added].

The claims about the scope and nature of the work attested to and executed by the HOA President in the

Certificate of Capital Improvement stand in shocking and perhaps irreconcilable contrast to paragraphs

13 and 15 of the Verified Answer that Association counsel executed and filed on behalf of the Colony

HOA Board of Directors just 13 days later asserting that the project was for roof repair not

replacement and that . . . the roof repair is not a capital improvement.

Reserve Funding Implications:

Provisions of the 1989 Operating Plan (The Association Paragraph D) required initial Home purchasers

(Section 1 / 1A Homeowners) to contribute the value of two months Association assessments at closing

to a Working Capital Fund which, along with budgeted Reserves for Contingency, was intended to cover

foreseeable capital expenditures. It is noted that, pursuant to the Offering Plan, By-Laws and

Declaration, replacement of the roofs and siding of Section 1 / 1A homes are part of the maintenance of

the Common properties, a collective responsibility, and clearly anticipated future capital expenditures.

As of the December 26, 1995 Amendment of the Offering Plan, the Working Capital Fund contained

$109,800 in deposits.


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The October 14, 1997 amendment of Article XI Section 3 (f) of the By-Laws authorized the transfer of the

Section 1/1A funded Working Capital Fund deposits to a newly established Capital Reserve Fund for

Capital Improvements for Sections 1, 1A, 2 and 3. It is noted that the amendment did not specify the

amount of funds that were transferred from the Working Capital Fund. Moreover, while the Working

Capital Fund was created with funds contributed by Section 1 / 1A Homeowners and the replacement of

Section 1 / 1A roofs and siding is both a collective responsibility and foreseeable Capital Improvement,

Section 2 and 3 Home exteriors were subsequently uniquely excluded from the collective maintenance

responsibility; their replacement is an individual responsibility, not a foreseeable collective Capital

Improvement.

Ironically, after transferring the Capital funds that were contributed by the Sections that are required to

collectively maintain / replace their roofs and siding (the most costly of Capital Improvements) to a fund

that is enjoyed by the Sections that individually maintain / replace their roofs and siding, the Board of

Directors then remarkably, arguably cynically, created a separate Reserve fund for the collective

maintenance of the Section 1 / 1A Home exteriors.

The Capital funds transfer flies in the face of logic; it was nothing less than a deceitful sleight of hand.

The creation of a separate Townhouse Maintenance Reserve Fund is nowhere authorized by the

governing documents.

Treatment of Roofs is found in the following provisions:

By-Laws Article III. Purpose

Declaration Article IV. Property Rights in the Properties. Section 2

Declaration IX. Exterior Maintenance. Section 1

Collectively, these provisions establish that the maintenance and repair of the Common properties

includes the maintenance, repair, and replacement of the roofs of the Homes on the properties.

Implications of the Third Supplementary Declaration:

Article II Section 2 of the Declaration authorized the Developer to unilaterally amend the Declaration to

reflect the different character of the new Homes in Sections 2 and 3 yet it limited that discretion to

additions and changes that are not inconsistent with the scheme of the Declaration. The amendment of

Article IX relieved Section 2 and 3 Homeowners of the responsibility to fund or contribute to the

collective maintenance of Home exteriors yet inappropriately left them vested with the right to vote on

the collective maintenance of the exteriors of Section 1/1A Homes. The amendment of Article V was

improperly defined and the supplementary failed to appropriately amend related substantive and

procedural provisions of the By-Laws and Declaration to reconcile the administrative implications of theincongruities in Home exterior maintenance and funding responsibilities. The third supplementary

Declaration created a second class of Membership. The creation of a second class of Membership is

fundamentally inconsistent with Article III of the Declaration, Article VI of the By-Laws and The

Membership and Voting Rights section of the 1989 Offering plan, which all expressly provide that there

should be one class of membership interest.

The subsequent transfer of the Section 1 / 1A funded Working Capital Fund deposits and the creation

of a separate Townhouse Maintenance Reserve Fund further exacerbated the distinction and division

between the separate classes, ensured that the interests of those separate classes would be antagonistic,

and provided a flawed mechanism for resolution of the inherently competitive/conflicting interests.


