ADDITIONAL PROVISIONS

ADDITIONAL PROVISIONS

Material Changes

Any material change in the subdivision itself, or in the program for marketing the subdivision interests, or its
handling after the filing of the Application and Questionnaire is made or the public report is issued must be
reported to the Commissioner. This not only includes physical changes, such as changing the lot or street lines,
but any new condition or development which may affect the utility or value of the subdivision or the terms of
the offering. Basically, a material change is anything that results in the public report or questionnaire not
reflecting the true facts/conditions of the subdivision offering.

Changes in contracts, deeds, etc., used in the sale of lots or units in a subdivision may constitute a material
change to be reported to the Commissioner. The purpose of reporting is to enable the Commissioner to revise
the public report and to set forth the true conditions existing in the subdivision after any material change has
occurred or take other action as warranted.

For a limited time after subdivision sales begin, amendments to the management documents of common interest
subdivisions are invalid without the prior written consent of the Commissioner, if the change would affect an
owner’s rights to ownership, possession or use in any material way. (Code Section 11018.7)

The owner of a (non-exempt) subdivision must report to the Commissioner the sale of five or more parcels or
units to a single purchaser.

Failure to report material changes not only violates the law but may also furnish a basis for rescission of
purchases through court action.

Special Districts

If the subdivision lies wholly or partially within a special district such as a community services district, resort
improvement district, county water district or similar public or semi-public district, which has the power to tax,
issue general obligation bonds, and raise money by other means, for the purpose of financing, acquiring,
constructing, maintaining or operating improvements for the subdivision or for the purpose of extending public
or other services to this subdivision, the subdivider will submit a Special Assessment District and Special
Improvement District Questionnaire identifying the district, the amount and term of indebtedness, the effect on
the tax rate and the total assessment and annual assessment per lot, unit or parcel in the subdivision. This same
questionnaire elicits similar information about districts empowered to levy “special taxes.” The inquiry is not
concerned with school districts, irrigation districts, fire protection districts or similar districts not formed for the
particular purpose of providing services to this and connected projects.

Special Regulations for Common Interest Subdivisions

A number of regulations specify the documents and statements required for a planned development, community
apartment, stock cooperative, or condominium project. These requirements are set forth in Sections 2792.1
through Section 2792.33 of the Commissioner’s Regulations. Examples include “reasonable arrangements” for:

1. levying regular and special assessments against each owner;

2. the governing body’s distribution of annual financial and budget information to all members;

3. members’ meetings, voting rights, governing body powers, inspection of the association’s books and
records; and,

4. establishing maintenance and reserve funds.

Environmental Impact Reports

An environmental impact report (EIR) may be required by local government prior to approval of the map for
the subdivision.

A subdivision developer should determine as early as possible (preferably prior to filing a tentative map)
whether an EIR will be required for the project.

The California Coastal Act

The California Coastal Act allows local governments to adopt programs for coastal conservation. Generally, the
Coastal Zone runs the length of the state from the sea inland about 1,000 yards, with wider spots in coastal
estuarine, habitat and recreational areas. A subdivider planning to develop a tract of land within the Coastal
Zone must obtain a coastal development permit or an exemption.

Mineral, Oil and Gas Subdivisions

The definition of mineral, oil and gas subdivisions covers division of land into parcels of any size, even when
each parcel created is 160 acres or more in size. No public report on a mineral, oil or gas subdivision has been
issued for a number of years.

Advertising Criteria

Guidelines for subdividers in the advertising and promotion of subdivisions are contained in Section 2799.1 of
the Commissioner’s Regulations. These guidelines are applicable in determining whether advertising for sale or
lease of subdivision interests is false or misleading within the meaning of those terms defined in Business and
Professions Code Sections 10140, 10177(c), 11022 and 17500 of the Code.

Nothing contained in these standards limits the authority of the Commissioner to take formal action against an
owner, subdivider or agent for the use of false or misleading advertising of a type not specifically described in
these guidelines.

The DRE publication Guidelines for Subdivision Advertising (RE 631) contains advertising requirements and
prohibitions. RE 631 may be obtained from the DRE’s Sacramento Subdivision Office

Desist and Refrain Orders

If the Commissioner finds that a person is violating any provision of the Subdivided Lands Law or the pertinent
regulations or if the further sale or lease of lots in a given subdivision would constitute grounds for denial of the
issuance of a public report, the Commissioner may order the immediate cessation of such violations or the
immediate termination of selling or leasing of the property by the issuance of an Order to Desist and Refrain (D
& R) from such activity.

When the Commissioner issues a D & R, the person named therein has the right, within 30 days after its receipt,
to file a written request for a hearing to contest the order. The Commissioner must assign the request to conduct
a hearing to the Office of Administrative Hearings. If the hearing is not commenced within 15 days after receipt
of the request or on the date to which it is continued by mutual agreement, or if the decision of the
Commissioner is not rendered within 30 days after completion of the hearings, the D & R is deemed vacated.

Out-of-State Subdivisions

A developer who wishes to offer in California subdivision interests (other than in a time-share) located outside
of California but within the United States must register the project with DRE and include certain disclaimers in
advertising and sales contracts.

A developer who wishes to offer in California subdivision interests located outside the United States is not
required to register with DRE but must include a disclaimer in advertising and sales contracts.

Basically, the disclaimers mentioned above state that DRE has not examined the offering and urge a prospective
purchaser to seek the advice of an attorney who is familiar with real estate and development law in the state or
country where the subdivision is located.