Section 1: Covenant for Assessment

The declarant, for each townhome building plot owned by him within the property upon which a residence house has been constructed to completion, hereby expressly covenants and agrees, and each and every one of the other owners of a townhome building plot within the Property by their claim or assertion of ownership thereto or by acceptance of a deed thereto, whether or not it shall be so expressed in such deed, is conclusively deemed to covenant and agree to pay to the Association as the same become due and payable, and without demand: (1) regular monthly or annual assessments or charges which shall be uniform and in the same and equal pro rata amount for each townhome building plot subject to assessment, regardless of the size, value or purchase price thereof, and (2) special assessments for capital improvement to the common area or any part thereof, all of which assessments herein provided for shall be established and collected as hereinafter provided. The regular monthly or annual assessments and the special assessments shall be a charge and a continuing lien upon each townhome building plot, together with the improvements therein, against which each such assessment is made, as hereinafter more particularly provided, each such assessment, together with interest, costs, and reasonable attorney’s fees shall also be the personal obligation of the person who was the owner of such townhome building plot at the time payment of the assessment fell due. The personal obligation for delinquent assessments shall not pass to his successors in title unless expressly assured by them. No owner of any townhome building plot subject to assessment shall be exempt or excused from paying any assessment by waiver of the use or enjoyment of the common area or any part thereof or by abandonment of his townhome building plot or is interest therein; however, no owner of any townhome building plot shall be liable for the payment of any assessment made after his ownership ceases. Notwithstanding the foregoing, any first mortgagee or other purchaser for value who obtains title to a townhome pursuant to the remedies provided in the first mortgage or foreclosure of the first mortgage, shall not be liable for unpaid assessments or charges against the mortgaged townhome which accrue prior to the time such mortgagee or purchaser acquires title to that townhome.

Section 2: Maintenance Funds of Association

The Board of Directors shall establish no fewer than two (2) separate accounts (the “maintenance funds”), into which shall be deposited all monies paid to the Association, and from which disbursements shall be made, as provided herein, in the performance of functions by the Association under this Declaration. The maintenance funds shall be established as a separate trust savings or trust checking accounts at a banking or savings institution. The maintenance funds shall include: (1) an operating fund for current common expenses of the Association, (2) a reserve fund for capital improvements, replacements, painting and repairs of the common Property (which cannot be normally expected to occur on an annual basis), and (3) any other funds which the Board of Directors may establish to the extent necessary under the provisions of this Declaration. The Board of Directors shall not commingle any amounts deposited into any other the maintenance funds with one another. Nothing contained herein shall limit, preclude or impair the establishment of additional maintenance funds by the Association, so long as the amounts assessed to, deposited into, and disbursed from any such fund are earmarked for specified purposes authorized by this Declaration.

Section 3: Purpose of Assessments

The assessments levied by the Board of Directors on behalf of the Association shall be used exclusively to promote the recreation, health, safety and welfare of the residents of the townhomes and for the operation, replacement, improvement and maintenance of the Property. All amounts deposited into the maintenance funds must be used solely for the common benefit of all of the owners for purposes authorized by this Declaration. Disbursements from the operating fund shall be made by the Board of Directors for such purposes as may be necessary for the discharge of its responsibilities herein for the common benefit of all of the owners, other than those purposes for which disbursements from the reserve fund are to be used. Disbursements from the reserve fund shall be made by the Board of Directors for the respective purposes specified in this Article 8. Nothing in this Declaration shall be construed in such a way as to permit the Association from using any assessments to abate any annoyance or nuisance emanating from outside the boundaries of the Property. Annual assessments shall include, and the Association shall acquire and pay for out of the applicable funds derived from such annual assessments, the following:

