(i) Labor costs. State the number of full and part-time staff projected for the HOA in Schedule A and whether the staff will be union members. State whether such level of staffing complies with all applicable housing and labor laws. The labor budget must include benefits required by Federal, State or local law or required by contract such as worker's compensation, disability insurance, welfare and pension contributions by employers, unemployment insurance and payroll taxes. Specify the wages and the cost of each applicable benefit. The budget must reflect current wage rates and payroll tax rates applicable for the budgeted year, and reasonably anticipated increases, or increases now mandated by contract. If applicable, state the expiration dates of all union contracts. If there is non-union labor in the development, discuss whether their wages meet minimum wage laws. In the case of an occupied nonresidential development, if the budget reflects a reduction in the existing staff, disclose what effect this will have on the existing level of services and whether such reduction is lawful.

(ii) Heating, cooling, and hot water costs. State the type and quantity of energy projected to be used during the year and the projected cost per gallon or other pricing unit inclusive of sales tax for all energy costs for providing heat, air conditioning, and hot water to the HOA property. State the basis for projecting the quantity of energy to be used. In the case of an occupied nonresidential development, unless it would be misleading for a particular development, base the projected quantity of energy on the average quantity of energy purchased for the prior three years. State the quantity of energy purchased in each of the three prior years, the average cost per gallon or other pricing unit and the total cost per year. The Department of Law may, from time to time, issue pricing guidelines to reflect minimum fuel costs.

(iii) Utilities (e.g., electricity and gas). State the basis for the projected consumption and projected unit cost for utilities. Unit cost should be based on the current tariff plus a reasonably anticipated increase which should be set forth, e.g., estimates based on current tariffs plus 10 percent increase. State which services will be provided by or through the board of directors and which must be obtained directly by home or lot owners. In the case of an occupied nonresidential building, unless it would be misleading for a particular development, base the projected quantity of the utilities on the average quantity of the utilities purchased for the prior three years.

(iv) Water charges and sewer rents. State the basis for the projection. If water charges or sewer rents will be separately billed by the HOA to individual lot or homeowners, the estimated individual annual charges should be stated in a separate schedule.

(v) Repairs, maintenance and supplies. Itemize the material components of the expense for repairs and maintenance that are the responsibility of the HOA such as interior repairs, roofing, exterminating, gardening, landscaping, janitor supplies, painting, and other service and maintenance items not included under “service contracts”, “road maintenance”, “snow removal”, “refuse removal” or “other”. State whether sponsor has procured or arranged actual contracts for the services described. Base the cost of the services on actual estimates, and state such basis in the footnote. In the case of an occupied nonresidential development, if the total budgeted amount is less than 80 percent of the maintenance expense indicated in the prior two years of certified financial statements, disclose and explain the reason for the projected decrease in expenses.

(vi) Road maintenance. If applicable, describe the services provided and the cost associated with maintaining the roads, including reserves set aside for repair and replacement. State the basis of the cost and indicate whether sponsor has procured or arranged actual contracts for the services described.

(vii) Service contracts. State the name of the contractor, the service, the annual cost and the expiration date of the contract. Highlight as a special risk any contract with an expiration date more 5 years after the anticipated first closing unless it is customary in the area to enter into a long-term contract for the service rendered (e.g., cable television contract).

(viii) Snow removal and refuse removal. State the services to be provided and the basis for the projected costs.

(ix) Insurance. If HOA property includes buildings or if the HOA is providing common fire insurance on homes, the budget for insurance must provide for fire and casualty insurance under an agreed amount replacement cost policy or under a policy including at least an 80 percent co-insurance provision so that the insured shall not be a co-insurer. Discuss the adequacy of the insurance to replace the structure in the event of total loss and to avoid being a co-insurer in the event of partial loss. If the homes of the HOA members are attached and common fire insurance coverage is not required, highlight as a special risk the consequences which could result if an uninsured or underinsured unit is damaged or destroyed by fire or other casualty. ( Note: If common fire and casualty insurance is mandatory, provision should be made in the declaration or by-laws to require mortgage holders to waive their customary right to apply insurance proceeds to the mortgage indebtedness.) Disclose the items covered, the coverage amount limits, the deductibles and the exposure insured against.

