HAMMOCK BEACH ESTATES HOME OWNER’S ASOCIATION, INC.

Board of Directors Meeting

Thursday, January 19, 2006, Beginning at 7:00PM

Hammock Community Center, Malacompra Road

The Board meeting commenced at 7:00PM. The following Board members were present: President, Paul Zacharias,

Vice president, Sara Clarke, Secretary, Peggy Steele, Treasurer, Karen Joyce, and Operations Coordinator, Joe Bowen.

The following homeowners, all invited by an e mail message , by notice enclosed with the minutes and by posting of a notice on the community bulletin board, were present: Harold Clarke, John Bonner, Frank Carelli, Bob Rohr, Luigi Zambetti, Lou Ciasulli, Joe Sermarini, Jim Morelewicz and Lou Luceri.

Before calling the meeting to order, Paul called upon those resent to voice any concerns or to have any item placed on the agenda. Bob Rohr asked about the time schedule for rewriting the C&Rs. Paul said we will discuss this issue later in the meeting. Bob also asked about the legal interpretation of the word “betterment” as used for reasoning for building of a pavilion. He also would like to know the rights of the homeowners in regard to assessment for building the pavilion. Paul said these items will be part of our discussion of issues for our meeting with the attorney..

Frank Carelli suggested that members who have different views of interpretation of the C&Rs accompany Paul when he goes to consult with the attorney. Frank also said he does not agree with the interpretation of the C&Rs governing the ruling made by the board regarding the ownership of more than 2 pets as per the special meeting held on Dec. 5, 2005. Paul said that this C&R will be dealt with when he consults with the attorney.

Karen stated that she would like the issue of allowing other residents to have the opportunity to join HBEHOA if they desired to be discussed. She said that there is one lot on the end of Solee Rd. that is not in the Assoc. and there are several lots on Mahoe Dr. N. that she said would be interested in joining the Assoc. Paul said that this issue could be brought up to the attorney along with another issue about 2 lots that are unbuildable but lot owners are paying their dues. The legal aspects of allowing residents to drop out of the association or allowing other residents to join the association will be added to the list of potential topics for the meeting with the attorney.

With no other items to be placed on the agenda, the proposed agenda was adopted.

Paul called the meeting to order.

2. Approval of minutes: Paul asked for any changes or additions to the Board meetings of Nov. 17, 2005. There being none, the minutes were approved as written.

Paul asked for any changes or additions to the special board meeting of Dec. 5, 2005. Sara said that she thought that Dorothy Drexler also said that an attorney should be consulted before making any decision about the issue of the number of household pets. Peggy said that she would check the tape of that meeting. Note: After checking the tape of the Dec. 2005 special meeting, it disclosed that Dorothy did state that she felt an attorney should be consulted before the issue was resolved. The minutes from the Dec. 5, 2005 meeting have been amended and posted on the website.

Paul asked for any changes or additions to the annual meeting of Dec. 8, 2005. There being none, the minutes were approved as written.

3. Discussion of possible topics/questions for meeting with lawyer

Paul presented the planned approach for obtaining attorney input and indicated that the steps would be taken over the current year culminating in a vote on revised C&Rs at the next annual meeting. The steps involved are:

1.. Develop package of information and questions for legal opinion and/or suggestions--set priorities for

items.

2.. Schedule a meeting with Dennis Beyer to present issues for review--identify Board members who would

like to attend.

3.. Discuss the Attorney’s recommendations and answers at a Board meeting.

4.. Establish committees, if and as needed, to develop proposed revisions to the C&Rs to implement the

Attorney’s recommendations. The committees may consist of just Board members or include association

members who have expressed an interest.

5.. Communicate with the membership through Board meeting minutes or in separate documents the changes

under consideration.

6.. Vote on the any proposed revisions to the C&Rs or bylaws at the next annual membership meeting.

7.. File the necessary documents with the County to make any revised documents legal.

8.. Update website.