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Remedy:

Amendment of the following provisions to facilitate harmonization / reconciliation of Home exterior

maintenance/funding responsibilities:

By-Laws

Article VI. Membership and Voting Rights Section 1. Membership

Article XI. Assessments and FinancesSection 2. Purpose of Assessments

Section 3. (a f) Basis of Assessments

Section 8. Operating Account

Declaration

Article IV. Property Rights in the Properties Section 2. Title to Common Properties

Article V. Development of The Colony at Holbrook Section 4. Encroachments on Lots or Common Areas

Article VI. Covenant for Maintenance Assessments

Section 2. Purpose of Assessment

Section 3. Assessments

Transparency and Accountability

Article X. Insurance; Section 1. Common Areas of the Declaration provides:

The Board of Directors shall maintain public liability insurance, to the extent

obtainable, covering each Association Member, lessee and occupant and the

managing agent, if any, against liability for any negligent act of commission or

omission attributable to them which occurs on or in the Common Properties.

To the extent obtainable, the Board of Directors shall also be required to

obtain the following insurance:

(a) Fire insurance with extended coverage, water damage,

vandalism and malicious mischief endorsements, insuring the

facilities on the Common Properties, in an amount equal to

their full replacement values and (b) workmens compensation

insurance. All insurance premiums for Common Area coverage

shall be paid for by the Association.

Article XIV. General Provisions; Section 4. Examination of Books and Records of the By-Laws

provides:

Each Member, or their respective representatives and first mortgagees, shall

be entitled to a reasonable examination of the books and records of the

Association at any time during normal business hours upon reasonable notice

to its Board of Directors. The Declaration, Certificate of Incorporation and

the By-Laws of the Association shall be available for inspection by any

Member or first mortgagee at the principal office of the Association.


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Review of United States Liability Insurance Co. Directors and Officers Policy No. CAP1015069A reveals

the following exclusion:

L. Any insureds actual or alleged liability for damages under any express

contract or agreement; however this exclusion shall not apply to defense

costs associated with any claim for which coverage under this policy would

be a violation of public policy or prohibited under insurance law.

In the event that the Supreme Court finds that the Board of Directors exceeded its authority in funding

the roof replacement project and, therefore, was unable to bind Section 1 / 1A Homeowners to the Vazac

agreement, to the degree that Vazac might be entitled to liquidated damages, the Directors and Officers

policy will apparently not provide coverage.

The April 29, 2011 request of Section 1 Homeowner Sheila Keller to review and copy the Directors and

Officers policy on May 2, 2011 was granted in part and denied in part. The Board delayed the inspection

until May 5, 2011 and prohibited the copying of the document. On May 4, 2011, Colony HOA Vice-

President Joseph Mul announced to the attendees of the Meet-the-Candidates meeting that the By-

Laws expressly prohibit the copying of the Official Records of the Association. Review of Article XIV

Section 4 of the By-Laws reveals that there is no reference whatsoever to such prohibition.

When challenged at the Meet-the-Candidates meeting about his remarkable assertion, Mr. Mul

immediately abandoned his claim of express prohibition and offered that the prohibition was implied

by the provisions silence on the question of copies.

The March 28, 2011 letter of the Board of Directors to Colony Homeowners regarding the Section 1 / 1A

roof replacement project cited . . . reliance on precedence and the past practices of prior Board of

Directors . . . as justification for its decision to assess Section 1 / 1A members and undertake the projectwithout member approval. That letter also noted that the Boards . . . final decisions at the December

10, 2010 Board Meeting resulted from the tireless effort, hard work and recommendations of the Roofing

Committee.

Following the Meet-the-Candidates Meeting, former HOA President Ernie Khouri was asked about the

language in the Associations covenants that authorized the creation of the separate Townhouse

Maintenance Reserve Fund. Mr. Khouri offered that authorization for creation of the fund was

inferred from the October 14, 1997 amendment that transferred the Section 1 / 1A funded Working

Capital Fund deposits to the Capital Reserve Fund.

Every thinking member who is cognizant of the Framers timeless cautionary notes about human nature

and due process should be more than a little concerned about the degree to which decisions and policies

of Colony HOA Boards are informed by inference, implication, past practice and the

recommendations of hand-picked advisers rather than by clear and unambiguous language. Remedy is

at hand. The covenants must be perfected to provide clear unambiguous language and ensure due

process. Contrary to recent claims, amendment is far from impossible. It has been accomplished several

times in the past particularly as regards Board powers, privileges and prerogatives.

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal

controls on government would be necessary.

James Madison The Federalist #51 February 6, 1788


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The Colony at Holbrook HOA

May 12, 1989 Offering Plan and Subsequent Amendments

Filing Dated Exp Date Authority Summary

inal Offering Plan 5/12/89 5/11/90 Colony at Holbrook, Inc.

endment No. 1 8/9/89 Colony at Holbrook, Inc.