(x) Management fees. State the basis for the projected management fee. The projected cost must include any costs required by the terms of the management agreement, such as bonding. Highlight as a special risk if the cost of the management contract is greater or substantially less than the prevailing cost for similar services, and state the prevailing cost which would be charged for these services. If no manager or management contract is provided for in the budget, highlight as a special risk, state the services that homeowners will have to provide and disclose that maintenance charges will increase if the HOA retains a managing agent in the future.

(xi) Legal fees and audit fees. If the budgeted amount for legal fees is less than $5,000, the footnote must indicate the extent to which legal services are budgeted. Audit fees must be based on and refer to a fee quotation from a certified public accountant for preparing the yearly certified financial statement for the HOA.

(xii) Real estate taxes. State the assessing authority, the projected assessed valuation and the basis for such valuation, the tax rate and the projected amounts to be paid. If the assessing authority or legal counsel renders an opinion that the assessed valuation of the HOA property will be reflected in the assessed valuation of the individual lots or homes, real estate taxes may be budgeted at zero ($0). If no opinion is available, include an expert's projection of assessed valuation at Exhibit B-10, and budget for real estate taxes based on the projected assessed valuation.

(xiii) Franchise or corporate taxes, income taxes and sales taxes. Include in the budget if taxes are payable by the HOA pursuant to State or local law, or under Federal income tax law, or furnish proof, by opinion of counsel or confirmation from taxing authorities, that the HOA is not subject to such taxes pursuant to such laws.

(xiv) Reserve. Some HOAs will be responsible for replacing roofs, repainting unit exteriors, resurfacing parking areas and roadways. These items will require special assessments unless reserves are built into the annual budget taking into account the life of the items. A reserve should be set aside for this purpose, or the probability of incurring substantial special assessments in the future indicating the replacement cost of the items should be highlighted as a special risk. The footnote must indicate the expected life of the item, the projected replacement cost and the calculation of the amounts to be placed in reserve each year.

(xv) Note: Roadways and sewers. The budget does not have to include road maintenance if roads are dedicated to the local government. The cost of sewage disposal does not have to be included if it is part of a local government sewer system. If the roads have not been dedicated when the plan is submitted or if the local government is not operating the sewer system when the plan is submitted, sponsor must state approximately when the local government will assume responsibility, whether there are any conditions precedent, and whether any completion bonds have been posted. If the local government will not assume responsibility until after the first closing, sponsor must either budget maintenance costs or agree to bear the cost of maintenance and operation until the local government assumes responsibility and indicate whether security has been posted to guarantee performance of this financial obligation.

(xvi) Other expenses. Include additional expenses such as association dues, HOA telephone expenses, license fees, registrations, permits, contingencies and miscellaneous expenses, including interest.

(i) State that the examination was made in accordance with generally accepted auditing standards and included such tests of the accounting records and other auditing procedures as the accountant considered necessary in the circumstances.

(ii) State that, in the accountant's opinion, the statement of income and expenses presents fairly the income and expenses of the building for the periods specified in conformity with generally accepted accounting principles.

(iii) Be signed by a duly authorized signatory or by the firm.

