ARTICLE 3. ASSOCIATION BUDGET, ASSESSMENTS, AND LIENS

Section 3.1 Unit Owner's Covenants to Pay Assessments. By acquisition of any ownership interest in a Unit, the Unit Owner thereof covenants and agrees thereby, on behalf of himself or herself and his or her heirs, successors, and assigns, to pay the Association, in advance, all general and special assessments levied as provided herein. Assessments for Common Expenses and those specially allocated expenses must commence on all Units that have been created upon the conveyance of the first Unit in Lexington Subdivision; however, Declarant may delay commencement of assessments for some or all Common Expenses or specially allocated expenses, in which event Declarant must pay all of the Common Expenses or specially allocated expenses that have been delayed. In the event that Units may be added pursuant to reserved development rights, Declarant may delay commencement of assessments for such Units in the same manner.
 
Section 3.2 Specially Allocated Expenses. Pursuant to RCW 64.90.480, the Association shall specially allocate certain expenses as follows:
  1. Expenses benefiting fewer than all of the Units, or the Unit Owners of such benefited Units exclusively. must be assessed against the Units benefited, with the expenses allocated evenly between the benefited Units.
  2. Assessments to pay a judgment against the Association may be made only against the Units in Lexington Subdivision at the time the judgment was entered, in proportion to their Common Expense liabilities.
  3. To the extent that any expense of the Association is caused by the negligence, gross negligence or willful misconduct of any Unit Owner or that Unit Owner's tenant, guest, invitee, or occupant, the Association may assess that expense against the Unit Owner's Unit after notice and an opportunity to be heard, to the extent of the Association's deductible and any expenses not covered under an insurance policy issued to the Association.
  4. In the event of a loss or damage to a Unit that would be covered by the Association's property insurance policy, excluding policies for earthquake, flood, or similar losses that have higher than standard deductibles, but that is within the deductible under that policy, the Association may assess the amount of the loss up to the deductible against that Unit. This subsection does not prevent a Unit Owner from asserting a claim against another person for the amount assessed if that other person would be liable for the damages under general legal principles.
Section 3.3 Association Budget. The Association shall prepare, or cause the preparation of, an operating budget for the Association at least annually, in accordance with generally accepted accounting principles. The Declarant shall adopt the initial operating budget for the Association. The operating budget shall set forth all sums required by the Association, as estimated by the Association, to meet its annual costs and expenses, including, but not limited to, all management and administration costs, operating and maintenance expenses of the Common Elements, and services furnished to or in connection with the Common Elements, including the amount of all taxes and assessments levied against, and the cost of liability, property and other insurance on, the Common Elements, and including charges for any services furnished by or to the Association; the cost of utilities and other services; and the cost of funding all reserves established by the Association. The funds required to meet the Association's annual expenses shall be raised from a general assessment against each Unit Owner as provided hereafter. After adoption of the operating budget, the Association may revise the operating budget at any time and from time to time, in accordance with the procedures set forth in Section 3.3(a) below, as it deems necessary or advisable in order to take into account and defray additional costs and expenses of the Association.
  1. Adoption of Budget. Within thirty (30) days after adoption by the Board of any proposed regular or special budget of the Association, the Board shall provide a copy of the proposed budget to all Unit Owners and set a date for a meeting of the Unit Owners to consider ratification of the budget not less than fourteen (14) nor more than fifty (50) days after providing the budget. Unless at that meeting the Unit Owners to which a majority of the votes in the Association are allocated reject the budget, in person or by proxy, the budget and the assessments against the Units included in the budget are ratified, whether or not a quorum is present. In the event the proposed budget is rejected, or the required notice is not given, the periodic budget last ratified by the Unit Owners shall be continued until such time as the Unit Owners ratify a subsequent budget proposed by the Board.
  2. Budget Summary. As part of the summary of the budget provided to all Unit Owners, the Board shall disclose to the Unit Owners:
    1. The projected income to the Association by category;
    2. The projected Common Expenses and those specially allocated expenses that are subject to being budgeted, both by category;
    3. The amount of assessments per unit and the date the assessments are due;
    4. The current amount of regular assessments budgeted for contribution to the Reserve Account;
    5. A statement of whether the Association has a Reserve Study that meets the requirements of RCW 64.90.550 and, if so, the extent to which the budget meets or deviates from the recommendations of the reserve study; and
    6. The current deficiency or surplus in reserve funding expressed on a per Unit basis. 
Section 3.4 Levy of General Assessment. In order to meet the costs and expenses projected in its operating budget, the Association shall determine and levy in advance on every Unit a general assessment, which shall become effective only after the Board follows the procedure for ratification of a budget described in Section 3.3(a) and the Unit Owners do not reject the proposed assessment. The amount of each Unit's general assessment shall be the amount of the Association's operating budget divided by the sum of the number of Units. The omission by the Association, before the expiration of any assessment period, to fix the amount of the general assessment hereunder for that or the next period, shall not be deemed a waiver or modification in any respect of the provisions of this Article or a release by any Unit Owner from the obligation to pay the general assessment, or any installment thereof, for that or any subsequent assessment period, but the general assessment fixed for the preceding period shall continue until a new assessment is fixed. Upon any revision by the Association of the operating budget during the assessment period for which such budget was prepared, the Association shall, if necessary, revise the general assessment levied against Units and give notice to each Unit Owner in accordance with Section 3.3(a).
 
