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Q Who will decide the amount of the monthly HOA dues and how will the HOA operate? A The HOA dues are initially determined by the California Department of Real Estate (DRE). The DRE will determine the initial dues after reviewing the Park's budget and conducting a reserve study. That is, the DRE will analyze the useful life of the Park's capitol improvements and require the Park Owner to replace such improvements or put into a "reserve" ample funds to replace the improvements. For example, if an improvement cost $50,000, had a life expectancy of 30 years and had a useful life remaining of 15 years, the Park Owner would be required to deposit $25,000 into the reserve fund for that improvement. The HOA dues, in part, would then fund the other $25,000 over the next 15 years such that ample funds would be available to replace that improvement when necessary. HOA dues in other parks typically fall in the range of $140 $180 per month. Dues are established by the HOA Board. In determining whether dues should be raised, the Board considers not just the funds it must collect to replace capitol improvements but also cost increases in maintenance, insurance, utilities, etc. Accordingly, HOA dues may increase over time. Typically, the HOA Board will consist of 5 members. Initially, as majority owner, the Park Owner will assign three of the five positions and the remaining two must be residents. When more than half of the lots have been sold, the HOA Board will be controlled by the residents but the Board must comply with the CC &R's and with State law. A resident who chooses not to purchase a lot, however, will not be paying HOA dues; that resident will simply continue to pay rent. Q Who will be responsible for the infrastructure? A Currently, the Park Owner by agreement with the City is responsible for all expenses to maintain the Park's infrastructure and capital improvements. After conversion, as individual lots are sold, the Park Owner will transfer a 1/208 interest in the Park's common areas and infrastructure to each owner but the Park Owner will continue to have the financial responsibility for every lot the Park Owner continues to own. Q Can the Park Owner sell lots for whatever he wants? A If Tots are not priced reasonably, people will not buy them. The Park Owner has already invested substantial money to ensure a successful conversion. Furthermore, an appraisal will be made prior to application to the DRE for permission to sell lots. A licensed appraiser will conduct the appraisal to determine the fair market value of the lots based, generally, on sales of comparable property. 5