"Trust Fund Provisions" at page 36 and Paragraph 21 of the Purchase Agreement amended to disclose

the down payments will be placed in an interest bearing account entitled "The Colony at Holbrook Esc

Account" in Norstar Bank. Interest on deposits will be credited to the purchaser's [sic] at closing.

endment No. 2 10/2/89 Colony at Holbrook, Inc.Paragraph I of Amendment No. 1 amended to disclose that the down payments will be deposited in an

interest bearing account in Chase Manhattan Bank and not in Norstar Bank.

endment No. 3 11/29/89 Colony at H olbrook, I nc.

I. Sponsor recorded Declaration in Suffolk County Clerk's Office 10/4/89 in Liber 10943 at page 032.

II. Sponsor has elected to commence sales of the 141 Homes of Phase II. The 141 additional Homes are

on the site plan at page 137 in Part II of the Offering Plan. The est. operating budget reflecting a total homes is set forth at page 10 of the Offering Plan.

When closing of title to the Homes in Phase II is ready to commence, Sponsor will record a Supplemen

Declaration in the Suffolk County Clerk's Office to bring the added property within the scheme of the

Declaration. Upon the recording of the Supplementary Declaration, the Association will consist of 271

members.

Per "Sewage" at page 21 of the Offering Plan, the SC Sewer Agency has granted permission to connect t

Homes in Phase I to temp sanitary systems until the planned expansion of SC Sewer District #14 sewag

treatment plant is completed . . . memorialized in Declaration recorded on 11/8/89 in Liber 109962 at p

565. The closing of title or occupancy of Home in Phase II may not occur until the Homes are connecte

the expanded STP. Expansion expected to commence '90 - '91. . .

endment No. 4 6/20/90 12/19/90 Colony at Holbrook, Inc.

I. Purchase Agreement for Phase II Homes will not be conditioned upon a purchaser securing mortgage

financing. Purchasers obligated to pay the balance of the purchase price at closing regardless. Down pa

to be held as liquidated damages in the event that a purchaser does not have sufficient funds to close.


I. 32 Unsold Phase I Homes as of 2/6/91; II. Aggregate Monthly Obligations of sponsor; III. Financial

Obligations to Association; IV. Unsold Homes Subject to Mortgages or Financing Commitments; V. Mea

Meeting Sponsor Obligations ; VI. Status of Current Obligations of Sponsor; List and Status of Sponsor

Public Offerings; VII. List and Status of Sponsors Other Public Offerings; VII. 2-4-91 Board of Directors M

Homeowners Cliff Axelson and Robert Russo elected by the Home Owners. The Sponsor designated El

Monter, Ira Par and Ron Bloomfield as Directors. Sponsor will retain control until the 6th anniversary

10/4/89 recording of the Declaration or until 90% of the Homes in all Phases of the Development are cl

whichever shall occur first; IX. Parkland Sewer Treatment Plant Upgrading

I. Budget; XI. Extension of Offering Plan


I. Correction to Previous Disclosure: Paragraph II of Amendment No. 5 deleted in its entirety and repla

with the following:

"Aggregate Monthly Obligations [sic]. Sponsors obligations for assessments on untitled Homes is limit

.

II. Extension of the Offering Plan.

Offering Plan Page


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The Colony at Holbrook Homeowners Association, Inc.

Covenants Review - Authorization to Impose Assessment and Execute Agreement Without Membership Authorization

Section

ParagraphSummary Article Section

Sub-

secSummary Article Section Summar

ng CapitalThe Association

D. Expenses of the

Association

Purchasers required to

contribute 2 mo's.

assessments to Assoc. at

closing as initial working

capital. Working Capital

Fund and budgeted

Reserves for Contingency

intended to coverforeseeable capital

expenditures.

XI. Assessments

and Finances

3. Basis of

Assessments

f. 1

and 2

10/14/97 amendment x-fered

"Working Capital Fund" deposits to

"Capital Reserve Fund"

ubject

By-Laws DeclarationOffering Plan

Pag


13/53



Section

ParagraphSummary Article Section

Sub-


ubject

By-Laws DeclarationOffering Plan

1, 2,

7

BOD can determine assessments

needed for maint. & operation of the

Assoc.

VI. Covenant for

Maintenance

Assessments

2. Purpose of

Assessment

For improvement,

maintenance and re

properties, services,

and Homes

4

BOD cannot borrow money on behalf

of membership without approval of

members

2. Purpose of

Assessments

. . . in particular for the improvement and

maintenance of properties, services and facilities

and related to the use and enjoyment of the

Common Properties and of the Homes situated

upon The Properties, including, without limiting

the foregoing, repair, replacement and additions

thereto, and the cost of labor, equipment,

materials, services, management and

supervision thereof.