Section 3.5 Payment of Assessment. Installments of general assessments may be collected on a monthly, quarterly, semi-annual, or annual basis, as determined by the Board and ratified by the Unit Owners in accordance with Section 3.3(a). Unless the Board otherwise provides, one-twelfth (1/12) of the General Assessment shall be due in advance on the first day of each calendar month. Any Unit Owner may prepay one or more installments on any assessment levied by the Association without penalty.
 
Section 3.6 Nondiscriminatory Assessment. Except as otherwise specifically provided herein, no assessment shall be made at any time which may unreasonably discriminate against any particular Unit Owner or group of Unit Owners in favor of other Unit Owners.
 
Section 3.7 Commencement of Assessments. Liability of a Unit Owner for assessments shall commence on the date upon which any instrument of transfer to such Unit Owner becomes operative (such as the date of a deed or the date of a recorded real estate contract for the sale of any Unit) or, if earlier, the commencement date of Unit Owner's occupancy of such Unit.
Upon the initial closing on any Unit from Declarant, the buyer thereof shall pay a one-time assessment in the amount of Five Hundred Dollars ($500.00). This amount shall be in addition to any assessment established by the Association, and shall be paid by all buyers, including builders. This amount may not be used to defray expenses that are the obligation of the Declarant pursuant to RCW 64.90.480.
 
Section 3.8 Certificates of Assessment Payment. Upon request, the Board shall furnish written certificates certifying the extent to which assessment payments on a specified Unit are paid and current to the date stated therein. A reasonable charge may be made by the Association for the issuance of such certificate.
 
Section 3.9 Special Assessments. In addition to the general assessments authorized by this Article, the Association may, by following the same procedure for ratification of a budget set forth in Section 3.3(a), levy a special assessment or assessments at any time, applicable to that year only, for the purpose of defraying, in whole or in part, the cost of any construction or reconstruction, inordinate repair, or replacement of a capital improvement located upon or forming a part of the Common Elements, including necessary fixtures and personal property related thereto, or for such other purpose as the Association may consider appropriate. The due dates of any special assessment payments shall be fixed by the Association Action authorizing such special assessment.

Section 3.10 Effect of Nonpayment of Assessment. If any assessment payment is not made in full within thirty (30) days after it was first due and payable, the unpaid amounts shall constitute a lien against the Unit assessed and shall bear interest from such due date at a rate of twelve (12) percent per annum or the highest rate then permitted by law, whichever is less. By acceptance of a deed to a Unit, recording of a real estate contract therefore, or any other means of acquisition of an ownership interest, and whether or not it shall be so expressed in any such deed or other instrument, each Unit Owner shall be deemed to grant thereby to the Association, its agents and employees, and to Declarant during the Declarant Control Period, the right and power to bring all actions against such Unit Owner personally for the collection of such assessments as a debt, and to enforce the liens created by this Declaration in favor of the Association by foreclosure of the continuing liens in the same form of action as is then provided for the foreclosure of a mortgage on real property. The liens provided for in this Declaration shall be for the benefit of the Association and shall arise in accordance with the terms of this Declaration without the necessity of any further action by the Association. The Association shall have the power to bid at any lien foreclosure sale and to acquire, hold, lease, mortgage, and convey the Unit foreclosed against.
 
Section 3.11 Duration of Lien. Any lien arising pursuant to Section 3.9 shall be a continuing lien in the amount stated in the assessment from the time of the assessment, but expiring pro rata as the assessment payments are made, and shall also be the personal obligation of the person or entity who is the Unit Owner of the Unit at the time of the assessment. The personal obligation to pay a prior assessment shall not pass to successors in interest unless expressly assumed by them; provided, however, that in the case of a sale or contract for the sale of any Unit which is charged with the payment of an assessment, the person or entity who is the Unit Owner immediately prior to the date of such sale shall be personally liable for the amounts of the monthly installments due prior to said date, and the new Unit Owner shall be personally liable for monthly installments becoming due on or after such date. The foregoing limitation on the duration of the personal obligation of a Unit Owner to pay assessments shall not, however, affect the validity or duration of the continuing lien for unpaid assessments against the respective Unit.
 