(i) Mandatory escrow agreement. All deposits, down payments, or advances made by purchasers prior to closing of each individual transaction shall be held pursuant to a written agreement entered into between the sponsor, the purchaser, and the escrow agent. Said provisions may be included in a separate escrow agreement or in the purchase agreement entered into between the sponsor, the purchaser and the escrow agent, and are referred to in this paragraph as the “escrow agreement.” The plan must set forth the material terms of the escrow agreement. The sponsor shall specify the exhibit in Part II of the plan that contains the escrow agreement. If a separate escrow agreement is used, a copy of the full agreement must be contained as a separate exhibit to the plan in Part II. Disclose, without limitation, any indemnity by the sponsor in favor of the escrow agent, provision for discharge of the escrow agent’s obligations by the sponsor upon payment of the deposit and interest in accordance with these regulations, any right of the escrow agent to represent the sponsor in any lawsuit, any compensation by the sponsor to the depository bank, any provision for payments by the sponsor under an indemnity in favor of the escrow agent and whether the sponsor will compensate the escrow agent for acting as such. The plan and escrow agreement must include language conforming to subparagraphs (v)-(vii) of this paragraph. However, the failure to include such language in the plan or escrow agreement shall not excuse the sponsor and the escrow agent from compliance with said subparagraphs.

(ii) Payments. All funds received from purchasers whether in the form of checks, drafts, money orders, wire transfers, or other instruments which identify the payor, shall be made payable to or endorsed by the purchaser to the order of the attorney or law firm as escrow agent.

(iii) The escrow agent. The escrow agent must be an attorney or firm of attorneys admitted to practice in the State of New York or an attorney admitted in a foreign jurisdiction who submits to the jurisdiction of the State of New York for any cause of action arising out of the escrow provisions set forth in the escrow agreement. The authorized signatories on any escrow account must be attorneys admitted to practice in the State of New York or admitted in a foreign jurisdiction who submit to the jurisdiction of the State of New York for any cause of action arising out of the escrow provisions set forth in the escrow agreement. Neither the escrow agent nor any authorized signatory on any account may be the sponsor, the selling agent, the managing agent, or a principal thereof. However, a law firm that has a member who is a principal may be the escrow agent provided that members of the firm who are signatories on any account are not themselves principals. Only an attorney or a member of a firm acting as escrow agent shall be a signatory on any account and only such attorney shall be authorized to release funds. The name, address and telephone number of the escrow agent and of each attorney who is a signatory must be stated in the plan.

(iv) The account(s). All deposits, down payments, or advances made by purchasers prior to closing of each individual transaction, whether received before or after the date of consummation of the plan, must be placed within five business days after the escrow agreement is signed by all necessary parties in an attorney's segregated special escrow account or accounts in a bank or banks doing business in the State of New York which account is insured by the Federal Deposit Insurance Corporation (“FDIC”). Sponsor shall state the applicable FDIC insurance limits, whether and to what extent the deposits, down payments, or advances are insured, and whether sponsor may utilize more than one segregated special account for each deposit, down payment, or advance. Include as a special risk that deposits in excess of said limits will not be federally insured. An attorney shall open and maintain any such account in his or her own name, or in the name of a firm of attorneys of which he or she is a member, or in the name of the attorney or firm of attorneys by whom he or she is employed, separate from such attorney's personal accounts or from any accounts in which assets belonging to the firm are deposited, and separate from any accounts maintained in the capacity of executor, guardian, trustee or receiver. A master escrow account with a sub- account for each purchaser is acceptable. The name of any account, the bank, and the bank address must be stated in the plan. The word “escrow” must be included as part of the name of any account. Funds from any account may be released only by signature of the attorney(s) who is/are named as an authorized signatory or signatories. Neither the sponsor nor any principal of the sponsor may be an authorized signatory on any account. Funds must be placed in an interest-bearing account or accounts, with all interest credited to the purchaser, unless the sponsor elects to place the funds in a separate Interest-on-Lawyer's-Account (“IOLA”) for each plan pursuant to Judiciary Law section 497. The plan shall indicate whether the interest rate to be earned will be the prevailing rate for such accounts. State the current prevailing rate and when interest will begin to accrue. No fees of any kind may be deducted from any account principal or any interest earned thereon. Sponsor shall bear any administrative cost for maintenance of any account.