At least annually the

determine the total

required, including t

operational items (in

repairs, reserves, m

approved capital

improvements and o

expenses) and subm

to members.

(a)

No fewer than 45 days before end of fiscal yr

BOD prepare Operating Budget for expenses

incl. repairs, maint, etc. and submit for

membership approval 15 - 30 days after budget

completed. 5 % contingency permitted.

Approval waived if not greater than prev. yr

(incl 5% contingency) plus 2% + the % increase of

the CPI for the prev. month

Pro rata member sh

of homes on the Pro

subject to the Decla

(1/316)

(b)

BOD to simultaneously prepare Capital Budget

for Capital improvements to be commenced in

fiscal yr. Mbrshp approvl waived if no single

project cost exceeds $10 k and aggregate

amount does not exceed $30k.

(d)Pro rata share = 1 / 316 (# of homes in Sections

1, 2 and 3)

(e)

BOD can pass emergency assessment for

expenses not anticipated in Operating or Capital

Budgets. Expenses must be approved by

members.

(f) 1

& 2

"Working Capital Fund" deposits transferred to

"Capital Reserve Fund" for FUTURE Capital

improvements.

8. Operating

Account

Cash deposit account for all operational portions

of all monthly and special assessments for all

members.

VI. Covenant for

Maintenance

Assessments

XI. Assessments

and Finances

3. Basis of

Assessments

3.

Assessments

essments

VII. Board of

Directors5. Powers

Introduction

Commencing with the

recording of the

Declaration, each Home

Owner will become

responsible for the payment

of a pro rata portion of the

expenses of the Assoc.

arising from the operation

and maintenance of the

common areas, the

maintenance of the roof and

the painting or staining of

the exterior facades

(including decks) of the

Homes, maintenance and

snow plowing of the

roadways, landscape

maintenance . . .

Pag


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Paragraph Summary Article SectionSub-


lass of

bership

est

E. Membership

and Voting Rights

in the Association

130 iniital homes;

anticipated up to 229

additional homes; 66

2/3% member vote to

amend Declaration and

By-Laws

VI. Membership

and Voting

Rights

1. Membership

There shall be one class of

Membership interest. Amnd 1/27 &

1/4/97

III. Membership

and Voting

Rights in the

Association

There shall be one c

Membership interes

IV. Property

Rights of the

Properties

2. Title to

Common

Properties

The maint & repair of the

Properties shall include ex

and building maintenance

and walkways which will c

staining or painting the ex

Homes, buildings and roof

replacement to the Home

buildings.

This Section shall not be a

provided for in Article XII,

reduce or eliminate the o

maintenance and repair o

Common Properties.

IX. Exterior

Maintenance

1. Exterior

Maintenance

Assoc. to maintain roofs a

each Home subject to asse

under Declaration.

V. ApplicabilityAll present and future members

subject to By-Laws

II. Definitions(d) " The

Properties"

All those areas of land in and subject

to the Declaration.

ubject

Offering Plan By-Laws Declaration

Association is formed to own,

operate and maintain the Common

Properties and to provide for certain

exterior maintenance of the Homes

for the benefit of the members of the

Association.

cability

fs & Siding

eated as

ommon

ements

Introduction

The Association

A. Declaration of

Covenants,

Restrictions,

Easements,

Charges and Liens

The maint & repair of the

common elements

includes the maint &

repair of roofs and siding

III. Purpose

II. Property

Subject to this

Declaration

2. Additions to

the Properties

Developer authorized to badditional properties into

Declaration - up to 350 ho

Additions made by filing su

Declaration. Assoc./memb

required. Supplementary

may contain additions/mo

that are not inconsistent w

scheme.

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ubject

Offering Plan By-Laws Declaration

ations of the

pplementary

ation



VI. Membership

and Voting

Rights

1. MembershipThe Association shall have one class

of Membership interest.

IV. Property

Rights of the

Properties

2. Title to

Common

Properties

Needs to be amended to r

distinction between Sectio

Homes and Homes in Sect

2. Purpose of

Assessments

V. Developmentof the Colony at

Holbrook

4. Encroachmentson Lots or

Common Area

Improperly identified as "S

the Declaration" for amen

Paragraph C of the 3rd sup

Declaration.