Section 3.12 Reserve Account for Repair or Replacement. Unless Lexington Subdivision has nominal reserve costs or the cost of a reserve study or update exceeds ten percent (10%) of the Association's annual Common Expenses, the Association shall establish and maintain a reserve fund for major maintenance, repair or replacement of the Common Elements and any improvements thereon ("Reserve Account"). Such Reserve Account shall be deposited with a banking institution, and in the name of the Association. The Reserve Account shall be expended only for the purpose of affecting the major maintenance, repair or replacement of the Common Elements and any improvements and community facilities thereon, and to any sidewalks, roads, walls or pathways developed as a part of Lexington Subdivision, equipment replacement, and for operating contingencies of a nonrecurring nature. The Board is responsible for administering the Reserve Account. The Association may establish such other reserves for such other purposes as it may from time to time consider to be necessary or appropriate. The proportional interest of any Unit Owner in any such reserves shall be considered an appurtenance of his Unit and shall not be separately withdrawn, assigned, or transferred from the Unit to which it appertains.
 
Section 3.13 Withdrawals from Reserve Account. The Board may withdraw funds from the Reserve Account to pay for unforeseen or unbudgeted costs that are unrelated to replacement costs of the Reserve Components. Any such withdrawal must be recorded in the minute books of the Association. The Board must give notice of any such withdrawal to each Unit Owner and adopt a repayment schedule not to exceed twenty-four (24) months unless the Board determines that repayment within twenty-four (24) months would impose an unreasonable burden on the Unit Owners. The Board must provide to Unit Owners along with the annual budget adopted in accordance with Section 3.3: (a) notice of any such withdrawal; (b) a statement of the current deficiency in reserve funding expressed on a per unit basis; and (c) the repayment plan. The Board may withdraw funds from the Reserve Account without satisfying the notification for repayment requirements under this Section to pay for replacement costs of Reserve Components not included in the reserve study.

Section 3.14 Reserve Studies. The provisions of this Section 3.14 are intended to summarize the requirements for reserve studies as provided in RCW 64.90.545 — 64.90.560, and in the event of any conflict with the provisions herein, the statutory provisions shall control.
  1. Board Determination. Unless exempt under Section 3.12, the Association must prepare and update a reserve study in accordance with this RCW 64.90.550 ("Reserve Study"). An initial Reserve Study must be prepared by a Reserve Study Professional and based upon either a Reserve Study Professional's visual site inspection of completed improvements or a review of plans and specifications for unbuilt improvements, or both when construction of some but not all of the improvements is complete. An updated Reserve Study must be prepared annually. An updated Reserve Study must be prepared at least every third year by a Reserve Study Professional and based upon a visual site inspection conducted by the Reserve Study Professional.
  2. Unit Owner Demand. When more than three (3) years have passed since the date of the last Reserve Study prepared by a Reserve Study Professional, the Unit Owners to which at least twenty percent (20%) of the votes are allocated may demand, in writing, to the Association that the cost of a Reserve Study be included in the next budget and that the Reserve Study be prepared by the end of that budget year. The written demand must refer to RCW 64.90.555. The Board shall, upon receipt of the written demand, include the cost of a Reserve Study in the next budget and, if that budget is not rejected by the Unit Owners pursuant to Section 3.3, arrange for the preparation of a Reserve Study.
Section 3.15 Limitations on Liability related to Reserve Account and Reserve Studies. Monetary damages or any other liability may not be awarded against or imposed upon the Association, its officers, the Board, or those persons who may have provided advice or assistance to the Association, its officers, or the Board, for failure to:
  1. establish a Reserve Account;
  2. have a current Reserve Study prepared or updated in accordance with the requirements of Chapter 64.90 RCW and this Declaration; or
  3. make the required disclosures in accordance with Section 3.3(b) and Chapter 64.90 RCW.
Section 3.16 Failure to Comply Does Not Relieve Unit Owners. A Unit Owner's duty to pay assessments is not excused, and a budget ratified by the Unit Owners is not invalidated, because of the Association's failure to comply with the Reserve Study or Reserve Account requirements.
 
Section 3.17 Certain Areas Exempt. The Tracts and all portions of Lexington Subdivision dedicated to and accepted by a public authority shall be exempt from assessments by the Association.