(v) Notification to purchaser. Within 10 business days after the escrow agreement is signed by all necessary parties, the escrow agent shall notify the purchaser that such funds have been deposited in the bank indicated in the plan, and shall provide any account number and the initial interest rate. If the purchaser does not receive notice of such deposit within 15 business days after tender of the deposit, he or she may cancel the purchase and rescind within 90 days after tender of the deposit. Complaints concerning the failure to honor such cancellation requests may be referred to the New York State Department of Law, Real Estate Finance Bureau, 120 Broadway, 23rd Floor, New York, N.Y. 10271. Rescission may not be afforded where proof satisfactory to the Attorney General is submitted establishing that the escrowed funds were timely deposited in accordance with these regulations and requisite notice was timely mailed to the purchaser.

(vi) Escrow revisions. Before funds are transferred to any new escrow account, or if the escrow agent is replaced, the plan must be amended to provide the same full disclosure with respect to any new account, the escrow agent and the escrow agreement as was originally provided. A bond, letter of credit or other security may be substituted for any escrow account only after the Department of Law approves in writing the use of such alternate form of security, pursuant to the provisions of paragraph (4) of this subdivision et seq.

(vii) Release of funds. The escrow agreement and the plan must set forth the requirements and procedures for the release of the escrowed funds. These shall include:

(viii) Disputes.

(ix) Exhibits to plan. Copies of the forms provided by the bank for opening any escrow account and the form of escrow agreement, if separate from the purchase agreement, must be included as Exhibit B-21 of the submission.

(x) Records on file. The escrow agent shall maintain all records concerning any escrow account for seven years after release of the funds. Upon the dissolution of any law firm which was the escrow agent, the former partners or members of the firm shall make appropriate arrangements for the maintenance of these records by one of them or by the successor firm and shall notify the Department of Law of such transfer.

(xi) Review and audit. The Department of Law may perform random reviews and audits of any records involving escrow accounts to determine compliance with statute and regulation.

(xii) Waiver void. Any provision of any contract or agreement, whether oral or in writing, by which a purchaser purports to waive or indemnify any obligation of the escrow agent holding trust funds is absolutely void. The provisions of this section of the regulations shall prevail over any conflicting or inconsistent provision in the offering plan or in a purchase agreement.

(xiii) Trust obligation of sponsor. Nothing contained herein shall diminish or impair the sponsor's statutory obligation to each purchaser pursuant to General Business Law section 352-h to hold in trust all deposits, advances or payments made in connection with the offer until consummation of the transaction with such purchaser. Consummation of the plan does not relieve sponsor of its obligations pursuant to General Business Law section 352-h. Funds from any escrow account remain the property of the purchaser until employed in connection with the consummation of the transaction. Such funds shall not be a part of the estate of the sponsor or the escrow agent upon any bankruptcy, incapacity or death.

(i) Application for alternate security. Sponsor must submit an affidavit which contains full information as to the proposed usage of such funds, the sponsor's financing of construction or rehabilitation work, expected completion date, the terms and conditions of the proposed surety bonds or letter of credit, and required undertakings and covenants.

(ii) Documentation. The proposed form of surety bond or letter of credit, any underlying agreement or related agreement, and any undertaking or covenant required hereunder, shall be appended to the application and also filed as exhibits to the plan in Exhibits Part B section 22.2(c)(6)(ii)(v) (B-22) of this Part or as exhibits to an amendment to the plan.

(iii) Change from escrow account. Where surety bonds are or a letter of credit is to be provided under an amendment to the plan calling for release of funds already deposited in escrow, the amendment shall provide for, and annex a form for, the written consent of each affected purchaser and shall provide for continuation of escrow of funds of any purchaser who does not execute and deliver such written consent to the sponsor.

(iv) Disclosure. If an application for alternate security is approved, the terms of such alternate security shall be disclosed in the plan or in an amendment to the plan promptly submitted.

(i) Deposits into escrow account(s). All down payments and deposits, received after the Attorney General's approval of the use of surety bonds as alternate security, shall be placed, within five business days after the escrow agreement is signed by all necessary parties, in an attorney's segregated special escrow account or accounts, established pursuant to and in compliance with paragraph (2) of this subdivision. Such funds shall be released by the escrow agent to the sponsor upon receipt by the escrow agent of a copy of the surety bond issued to the purchaser whose funds are being released.