3. Basis of

Assessmentsa - f

2. Purpose of

Assessment

Needs to be amende

reflect the distinctio

Section 1 & 1A Hom

Homes in Sections 2

8. Operating

Account3. Assessments

Needs to be amend

reflect the distinctio

between Section 1 &

Homes and Homes i

2 & 3.

ubject

Offering Plan

Filed 6/20/94 by Elliot Monter, President Board of Directors pursuant to Article II, Section 2 of the Declaration unilaterally amending Article IX of the Declaration to reflect the differen

character of the Homes being constructed in Phases 2 and 3.

A. Article IX is amended to reflect the fact that the Association will not furnish maintenance of the roofs and the painting or staining of the exterior facades and decks of the detached H

Sections 2 and 3 and, therefore, the Home Owners of such detached Homes will not pay association assessments on those budgeted items, reserves and special assessments which

applicable to roof maintenance and painting or staining of the exterior of Homes [emphasis added]. The Owners of Homes in Section 2 and 3 will be responsible for their own Hom

maintenance (i.e. roof repair and painting or staining of their Home exterior).

Article II, Section 2 provides, in relevant part:

Such supplementary Declaration may contain such complimentary additions and modifications of this Declaration as may be necessary to reflect the different character, if any, of the ad

Property as are not inconsistent with the scheme of this Declaration . In no event, however, shall such supplementary Declaration revoke, the Covenants, Restrictions, Easements, Cha

Liens establishing this Declaration within the Properties.

Related Substantive and Procedural Provisions

By-Laws Declaration

XI. Assessments

and Finances

Need to be amended to reflect the

distinction between Section 1 & 1A

Homes and Homes in Sections 2 & 3. VI. Covenant for

Maintenance

Assessments

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I. Homes; II. Aggregate Monthly Obligations; III. Financial Obligations to Association; III. Unsold Homes

to Mortgage for Financing Commitments; IV. Means of Sponsor's Obligations; V. Board of Directors: E

Monter, Ron Bloomfield, Ira Parr - Sponsor's representatives; Mary Munda, Eric Sackler - Homeowners

Financial Statement; VII. Budget; VIII. List and Status of Sponsor's Other Public Offerings; IX. Escrow an

Fund Provisions; IX. Extension of Offering Plan.

I. Phase II Site Plan Modifications: Pursuant to the authority granted in the Offering Plan, the Sponso

elected to construct single family detached Homes on the Phase II Property and has modified the site

of the Phase II Property to accommodate such Homes. The new Homes will be offered as a zero-lot

development on 45 foot minimum width lots. The Phase II property will contain the following sectiothe 14 existing attached Homes; 2: 102 detached homes; and 3: 70 detached homes. 316 maximum

contemplated in development.

As of 5/10/93, Town of Islip Planning Board approved creation of Section 1A and authorized constru

Section 2 models. Zero-lot line subdivision plats for Sections 2 and 3 approved in concept the Town

Planning Board. The new plats proposed for Sections 2 and 3 based on the original planned infrastr

improvements and reflect only minor driveway curb cut/drainage location revisions, which have bee

approved by the Town Planning Board.

Sponsor will record Supplementary Declaration(s) in SC Clerk's Office to bring the added Section(s) o

II within the scheme of the Declaration. Pursuant to Section 2 of Article II of the Declaration, the

Supplementary Declaration(s) will provide that the association will not furnish maintenance of the r

the painting or staining of the exterior facades and decks of the detached Homes in Sections 2 and 3

therefore, the Home Owners of Such detached Homes will not pay Association assessments on those

budgeted items, reserves and special assessments which are applicable to roof maintenance and pai

and staining of the exterior of Homes. The owners of Homes in Section 2 and 3 will be responsible f

own Home exterior maintenance (i.e. roof repair and painting or staining of their Home exterior).

II. Status of Construction; III. Sewage; IV. Status of Sales; V. Aggregate Monthly Obligations; VI. Financi

Obligation to Association; VII. Unsold Homes Subject to Mortgages for Financing Commitments; VIII. M

Sponsor's Obligations; IX. Board of Directors: Elliot Monter, Ron Bloomfield, Ira Parr - Sponsor's

representatives; Mary Munda, Eric Sackler - Home Owners; X. Financial Statement; XI. List and Status o

Sponsor's Other Public Offerings; XII. Extension of Offering Plan.


Offering Plan Page


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endment No. 9 7/12/93 Colony at Holbrook, Inc.

I. Phase II Property: Paragraph I of Amendments No. 8 is amended to disclose the following:

1. The subdivision map for Section 1A was filed with the SC Clerk's Office on May 19, 1993 as filed ma

number 9357.

2) The First Supplementary Declaration to the Declaration was filed on June 14, 1993, in the SC Clerk

Office in Liber 11632 at page 829.