Paul said that he would like the Board to complete item 1 at this meeting. He distributed a document identifying 10 issues with potential questions for the attorney. The Board members discussed each item and after eliminating two issues, established priorities for the other eight issues. The Board eliminated for now the legal questions regarding responsibility for cleaning the north/south canal until more research is done and the issue is further discussed with Alan Baggett of St Johns Water Management District. The issue of adding or removing lots from the association was discussed and it was decided that we not pay for attorney input until we had reason to do so. Paul asked who from the Board would join him for the meeting with the attorney. Karen Joyce agreed to go along. Sara Clarke suggested that Frank Carelli and Lou Ciasulli, as members of the Fining Committee, be asked to attend if they are interested. They both expressed an interest in attending and Paul agreed to coordinate the meeting time with Karen, Frank, and Lou. [Note: The meeting with Dennis Beyer was subsequently scheduled for February 3.] The text that follows are the eight issues in priority order for discussion with the attorney:

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Issues for legal review and opinion (as revised per 1/19/06 Board Meeting)

1. Board’s authority and approach for imposing an assessment to build a pavilion

At the Associations 2005 Annual Meeting, the Board conducted an advisory vote to determine if the membership supported the Board’s plan to build a pavilion next to the pool as a recreation facility betterment. Members were informed that building a pavilion would require a special additional assessment of about $250 on each lot owner. (current annual dues are $175.) The measure passed by a vote of 36-35. The Board believes it has the authority to proceed with this initiative, but wants to be certain that there is no legal barrier and that it follows the appropriate process for implementation.

· Is the Board correct in treating the pavilion as a “betterment” as described in the By-Laws (Section 7.2)

· Does the Board have the authority to implement the pavilion initiative given the process it has followed?

· What process steps are required?

· Is it permissible for the Board to obtain a bank loan in the Association’s name to allow members to pay the special assessment in installments? Are there any legal issues with such an approach?

2. Approach and process for enforcing C&Rs—ARC and Fining Committee

The original C&Rs provide for the enforcement of property maintenance standards by the Board issuing a letter noting the violation and then, if the problem is not corrected, hiring someone to perform the work and billing the lot owner. The C&Rs were subsequently amended to create a Fining Committee and a process for the Board to levy a penalty that the lot owner can then appeal to the Fining Committee. The Board has recently encountered a homeowner who’s roof continues to be in poor repair and would like to force the homeowner to take action. However, the homeowner has refused to receive any mail from the association.

· What process should the Board follow in enforcing the C&Rs?

· Are there legal issues with the Board going uninvited onto a homeowner’s property to correct a deficiency?

· What are your recommendations for revising the C&Rs to clarify the enforcement process?

· What are the action options for the Board when the homeowner refuses to receive or acknowledge any communication or correspondence?

3. Interpretation questions pertaining to pet limitations

Our C&Rs currently contain a pet limitation provision: “A maximum of two (2) dogs, cats, or other household pets may be kept, provided that they are not kept, bred or maintained for any commercial purpose” The Board has enforced this provision when it has been aware of a homeowner with more than two dogs. It has also recently issued an interpretation allowing a homeowner whose house occupies two lots to have up to 4 dogs. The Board is concerned that the ambiguity of this provision may make any enforcement challengeable because household pets can also be defined to include fish, birds, hamsters, guinea pigs, and reptiles. The Board is reluctant to get into the business of counting fish and it is not clear how the provision applies to someone with two cats and a dog or any other combination of more than two pets.

· Is the wording of this C&R provision enforceable?

· Can the Board limit the number of animals that a homeowner can have?

· What are the necessary elements of any pet limitation C&R so that such provisions can be enforced?

· What recommendations do you have for C&R language regarding pet limitations or should we consider eliminating the provision.

· Was the Board within its authority to issue the interpretation of the C&R with respect to this first homeowner who built one house on two lots?

4. Options for site-maintenance agreements with builders during construction process

Some Association members have complained about how builders are maintaining their construction sites. We currently have dealt with this by contacting the builder and asking that they address the problem, which has usually worked although not necessarily very quickly. It has been suggested that the association require builders put money on deposit that could be tapped to correct deficiencies. Alternatively, it has been suggested that the Board create a Memo of Understanding (MOU) specifying site management expectations and a process for complaints to be made and the timing for corrective action.