(ii) Payments. All funds received from purchasers, whether in the form of checks, drafts, money orders, wire transfers, or other instruments which identify the payor, shall be made payable to or endorsed by the purchaser to the order of the attorney or law firm as escrow agent.

(iii) Requirements to act as surety. The surety company must be licensed to write insurance in the State of New York by the New York State Department of Financial Services, whether or not the property which is the subject of the plan is located in the State of New York unless the law of the state where the property is located requires otherwise. If the property is located outside New York State and the sponsor claims that the law of such state conflicts and is controlling, the sponsor's application must specify the conflicting law. In order for the application for alternate security to be approved by the Attorney General, the applicant must show that the surety company with which the sponsor proposes to contract has a current rating for debt securities no lower than the third highest grade conferred by at least two of the national reporting services regularly evaluating insurance companies.

(iv) Agreement between sponsor and surety. The plan must fully disclose the material terms of the agreement between the insurance company as surety and the sponsor, including the premium to be paid by the sponsor, any agreement by which sponsor provides collateral to secure its obligations to the surety and any agreement by the sponsor indemnifying the surety. The agreement must provide that the surety will abide by directives in conformity with these regulations.

(v) Provisions of the bond. The surety bond must specify the name and address of the sponsor as principal; the name and address of the surety company to which claims for payment may be made; provision for the name and address of the purchaser as obligee on the bond; provision for the amount of the down payment or deposit secured and the rate of interest, if any, to accrue on such funds; the term of the bond, and, if the bond is for a finite period, a guarantee by the surety that it will pay the amount secured to the purchaser-obligee prior to expiration of the bond or a guarantee by the sponsor that the bond will be renewed before expiration.

(vi) Term and continuation. Each surety bond and any accompanying agreement shall provide that it will continue in effect or that it will be renewed periodically until consummation and closing of the sale of the respective unit the down payment for which is secured by such surety bond or until the secured funds of a purchaser have been returned in full, or until the funds secured by the surety bond have been placed in any escrow account pursuant to paragraph (6) of this subdivision or until there is an undisputed purchaser default or a final, non-reviewable determination by the Attorney General or final, non-appealable order or judgment of a court of competent jurisdiction that the purchaser has defaulted and that the sponsor is entitled to the secured funds.

(vii) Delivery of the surety bond. The sponsor shall cause the surety to mail or personally deliver the surety bond to the purchaser-obligee before the funds are released to the sponsor from any escrow account. The sponsor, the escrow agent and the surety company shall each retain a copy of the surety bond.

(viii) Invoking the bond. The purchaser-obligee shall have the right to demand payment of the amount secured by the surety bond directly from the surety, without first requesting payment from the sponsor. The surety shall be obligated to pay the amount secured by the bond to the purchaser-obligee without the consent or despite the objection of the sponsor, upon the following events or circumstances:

(ix) Failure by purchaser-obligee to produce a copy of the bond. A purchaser's inability to produce a copy of the surety bond shall not be a basis for the surety to reject the purchaser's claim. The surety shall retain a copy of the bond and shall pay the secured funds to the purchaser-obligee without a copy of the bond as long as the purchaser is able to provide proof of identity as the obligee on the bond.

(x) Disputes.

(i) Amount. The amount of the letter of credit shall be at least 125 percent of the aggregate of all down payments or payments expected to be received from purchasers, and not retained in escrow, during such period of time as the letter of credit will be needed, as estimated by the sponsor in the application to the Department of Law. The amount of the letter of credit may be reduced or increased as warranted by circumstances and pursuant to a filed amendment to the plan.

(ii) Irrevocability. The letter of credit must be irrevocable during the stated term and any renewal term.

(iii) Beneficiary. The beneficiary must be an attorney, or firm of attorneys, acting as or qualified under subparagraph (2)(iii) of this subdivision to act as escrow agent under the plan, who shall act as a fiduciary for the benefit of purchasers under the plan.