3) Article XI of the Declaration will be amended prior to the closing of title to the first Home in Secti

and 3 to include the following provisions which will be applicable only to zero lot line single family

detached Homes developed in Sections 2 and 3:

a. The Association shall be responsible for landscape maintenance of all areas within Sections 2 and

including common areas and the front and rear yards of the individual Homes. The Home Owners minstall a chain link fence with Black vinyl coating (no higher than 36 inches) in their rear yard and sha

responsible for its installation and maintenance. Home Owners shall give the association landscape

maintenance contractor access to the rear yard if a fence is installed. A 6' foot wide gate must be in

if completely fenced . . . ; b. . . .; c. No alterations / revisions to the dwelling wall (exterior/interior) a

the zero-lot one side of the dwelling shall be permitted unless it is in full compliance with State and L

building codes and subject to approval by the Association Board of Directors or a designated Archite

review committee; d;

II. Sewage . . . SC DPW correspondence dated 5/24/93 indicates Section 1 Homes may e connected to

Parkland District 14 STP on or about July 1, 1993.

III. Status of Construction; paragraph II of Amendment No. 8 is further amended to the extent that t

Sponsor, on April 30, 1993, received conditional approval from the Town of Islip for the release of th

outstanding surety bond for Section 1.

endment No. 10 8/17/93 Colony at H olbrook, I nc.

I. Escrow and Trust Fund Provisions: The disclosure contained in this Amendment replaces and superce

former Section of the plan dealing with the placing of down payments in escrow in Paragraph IX of

Amendment No. 7.

Offering Plan Page


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I. Phase II Property: Paragraph I of Amendments No. 8 and 9 are amended to disclose the following:

1. The subdivision map for Section 2 of the Colony was filed with the SC Clerk's Office on January 26,

as filed map number 9466, Abstract number 12410.

2. Building permits for 20 Homes in Section 2 have been received by the Sponsor from the Town of Islip

Dpt. as of Feb. 10, 1994

3. In Sections 2 and 3 (zero lot line development), there must be a 10' separation between Homes an

improvements may be constructed/installed within that designated 10' area. Full compliance with S

Local and Home Owners Association requirements shall govern this requirement.

Article V, Section IV of the Declaration will be amended pursuant to the authority granted in Article I

Section 2, as follows:

"In the zero lot line Sections 2 and 3, roof overhangs, eaves, trim, facia, soffits, etc. are to be considere

acceptable encroachment into adjoining lots and/or common areas and shall be treated in the same fa

as other encroachments addressed in Article V."

II. Sewage; III. Status of Construction and Sales; IV. Aggregate Monthly Obligations; V. Financial Obliga

Association; X. Budget; X. List and Status of Sponsor's Other Public Offerings; XI. Extension of Offering


I. Phase II Property Section 3: Per the Offering Plan as modified by Amendment Nos. 8, 9, 11, the Spon

elected to commence sales of the 70 Homes in Section 3.

II. Agreement wit Northville Industries re: 1986 gasoline spill and license to Northville to install and ma

monitoring test wells and groundwater recovery wells. Lic. expires June 30, 1996.

III. Ponds; IV. Fencing; V. Extension of Offering Plan.


I. Status of Sales: Sponsor closed title to all 130 Homes in Section I, 13 of the 14 Homes in Section 1A a

Homes in Section II. Sponsor has additionally entered into contracts for 29 Homes in Section II and 23

in Section III.

II. Aggregate Monthly Obligations; III. Financial Obligations to Association; IV. Unsold Homes Subject to

Mortgages for Financing Commitments; V. Means of Sponsor's Obligations; VI. Board of Directors: Ellio

Monter, Linda Buffardi, Richard Spirio - Sponsor's representatives; Jesse Fenster, Anthony Raniello - Ho

Owners; VII. Financial Statement; VIII. List Mid Status of Sponsor's Other Public Offerings; IX. Budget; X

Section III: The subdivision map for Section III was filed in the SC Clerk's Office on October 21, 1994 as m

#9585; XI. Status of Construction; XII. Sewage: SC DPW acquired title to the pump station at The Colon

recorded with SC Clerks Office on 10/24/94 on Liber 11699 at page 388; XIII. Working Capital Fund: Th

Sponsor has been collecting two months Association assessments at the closing of title to each Hom

amount of $76,404.44 is currently being held in a savings account at Chase Manhattan Bank ; XIV. Ex

of Offering Plan.