Ÿ Does the Board have the authority in the C&Rs to require builders to deposit funds and then to tap such funds to correct problems?

Ÿ What would the Board have to do if it wanted to implement such an approach?

Ÿ If the Board were to implement an MOU approach, what would be your recommendations for wording or implementation?

5. Appropriateness of including County ordinances in C&Rs

Our C&Rs now include the same specific language regarding noise, pet management, and vehicle parking restrictions that is spelled out in Flagler County Ordinances. Our concern is that including them explicitly in the C&Rs rather than by reference makes the Board the enforcement authority rather than the County.

Ÿ What is your recommendation as to whether such provisions should be included in the C&Rs?

Ÿ Do we have the authority to take action on such violations and what process should we follow with regards to involving Flagler County authorities?

6. Action needed if property insurance required by C&Rs cannot be obtained

The C&Rs states that the Association, without prior written approval of at least 2/3rds of the lot owners, shall not be entitled to fail to maintain fire and extended coverage on the Recreation Facility on a current replacement cost basis in an amount not less than one hundred (100%) percent of the insurable value (based on current replacement cost). Currently the Recreational Facility has a bathroom building but may in the future have a pavilion. Our insurance provider says that for 2006 no insurance companies are writing fire and extended coverage policies for such low valued structures. Moreover, if a pavilion is built, it is unlikely that we would be able to get windstorm coverage.

Ÿ What action does the Board need to take now because we cannot get insurance?

Ÿ Does extended coverage mean “wind insurance” and if so, what can we do if no one will right such a policy?

Ÿ What would you recommend as a way to reword this provision given the situation of the insurance marketplace?

7. Need/approach to revising C&Rs now that Board has taken over from developer

The developer has sold his last lot and legal papers were filed that turned the association and its responsibilities over to the Board.

Ÿ Would you recommend that the Board revise the C&Rs to eliminate the references to the developer’s authorities and responsibilities and to substitute the Board or Association where appropriate?

Ÿ If we revise the language, do we issue a new document or prepare another amendment? What process should we follow?

8. What to do about fees specified in C&Rs that were not collected

The C&Rs call for each original lot owner to pay a $100 fee to the association and for applicants for Architectural Review to pay a $50 fee. The developer and previous Boards have never collected such fees.

Ÿ Is the current Board under any obligation to collect back fees?

Ÿ Does previous non-collection limit the Board from collecting the Architectural Review fee in the future?

Ÿ What wording changes to the C&Rs would you suggest to make the collection of fees more enforceable?

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4.. Treasurers report: Paul discussed the final budget report for 2005. For the year, total expenses, (including the $7795 spent from Reserves to replace the pool deck) exceeded total income by $193. The association’s reserves (cash balance) going into 2006 will be $13,859. The report also shows that the social committee expense for the holiday party totaled $230.38. Total expenses for the party were $l727.38 and attendees paid $1497.00. The Board had committed to paying $200.00 for hall rental deposit/charge and Bob Singleton had generously agreed to pay anything over that amount. Since actual expenses totaled only $30.38 over the budgeted amount and total social committee expenses were under budget for the year, Paul suggested, and the Board concurred, that the Association would cover that cost. (The final 2005 budget report and 2006 budget is attached ).

Paul asked Karen about having an independent review of the books done, which is not required, but

has been done in previous years. Karen and the other Board members thought it would be a good idea for the review to be done, jointly by two association members if feasible. Norm Humphreys has done it before, and Paul said that Charles McMorrow is an auditor and Karen will call him. Paul will talk to Norm.

Karen said that 77 paid dues and 79 homeowners have not paid. A reminder will be put on the website and highlighted in the meeting minutes.

DUES MUST BE PAID BY JAN 31,2006. without incurring a penalty for late payment

5. Operations report: Joe discussed measures to diagnose and fix a leak in the pool and anticipated maintenance activities during 2006.