(iv) Authority to draw. The letter of credit must provide that the beneficiary shall have sole power to draw upon the letter of credit without the consent or despite the objection of the sponsor or of any provider of underlying credit, at such times or upon such events as are set forth in subparagraph (ix) of this paragraph.

(v) Issuer. The issuer must be a bank authorized to act as a commercial bank or savings institution under supervision of the New York State Department of Financial Services or a federally supervised banking institution located in the State of New York, unless the property is located in another state and the letter of credit is issued by a bank located within such state. In order for the application for alternate security to be approved by the Attorney General the applicant must show that the issuer bank has surplus funds and net worth of at least 10 times the amount of the letter of credit, and must have a current rating with respect to its debt securities that is within “investment grade” by one of the generally accepted national reporting services regularly rating the debt securities of banking institutions and that the provisions of the letter of credit include the right of the beneficiary to draw down the letter of credit in conformity with these regulations.

(vi) Term and continuation. The letter of credit and related agreement and any accompanying undertaking shall provide that it will continue in effect or that it shall be periodically renewed until consummation and closings of sales of all units referred to in the application for alternate security pursuant to paragraph (3)(i) of this subdivision or until the covered funds of purchasers have been returned to them in full.

(vii) Undertaking. If the letter of credit will expire prior to the latest date of closings of sales of all such units, provision for renewal of the letter of credit without loss of irrevocability and without any change of terms shall be afforded by:

(viii) Operative provisions. Upon approval of a sponsor's application for use of a letter of credit as alternate security:

(ix) Right to draw upon letter of credit. The escrow agent as the beneficiary of the letter of credit, acting as fiduciary for the benefit of purchasers under the plan whose funds were released from escrow by reason of the grant of sponsor's application, shall have the duty and the right to draw upon and collect the proceeds of the letter of credit, 10 business days after notice to the sponsor and sponsor's failure or refusal to restore such funds to the escrow agent, without the consent or despite the objection of the sponsor or the provider of the credit, upon the following events or circumstances:

(x) Disputes.

(i) not fewer than seven days after delivering an executed purchase agreement together with the required deposit to rescind the purchase agreement and have the full deposit refunded promptly. The purchaser must either personally deliver a written notice of rescission to the sponsor or selling agent within the seven day period or mail the notice of rescission to the sponsor or selling agent and have the mailing post marked within the seven day period; or

(ii) not fewer than three business days to review the offering plan and all filed amendments prior to executing a purchase agreement.

(i) to comply with applicable laws or regulations;

(ii) to remedy any notice of violation; or

(iii) to remedy any work order by an insurer.

(i) Sponsor must record and file the declaration prior to closing title to any home or lot.

(ii) Describe the purpose of the HOA, and the easements created by the declaration. State that membership in the HOA is mandatory for home or lot owners. State the minimum number of homes or lots that will be part of the HOA and the maximum number of homes or lots that may be part of the HOA, and any time limits within which the sponsor has the option to include additional homes.

(iii) State the expiration date of the convenants and restrictions and whether the provisions of such covenants and restrictions will be extended thereafter.

(iv) Describe any restrictions on who may become a member of the HOA; restrictions on exterior architectural changes, design, color, landscaping or appearance; restrictions on occupancy density; restrictions on the kind, number or use of vehicles; restrictions against renting, mortgaging or conveying property; restrictions on commercial activity; or any other restrictions. If there are any occupancy restrictions based on age, or family composition, these must be highlighted as a special risk and a counsel's opinion with regard to the legality of such restriction pursuant to Federal and state law must be included in the plan.

(v) State that any land or construction loan mortgage on any part of the planned development will be subordinate to the declaration, or include a convenant which insures the HOA's and/or the home or lot owner's undisturbed use of the premises for the purposes described in the plan even in the event of foreclosure.