Offering Plan Page


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I. Status of Sales; II. Aggregate Monthly Obligations; III. Financial Obligation to Association; IV. Unsold

Subject to Mortgages for Financing Commitments; V. Means of Sponsor's Obligations; VI. Board of Dire

Clifford Axelsen, Walter Hagopian, Robert Russo, Anthony Paniello - Home Owners; Elliot Monter - Spo

representative; VII. Financial Statement; VIII. List and Status of Sponsor's Other Public Offerings: IX. Bu

Working Capital Fund: The Sponsor has been collecting two months Association assessments at the c

of title to each Home. The amount of $109,800 is currently being held in a savings account at Chase

Manhattan Bank; XI. Extension of Offering Plan.

Offering Plan Page


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Declaration of Covenants, Restrictions, Easements, Charges and Liens

Recorded in Suffolk County Clerk's Office Libre 10943 at Page 032 on October 4, 1989

Liber Page Provision Authority

Original Declaration 10/4/1989 10943 032Developer's Initial

Filing

irst Supplementary

Declaration6/14/1993 11632 829 Article II Section 2

Elliott Monter, President

Upon order of the Board of

Directors

Section 1A of Phase II expressly brought

within scheme of Declaration increasing the

number of units from 130 to 144.

130 Homes in Section 1 of :Phase I;

14 Homes in Section 1A of Phase II

"A" Map of Colony

Holbrook Section 1

dated April 15, 199

econd Supplementary




Directors

Section 2 of Phase II expressly brought within

scheme of Declaration increasing the number

of units from 144 to 246.



102 Homes in Section 2 of Phase II

"A"

Third Supplementary




Directors. Pursuant to

Amendment

This was an amendment -

not a supplementaryDeclaration.

Amendment of Article IX changing nature of

common element by making Owners of

Section 2 and 3 Homes responsible for

maintenance of roofs, painting/staining of

siding/exterior facades and decks and

relieving Section 2 and 3 homeowners of

responsibility to pay Association assessments

on those budgeted items, reserves and specialassessments applicable to roof maintenance

and painting/staining of home exteriors.

"A" Map of Colony

Holbrook Section 1

dated December 10

1997

ourth Supplementary

Declaration9/22/1994 TBD TBD Article II Section 2



Directors

Section 3 of Phase II expressly brought within

scheme of Declaration increasing the number

of units from 246 to 316.





"A" Map of Colony

Holbrook Section 1

dated April 15, 199

FilingDate /

Recorded

S.C. Clerk AuthorizationSummary Exhibit

Declaration Page


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By-Laws

Liber Page Provision Authority

Original By-Laws TBD TBD TBDDeveloper's Initial

FilingTBD

Amendment 1/21/1997 TBD TBDArticle V. Use of Facilities: Section 1

Membership amended.

Amendment 10/14/1997 TBD TBD TBD TBD

Article II. Definitions: (h) "Owner" amended; (k)

"Members in good standing" (l) "Members not ingood standing" (m) "Bulletin Board" (n) "CPI" (o)

"Week" added.

Article V. Use of Facilities: Section 1. Membership

amended

Article VII. Quorum, Proxies and Waivers: Section

1. Quorum amended; Section 3. Right to Vote

amended; Section 6. Place of Meeting amended;

Section 7. Annual Meetings amended.

Article VIII. Board of Directors: Section 1. Number

and Term amended; Section 2. Voting amended;

Section 3. Elections and Nominations amended;

Section 4. Vacancy and Replacement amended;

Section 5. Powers (a) (4) amended; Section 5.

Powers (b) 2 amended; Section 7. Meetings (b) (2)

amended; (c) formerly designated (d); (d) formerlydesignated (e); (e) amended.

Article IX. Officers: Section 1. Elective Officer

amended; Section 2. Election amended; Section 8.

The Treasurer amended.

Article XI. Assessments and Finances: Section 3.

Basis of Assessments (f) (1) (2) amended; Section

7. Checks amended.

TBD

Amendment 1/10/2002 TBD TBD TBD TBDArticle VIII. Board of Directors Section 5. Powers

(a) 10 (a-e) added. TBD

FilingDate /

Recorded

S.C. Clerk AuthorizationSummary Exhibit

By-Laws Page


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ST-124 (5/06) (back)

Guidelines

I a contractor gets a properly completed (that is, no required

entries on the orm are let blank) Form ST-124, Certicate o

Capital Improvement, rom the customer within 90 days ater

rendering services, the customer bears the burden o proving

the job or transaction was a capital improvement (that is, was not

taxable to the customer).