[background on the pool leak: On December 14, Steve Steele recognized that our pool water bill was about $100 higher than normal and upon inspection found that the water meter was continuing to run although there was no faucets or anything turned on. Joe and Steve searched for obvious problems. After finding none our pool maintenance company, A1A Pools investigated and indicated that they thought the problem related to some cracked tiles but would not guarantee the repair. The Board authorized Joe to deal with this emergency by contacting a pool leak diagnostic company that had been used by members of the community. Joe obtained cost information and Paul authorized Joe to proceed with the emergency repair, given that the anticipated cost was within the $1000 that the Board had budgeted as reserve expenditures for deferred maintenance. On December 20, Paul signed a contract with “American Leak Detection“ for them to diagnose the problem and perform necessary minor repairs, subject to Joe‘s approval.]]

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Joe said that on January 12, 2006, the company diagnosed several leak items in the pool and performed repairs of the gaskets around the floor drain and lights to address the problem. The expense for this repair was $805 and was guaranteed for 30 days. The company had also noted that there were 3-4 cracked tiles but did not determine that they were leaking at this time. Given the short time frame for the guarantee, Joe has placed a bucket in the pool and turned off the recalculate to assess the pools evaporation rate so it could be determined whether water is continuing to leak. In Joe’s view the few cracked tiles should be replaced this year and consideration should be given for replacing all of the original tiles in 2007. Based on information from the pool maintenance company, the tile repair should be able to done for about $100 depending on the exact number of tiles. Sara asked if the tiles could be matched and Joe indicated that a relatively close match would be possible, but given that the tiles were 12 years old, an exact match would be difficult. Paul asked if there was any objection to replacing the tiles now. With no objection, Joe will proceed to have the 10 or 12 tiles replaced in February.

Joe will coordinate with Lou for mulching the beach path and repair work on the walkover which is planned for March. Both the walkover repair and mulching will be done as volunteer projects.

The 2 ponds will be treated in March or April. Some of the grass eating fish will be replaced. (3-5 in the small pond and 6-10 in the large pond). The cost of the fish is approximately $7.50 per fish.

The palm trees by the pool will be trimmed when the berries appear and before the hurricane season. The schedule for this will be during the summer months, before August 1, 2006.

Joe contacted St. John s Water Management about clearing the grass around grates on roads. They said that using roundup is not a good idea if there are fish in the ponds, as it is a killing chemical . Joe said that when a contract is drawn up for lawn maintenance that it should include weed eating the grass around the grates . Paul asked Joe to go over the existing contract for lawn maintenance and add any additional items that should be included before letting it out for bid. Joe questioned the maintenance around the dry pond. Joe suggested that Paul talk to Mr. Baggett (St. John’s Water Management) about proceeding to keep this area functioning the way it is supposed to.

6.. Establishing the calendar of Social Activities and Meetings for 2006:

Paul questioned Jim Morelewicz about the date for the 2006 Christmas party which needs to be scheduled. Jim said that all Fridays and Saturdays in December have been reserved, so the party has been scheduled for Sunday, Dec. 10, 2006 Peggy gave Jim a check for $200.00 to hold the VFW hall.

The board meetings are scheduled for March 9, May 4, August 17, October 12, November 16, and the annual members meeting for December 7. The Neighborhood party at the pool is scheduled for June 17.

Paul said that when we reserve the Community Center, we have the facility for the whole day and he thinks that maybe some informal social events could be held during the day. {Anyone interested in coordinating a afternoon of cards or crafts or any other type of get together on one of the meeting days should contact Paul . )

7. Communication with members: Paul said he is working with Joe Sermarini to getting messsages through the HBEHOA site. The Yahoo site that messages are sent out from is up and working and we have the ability to receive messages from the membership.

Peggy said that there are several members whose addresses are not correct or we do not know the address. We will work on finding the correct mailing addresses for the mail that has been returned, no forwarding address known.

Paul asked Karen if there was anything to be brought up about the website. Karen will work with Joe Sermarini about enhancing the website Joe has changed the header from “Palm Coast” to Flager County and the zip code has been corrected.

Paul said that if we want the “Beachcomber Newletter” to continue, we will need a new editor.

The next board meeting will be March 9, 2006 at 7:00pm at the Community Center. Sara made a motion to adjourn, seconded by Karen. The meeting was adjourned at 8:50pm.

Respectfully submitted,

Peggy Steele, Sec. jan06hbeboardmeetpzm