Water, electrical, lighting and other necessary utility services for the common Property.
Maintenance and repair of private driveways, walkways, and parking areas lying within the common Property.
Landscape planting and maintenance by the Association of all slopes, landscaping and planted areas within the common Property, including irrigation and lighting.
Fire and casualty insurance with extended coverage as provided herein, covering the full insurable replacement cost of the common Property improvements.
Liability insurance, as provided herein, insuring the Association against any liability to the public or to any owner, their invitees or tenants incident to their occupation and use of the common Property, with limits of liability to be set by the Board of Directors of the Association, such limits and coverage to be reviewed at least annually by the Association and increased or decreased in its discretion.
Such errors and omissions and directors and officers liability insurance as the Board deems appropriate pursuant to Article XI.
Workers’ compensation insurance to the extent necessary to comply with any applicable laws, medical payments insurance, and any other insurance deemed necessary by the Board of Directors of the Association.
Standard fidelity bonds covering all members of the Board of Directors of the Association as, and in an amount determined by the Board of Directors.
Painting, maintenance, repair and replacement of all building, equipment and landscaping in, on and of the common Property, as the Board of Directors of the Association shall determine is necessary and proper.
Any other materials, supplies, furniture, labor, services, maintenance, repairs, structural alterations, insurance, taxes or assessments which the Association is required to secure or pay for pursuant to the terms of this Declaration or by law or which in the opinion of the Association’s Board of Directors shall be necessary or proper for the operation of the common Property or for the enforcement of this Declaration.

Section 4: Basis of Maximum Annual Assessment

Except as provided below, until the first day of the Association’s fiscal year next following the first close of escrow for the sale of a townhouse, the maximum annual assessment under this Article 8 shall be determined in accordance with the budget of the Association. The first annual assessment shall be adjusted according to the number of months remaining in the initial fiscal year.

If the Board of Directors determines that the initial annual assessment is insufficient to meet the common expenses of the association during the remainder of the Association’s initial fiscal year, the Board of Directors may, by majority vote, increase that annual assessment by not more than ten percent (10%) above the maximum annual assessment for such year reflected in the approved budget for the Association. Prior to the end of the Association’s initial fiscal year any proposed annual assessment in excess of ten percent (10%) above the maximum assessment shall be subject to approval by a majority vote of the voting power of the Association.

Commencing on the first day of the fiscal year next following the first close of escrow for the sale of a townhome, the maximum annual assessment for any fiscal year may be increased by the Board above the maximum annual assessment for the previous fiscal year, without a vote of the membership and effective no sooner than the first day of each fiscal year, in an amount no more than the greater of (1) ten percent (10%), or (ii) the percentage (but not more than twenty percent (20%)) by which the U.S. Bureau of Labor Statistics, for the Houston S.M.A.S., consumer price index for all urban consumers (the “index”), has increased as of the date of the annual assessment increase over the level of the index as of the close of the immediately preceding fiscal year of the Association. Any increase in the maximum annual assessment which exceeds the maximum increase authorized in this subsection A shall require the vote or written consent of members representing a majority of the voting power of the Association.
Except as provided in this Section 4 and Section 5, the Board of Directors may not fix an annual assessment for any fiscal year at an amount which exceeds the maximum authorized for such fiscal year.

Section 5: Association Budgets

The Board of Directors shall cause to be prepared an annual report containing (i) a balance sheet and income statement reflecting income and expenditures of the Association for each fiscal year, including deposits in and withdrawals from the reserve fund and the operating fund; (ii) a statement of the place where the names and addresses of the current members may be found; and (iii) a statement of changes of financial position of the Association. Within ninety (90) days after the close of the Association’s fiscal year, the Board shall cause to be distributed a copy of each such annual report to each member, and to each first mortgagee who has filed a written request therefor with the Board of Directors. The annual report shall be prepared by an independent account.¹ At least sixty (60) says prior to the beginning of each fiscal year, the Board of Directors shall prepare and distribute to the membership of the Association a written, itemized estimate (budget) of the income and expenses of the Association during such year in performing its functions under this Declaration (including a reasonable provision for contingencies and deposits into the reserve fund, less any expected income and account for any surplus from the prior year’s respective maintenance fund). Each annual assessment shall constitute an aggregate of separate assessments for each of the maintenance funds, reflecting an itemization of the amounts assessed and attributable to prospective deposits into the reserve fund and the operating fund.

