To: HBEHOA Members:

In November 2004, the Developer assigned and transferred to the Association, and the Association accepted, all of the developer’s rights and interest under the Declaration of Covenants and Restrictions (C&Rs), Article of Incorporation, and Bylaws. Since then, Boards of Directors have administered, enforced and interpreted these documents for the Association, but have not updated the documents to reflect the transfer of authority.

I have prepared for the Board a draft modification to the current C&Rs that reflects how I believe the C&Rs should now read to 1) reflect the assignment of authority from the Developer to the Association and eliminate references to the Developer throughout the C&Rs, 2) remove or update provisions to reflect completed actions, and 3) correct typographical errors and mistakes in the current document. No other changes in substance are included at this time.

The Board received this document at our November 16 meeting so that the board members can review and provide me comments on it. I am hopeful that the new 2007 board will discuss and modify the document as necessary, and then approve it at its first regular meeting in January. During this time period, you can review the document as well and provide any comments to me or any other Board member. The document will be put on our website www.hbehoa.com and printed copies will be available at the annual meeting or upon request from Peggy Steele (446-9094). Comments can be mailed to the association: HBEHOA PO Box 350668, Palm Coast, FL 32135, or emailed to hbehoa@yahoo.com.

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Once approved by the Board, it is my intent that this interpretive document will serve as the baseline starting point for membership discussion during 2007 of any additional changes to the provisions of the C&Rs that the majority of the membership believe are needed. Once the baseline document and any such additional changes are approved by the membership, the new C&Rs will be submitted to a competent law firm for review. The reviewed document will then be sent to Flagler County for recording as the revised Declaration for the Association after resolution of any substantive issues raised by the law firm. .

I am hopeful that this approach will facilitate the discussion and voting process for changes to the C&Rs and save the Association legal fees by processing a single revision that incorporates all changes.

Paul Zacharias, President Date: November 16, 2006