(vi) Describe any requirement of members to maintain fire or other insurance on homes and the consequences if a member does not do so.

(vii) State whether the declaration allows the sponsor to annex other real estate, and describe the effect of further annexation.

(viii) Describe any provisions that do not apply to the sponsor or to a mortgagee who takes title by deed in lieu of foreclosure or by foreclosure.

(i) State the date or projected date and statutory authority under which the HOA was or will be incorporated.

(ii) State the number and composition of the board of directors, eligibility requirements, elections and when the first meeting will be held. Highlight as a special risk if the first meeting of the board of directors will not be held within six months of the first closing. State whether and under what circumstances officers and directors may be removed.

(iii) Describe voting procedure, the vote needed to amend the HOA's declaration or bylaws and the vote needed for extraordinary items such as capital improvements.

(iv) State the names and business addresses of the existing officers and directors of the HOA and their relationship, if any, to sponsor, sponsor's principals or sponsor's attorney.

(v) State when association charges will first be levied against owners, how the charges can be increased or decreased, how charges and delinquent charges will be collected, whether unpaid charges bear interest and the rate, whether unpaid charges will be a lien on a member's property, whether members will be assessed with late charges and/or attorney fees for collecting unpaid charges, whether the lien for unpaid charges will be subordinate to a first mortgage, whether a member with unpaid charges can use HOA property other than property for ingress and egress from his or her home. Highlight as a special risk if voting rights may be suspended for nonpayment of assessments. State whether fines or other penalties will be levied for violation of rules and regulations promulgated from time to time by the HOA.

(i) sponsor will be obligated for association charges including supplemental charges on all unsold homes or lots; or

(ii) sponsor will be obligated for the difference between the actual Association expenses including reserves applicable to completed improvements as provided for in the association's budget, and the association charges levied on owners who have closed title to their homes or lots as projected in Schedule A of the offering plan which shall be paid to the association on a monthly basis.

(i) The declaration of covenants, restrictions, easements and liens when recorded will be legal and valid, including specific reference to age restrictions, if any.

(ii) Members of the HOA will or will not be entitled to deduct any portion of Association charges for federal or state income tax purposes.

(iii) The HOA will qualify as a tax-exempt organization under Internal Revenue Code section 528. If applicable, describe the extent of the exemption from income taxes for an HOA that elects to be treated as a tax exempt organization under section 528 of the Internal Revenue Code. If applicable, discuss Internal Revenue Code section 277.

(iv) The HOA property and homes sold in conjunction with the HOA, if built in accordance with the plans and specifications, will conform to applicable zoning ordinances and statutes. This opinion may be included by amendment to the plan before the first closing occurs.

(v) The HOA will be liable for sales, corporate or franchise taxes pursuant to state or local law.

(i) the name and address of the managing agent;

(ii) the term of the management agreement and the agent's right, if any, to cancel the agreement;

(iii) all fees and other compensation for services;

(iv) the major duties and services to be performed by the managing agent including whether bookkeeping, payroll and collection of association charges are provided;

(v) the obligation, if any, of the HOA to reimburse the agent for expenses incurred or to indemnify the agent against liability for acts properly performed by it pursuant to the agreement;

(vi) whether the management agreement is assignable by the agent and what restrictions are imposed on assignability;

(vii) the right of the board of directors to cancel the agreement with or without cause.

(i) The date and term of each lease, the space leased, the identity of the lessee and sublessee, if any, the rent and any additional rent payable thereunder, and the present and permitted use for the space.

(ii) Whether the present and future rent payable by the lessee is sufficient to cover the expenses fairly attributable to the leased space.

(iii) Highlight as a special risk if:

(iv) Explain the board of director's rights and obligations under the lease with regard to making ordinary or structural repairs, rebuilding after a casualty, retaining insurance or condemnation proceeds, limiting uses to those compatible with the character of the development, and barring offensive uses. State whether consent of the board of directors is required before a lessee can assign or sublet space, change the current uses, alter the structure, or perform work that may result in mechanics' liens.