Section 6: Lien to Secure Assessments

Each and every assessment, regular or special, made or levied by the Association against the owner of a townhome building plot as herein provided, shall constitute and be secured by a separate and valid and subsisting lien hereby erected and fixed and which shall exist upon and against his townhouse building plot and all improvements thereon, which liens shall exist in favor of the Association for the benefit of all owners. Such liens shall be prior and superior to all other liens, except that the same subordinate, secondary and inferior to (a) all liens for taxes or special assessments levied by the City, County and State governments or any political subdivision or special district thereof, (b) all liens securing amounts due or to become due under any mortgage, vendor’s lien or deed of trust filed for record prior to the date payment of any such assessment became due and payable, and (c) all liens, including but not limited to, vendor’s liens and deeds of trust, securing any loan made to a purchaser for any part of the purchase price of any townhome building plot when the same is purchased from the declarant, or his successors or assigns as the builder. Any foreclosure of any such prior or superior lien under the power of sale of any mortgage, deed of trust or other security instrument, or through court proceedings in which the Association has been made a party, shall cut off and extinguish the liens securing assessments levied and made prior to such foreclosure date, but no such foreclosure shall free the townhome building plot from the liens securing assessment thereafter levied.

Section 7: Levy of Regular Assessments, Notice

The adoption of a resolution by the Board of Directors of the Association which fixes and establishes the amount and the time of payment of monthly or annual assessments shall in itself effectively constitute, create and establish a valid assessment against each townhome building plot subject to assessment as well as the personal obligation of each owner thereof to pay such assessment as the same becomes due and payable as specified in such resolution, and it shall not be necessary or required that any member of any class assent to any such resolution except as may be required by the provisions of Section 8 below. It shall not be necessary or required that notice of the adoption of any such resolution or assessment be given to any owner in order to fix and establish such assessment or his personal obligation to pay the same as it becomes due and payable, as the mere adoption of such resolution (with the assent provided for in Section 8 below, when required) shall in and of itself effectively create and establish such assessment and obligation; however, no owner shall be penalized or required to pay any interest or attorneys’ fees, nor shall the lien created by such assessment as the same becomes due and payable unless notice of such resolution and assessment has been first given to such owner by the personal delivery, or by the mailing or a written statement thereof to his last known address as reflected by the books and records of the Association. In this connection it shall be the duty and obligation of each owner (regardless of how title is acquired) to notify the Association in writing of his ownership of a townhome building plot, including the identifying number of his tract and of his mailing address and whenever the notice of assessment herein provided for is addressed and is personally delivered or mailed to the last known owner at his last known address as shown by the records of the Association, such notice shall be deemed to have been duly given to and received by the true owner at his correct address even though there may have been a change of ownership or address. Notice of the lien shall state (i) the amount of the assessment or installment, as the case may be, and other authorized charges and interest, including the cost of preparing and recording the notice of lien, (ii) the expenses of collection in connection with any delinquent installments, including without limitation reasonable attorneys’ fees, (iii) a sufficient description of the townhome against which the same has been assessed (iv) the name and address of the Association and (v) the name of the owner thereof. This notice of lien shall be signed by an authorized representative of the Association. The lien shall relate only to the individual townhome against which the assessment was levied and not to the Property as a whole. Upon payment to the Association of the full amount claimed in the notice of lien, or other satisfaction thereof, the Board of Directors shall cause to be recorded a notice of satisfaction and release of lien (“notice of release”) stating that the satisfaction and release of the amount claimed. The Board of Directors may demand and receive from the applicable owner a reasonable charge for the preparation and recordation of the notice of release before recording it. Any purchaser or encumbrancer who has acted in good faith and extended value may rely upon the notice of release as conclusive evidence of the full satisfaction of the sums stated in the notice of lien.

Section 8: Maximum Monthly or Annual Assessments

The amount of the monthly or annual assessments shall not exceed Fifty ($50.00) Dollars per month or Six Hundred ($600.00) Dollars per year unless the resolution of the Board of Directors fixing the monthly or annual assessment in excess of such respective amounts shall be ratified, with sixty (60) days after the adoption thereof, by:

The written assent of 51% of each class of members or the assent of 51% of the votes of each members who are voting in person or by proxy at a meeting of the membership called for this purpose, if such assessment does not exceed $80.00 per month or $960.00 per year; or
The written consent of two-thirds (2/3rds) of each class of members or the assent of two-thirds (2/3rds) of the votes of each class of members who are voting in person or by proxy at a meetings of the membership called for this purpose, if such assessment exceeds $80.00 per month or $960.00 per year.

