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five percent (5 %) of the budgeted gross expenses of the Association for that fiscal year." Before proceeding further, the Board should obtain an appraisal of the value of the property to be conveyed in order to determine whether the proposed conveyance is subject to this restriction. 2. Proposed Use (Public Street) Would Violate CC &R Section 4.18.2 Section 4.18.2 requires that Parcel A "be utilized for open space and public trail purposes ... [and] may not be developed in a manner which is not fully consistent with such purposes." Construction of a public road would not be consistent with this provision. Lot A is included in the description of the real property that is subject to the CC &Rs. Even if the Board sells a portion of that Lot to the City, the property remains bound by the CC &Rs and must be used in a manner consistent with the CC &RS. Notably, it is not (for real property purposes) problematic for the City to build a road on Lot D (at the end of Sunset Creek Lane) because that Lot is owned by the City and not subject to the CC &Rs. There is a possibility that the limitations imposed by Section 4.18.2 arise from a condition of approval granted to the original development by the City. If that is the case, then not only would the CC &Rs have to be revised to eliminate the restriction related to Parcel A, but the Conditions of Approval would have to be revised by City action. This is a cumbersome and complex process which hopefully the City will be willing to undergo should, in fact, it turn out that the limitation of use on Parcel A was a Condition of Approval. Another means to remove the limitation, which may have to be performed in conjunction with that discussed immediately above, is to remove Parcel A from the control of the CC &Rs. Currently, Parcel A is subject to the CC &Rs like all other real property in the Association. The typical means to remove real property from the effect of recorded CC &Rs is to "de- annex" that property. Unfortunately, your governing documents do not provide any authority for the Association or membership to de -annex property. De- annexation is not the same as conveying because CC &R restrictions will follow property even though ownership will change. The only way to prevent the CC &R restriction from following property is to first de -annex the property. Given the lack of specific authority to de -annex property, it is not clear at this time whether that can ever take place without a unanimous vote of the membership. What is known is that pursuing possible amendment to any Conditions of Approval and pursuing de- annexation would be time - consuming and expensive. To conclude, the accomplishment of the alternate access plan to the adjacent property to be developed is far from simple, and eventually may not turn out to be legally possible or even feasible from a practical standpoint. It is our recommendation that the Board determine the level of commitment on behalf of the City and the level of commitment on behalf of the Board of Directors to devote the necessary resources in an effort to push the "Parcel A Plan" through to fruition. If the level of commitment of the City is as high as that of the Board, then we will be able to provide an estimate as to the probable costs of doing so. We are available to discuss this matter with you at your convenience. Jennifer R. Lucas Attorney at Law HUGHES GILL COCHRANE Pc ATTORNEYS AT LAW 1600 South Main Street, Suite 215 Walnut Creek, CA 94596 Tel: 925.926.1200 x218 Fax: 925.926.1202 www.hughes- gill.com 2