I a contractor does not get a properly completed Certifcateo Capital Improvementwithin 90 days, the contractor bears

the burden o proving the work or transaction was a capital

improvement. The ailure to get a properly completed certifcate,

however, does not change the taxable status o a transaction; that

is, a contractor may still show that the transaction was a capital

improvement. I a contractor erects a building or a customer, or

perorms some other work that constitutes a capital improvement,

the contractor must pay tax on the purchase o building materials

or other tangible personal property, but is not required to collect

tax rom the customer or the capital improvement. I the work

perormed is taxable (such as repair, service, or maintenance),

the contractor must collect tax rom the customer on the ull

charge to the customer, including labor and materials.

The contractor must keep any exemption certicate or at leastthree years ater the due date o the last return to which it

relates, or the date the return was led, i later. The contractor

must also maintain a method o associating an exempt sale

made to a particular customer with the exemption certicate on

le or that customer.

When the customer completes this certicate and gives it to the

contractor, it is evidence that the work to be perormed will result

in a capital improvement to real property.

A capital improvement to real property is dened in

section 1101 (b)(9) o the Tax Law and Sales Tax Regulation

section 527.7(a)(3), as an addition or alteration to real property

that:

(a) substantially adds to the value o the real property or

appreciably prolongs the useul lie o the real property,

and

(b) becomes part o the real property or is permanently axed

to the real property so that removal would cause material

damage to the property or article itsel,

and

(c) is intended to become a permanent installation.

The work perormed by the contractor must meet all three o

these requirements to be considered a capital improvement.

This certicate may not be issued unless the work qualies as a

capital improvement.

A contractor, subcontractor, property owner, or tenant, may

not use this certifcate to purchase building materials or other

tangible personal property tax ree. A contractors acceptance

o this certifcate does not relieve the contractor o the liability

or sales tax. A contractor must pay sales tax on the purchase o

building materials or other tangible personal property subsequently

incorporated into the real property as a capital improvement (see

Publication 862, Sales and Use Tax Classifcations o Capital

Improvements and Repairs to Real Property, or additional

inormation) unless the contractor can legally issue Form ST-120.1,

Contractor Exempt Purchase Certifcate.

The term materialsis dened as items that become a physical

component part o real or personal property, such as lumber,

bricks, or steel (Sales Tax Regulation, section 541.2(i)).

This term also includes items such as doors, windows, kits, and

preabricated buildings used in construction.

Floor covering

Floor covering such as carpet, carpet padding, linoleum and

vinyl roll fooring, carpet tile, linoleum tile, and vinyl tile installed

as the initial nished foor covering in (1) new construction, (2) a

new addition to an existing building or structure, or (3) in a total

reconstruction o an existing building or structure, constitutes a

capital improvement regardless o the method o installation. As

a capital improvement, the charge to the property owner or the

installation o foor covering is not subject to New York State and

local sales and use taxes. However, the retail purchase o foor

covering (such as carpet or padding) itsel is subject to tax.

Floor covering installed other than as described in the preceding

paragraph does not qualiy as a capital improvement, even

though it meets the criteria stated in (a), (b), and (c). Thereore,

the charge or materials and labor is subject to the sales tax,regardless o the manner in which the covering is installed (see

Publication 864.1, Floor Coverings and the Sales Tax Law, or

additional inormation), but the contractor may apply or a credit

or reund o any sales tax already paid on the materials.

The term foor coveringdoes not include fooring such as

ceramic tile, hardwood, slate, terrazzo, and marble. Thus, the

rules or determining when foor covering constitutes a capital

improvement do not apply to such fooring. Rather, the criteria

stated in (a), (b), and (c) above apply to the fooring.

For guidance as to whether a job is a repair or a capital

improvement, reer to Publication 862, Sales and Use Tax

Classications o Capital Improvements and Repairs to Real

Property.

Internet access:www.nystax.gov(or inormation, orms, and publications)

Fax-on-demand forms: 1 800 748-3676

Telephone assistance is available rom 8:00 A.M. to 5:00 P.M.(eastern time), Monday through Friday.

To order orms and publications: 1 800 462-8100

Sales Tax Inormation Center: 1 800 698-2909

From areas outside the U.S. and outside Canada: (518) 485-6800

Hearing and speech impaired (telecommunicationsdevice or the dea (TDD) callers only): 1 800 634-2110

Persons with disabilities: In compliance with theAmericans with Disabilities Act, we will ensure that our lobbies,oces, meeting rooms, and other acilities are accessible to

persons with disabilities. I you have questions about specialaccommodations or persons with disabilities, please call 1 800 972-1233.

Need help?


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issue summary 5-9-11

Documents