Section 9: Special Assessments for Capital Improvements

In addition to the monthly or annual assessments authorized above, the Board of Directors of the Association by resolution may levy a special assessment for a definite total amount which shall be equal and the same for each townhome building plot assessed, for the purpose of defraying, in whole or in part, the cost of construction, reconstruction, repair or replacement of a capital improvement upon the common area, including fixtures and personal property related thereto, provided that such resolution shall be ratified, within sixty (60) days after the adoption thereof, by the written assent of two-thirds (2/3rds) of the votes of each class of members who are voting in person or by proxy at a meeting of the membership called for this purpose. Such assessment may be payable in installments or in a lump sum as such resolution may provide, but in any event the total amount of such special assessment shall be paid in full within twelve (12) months from the date assent of the membership as above provided is obtained and the resolution levying such special assessment shall so provide.

Section 10: Written Assent in Lieu of Attendance

If a meeting of the members shall be called for the purpose of acting upon the ratification of any resolution of the Board of Directors as may be required in Section 8 or Section 9 above, instead of attending such meeting, any member of any class may submit his written assent to the ratification of such resolution to the president or secretary of the Association at any time after notice of such meeting has been given and prior to the time the meeting is called to order, and when such written assent is so given the same shall have the same force and effect as if such member giving such assent were personally present and voting assent at the meeting, both for the purpose of determining the presence of a quorum and for the purpose of determining the number of votes cast in favor of ratification of such resolution; however, the written assent as submitted shall not be considered in determining the presence of a quorum for the conduct of any other business which may be brought before the meeting.

Section 11: Uniform Rate of Assessment

Regular (monthly or annual) and special assessments must be fixed in the same amount for all townhome building plots subject to assessment. All townhome building plots upon which a residence has been built to substantial completion shall be subject to assessments regardless of who may own the same. All vacant townhome building plots or townhome building plots on which homes are being constructed which are not owned by declarant, as defined in this Declaration, shall also be subject to assessments; however, vacant townhome building plots or townhome building plots upon which homes have not been substantially completed and which are owned by the declarant, as defined in this Declaration, shall not be subject to assessments until substantial completion of the home on such townhome building plot. When construction of a residence on a townhome building plot owned by the declarant or any other owner has been substantially completed it shall, in the case of monthly assessment be subject to assessment on the first day of the month next following the date of substantial completion, and in the case of annual assessments a pro rata part of the annual assessment shall be paid by the declarant or other owner for the number of months remaining in the assessment year after the date of substantial completion. It shall be the duty of the declarant to notify the Association at the time a residence has been ______²

Section 12: Date of Commencement of Assessments

The monthly or annual assessments hereinabove provided for shall commence as to all townhome building plots subject to assessments on the date specified in the resolution of the Board of Directors fixing such assessments. No assessment shall accrue against any townhome building plot or the owner thereof unless and until such assessment shall be levied by the Board of Directors as hereinabove provided. The Board of Directors shall not levy any assessment prior to the date of first conveyance of a townhome building plot by the declarant to a purchaser in excess of $75.00 per month or $900.00 per year.

Section 13. Effect of Non-Payment of Assessment, Remedies of Association

If any assessment is not paid within thirty (30) days after the due date thereof, the same shall bear interest from the due date until paid at the rate of 10% per annum. The Association may bring an action at law or in equity against the owner personally obligated to pay the same to enforce collection and/or for foreclosure of the lien against his townhome building plot. Each such owner, by his assertion of title or claim of ownership or by his acceptance of a deed to a plot hereby expressly vests in the Association, and its office and agents, the right, power and authority to institute all actions against such owner personally for the collection of such assessments, charges and debts and to enforce the above mentioned items by all methods available for the collection of debts and enforcement of liens. All such actions may be instituted and brought in the name of the Association and may be maintained and prosecuted by the Association in a like manner as an action to foreclose the lien of a mortgage or deed of trust on real property.