Dear Prospective Member:

Thank you for considering Scottsdale East Homes for your new residence! We are a bit of a "different duck" than what most people are accustomed to in housing. Although co-ops abound in the East, there are only 7 in the state of Arizona and 5 of those are in the Phoenix area.

The following information will give you just a beginning on your continual education process on cooperative living. Please make notes of any questions you may have, and we will be happy to go over them with you.

The most important thing to know and to remember is that you are NOT buying real estate.

The property is owned by Scottsdale East Homes, Inc., and you are a member of that corporation.

The ownership of that membership entitles you to residency in a specific unit in the cooperative. It is much like a membership in a spa or country club in that you own the right to use the facilities under certain terms and agreements. You do not own the unit itself or any of the real property it sits upon.

The sole purpose for the existence of the corporation is to provide cooperative housing at the lowest cost possible. The corporation operates on a "NOT FOR PROFIT" basis. We are not non-profit like charities, but there is no landlord making money on the corporation.

Therefore, your monthly assessment covers only the actual costs of operating. The corporation is operated through a Board of Directors elected directly from the membership of the co-op, which consists of five (5) people who live here. This is very important as the Board is the body which makes the financial decisions for the property. Since they also own a membership and live on the property, they have the same investment and interest in keeping the monthly assessments low.

There are two dollar amounts we discuss during a membership sale. The first is the UNIT SALE PRICE. When a member comes into our office and says they want to place their membership for sale, we give them the average sales price of the last three units actually sold, and the middle sale value from the past twelve months. The price they then place on their unit is strictly a market value. The market value amount will vary depending on upgrades and/or amenities.

The amount agreed upon by the member and buyer will be paid directly to the outgoing member in the form of a cashier's check or money order. There is also a $1800.00 transfer fee, payable to Scottsdale East Homes, Inc., which is negotiated by the buyer & seller. ALL TRANSACTIONS MUST TAKE PLACE IN THE MANAGEMENT OFFICE.

The second amount we discuss is the MONTHLY ASSESSMENT (also called CARRYING CHARGE) which is payable to the corporation on the first of each month, delinquent on the 10th.

This monthly assessment covers:

A. Taxes and Insurance
B. Reserve contributions
C. Most general maintenance costs
D. Administration
E. Utilities

See below for detailed breakdown

A. GENERAL TAXES AND INSURANCE

As stated above, we pay into an escrow account for Real Estate Taxes, General Liability Insurance. Also included are Payroll Taxes and Employee Health Insurance.

The General Liability Insurance covers the property itself, and the Corporation as a legal entity. It does NOT cover your own personal liability.

In case of fire in a unit, the co-op insurance would cover:

• White blocks or plasters walls; a base grade carpet and floor tiles; and original appliances.

YOU would be responsible for:

• Your own personal possessions; Any upgrades or additions you had made to the property such as an increased value on the carpeting or floor tiles; Installation of ceiling fans, room additions or patio covers, etc.; All window coverings of any type; Medical coverage for injuries to persons INSIDE your unit.

B. RESERVE CONTRIBUTIONS

We contribute part of the monthly income to reserve accounts specifically set aside for capital improvements. As a result in the past five years, we have installed:

• Resurfacing of parking Lots
• New Main Water Lines
• Painting of Entire Complex
• Painting of Carports

We also contribute part of the monthly income to a reserve called the GENERAL OPERATING RESERVE. This cumulative reserve is intended to provide a measure of financial stability during periods of special stress and may be used to meet deficiencies from time to time as a result of delinquent payments by individual cooperators.

Another reserve required is called the RESERVE FOR REPLACEMENT. The reserve is for reimbursement for major repairs and improvements done on the complexes each year, such as: A/C units, roofs, carpeting, tub enclosures, countertops and hot water heaters.

All of these reserve accounts are itemized in the monthly financial statement provided to the Board, and to any member who requests them. All monies are invested in the highest possible insured accounts on behalf of the corporation. The interest earned is placed in the general operating disbursement account.

C. MAINTENANCE

The following is included in maintenance:

At the present time two (2) men is on full-time payroll in the maintenance department.

COVERED MAINTENANCE - Air condition/heating system, water heater, all electrical equipment (light switches, wall plugs, etc.), roof, plumbing (sinks, faucets, toilets), original window and arcadia door screens, locks on windows & arcadia door, and exterior exterminating.

DOES NOT COVER additions to the property (room enclosures, patio covers, patio sheds, ceiling fans, front or kitchen passage doors, screen doors, deadbolt locks, etc.), cleaning or replacement of draperies or other window coverings, interior exterminating, broken windows, any repairs or maintenance necessitated by members own negligence or misuse. REMEMBER, you are moving into the unit on an "AS IS" basis.

D. ADMINISTRATION

At SEH, we are what are called "self managed" meaning the Board has hired a General Manager who works directly for the Board and is accountable to the Board. The General Manager then hires and supervises other employees as needed Expenses also included under administration are:

The purpose of the General Manager and other personnel is to handle the upkeep of the physical property as well as deal with the administrative duties of collecting assessments from the members, clarifying Board policies, as well as enforcing them when necessary, and assisting members as needed with maintenance service calls and other requests. In addition to serving existing members, the office staff is responsible for answering questions for prospective and new members.

E. UTILITIES

This includes the following:

• Gas for laundries and pool (one heated each year), electricity for laundries, office, parking areas, water and sewer, trash collection.

Any persons interested in purchasing a membership MUST submit a written membership application. The management office is responsible for running a background and credit check on each applicant. All applicants must be interviewed and accepted by the Board of Directors.

You must at all time adhere to the rules in the OCCUPANCY AGREEMENT and BY-LAWS OF THE CORPORATION. Any infraction could result in EVICTION.

• A. Registration of automobiles (maximum 2)
  • No Motor homes, campers, trailers, boats.

• B. Basic's such as:
  • No foil on windows
  • No loud disturbances
  • No clothes on balconies
  • No flower pots, etc. on patio fences or upstairs open patio ledges
    Common courtesies

• C. NO PETS EXCEPT AS STATED IN NEW RULING ADOPTED 6-23-87.
  • This allows small birds in cages. Absolutely no dogs or cats or snakes.

• D. NO SUBLEASING.
  • Violation is cause for eviction.

Members have a great deal of latitude in the decorating of their homes. You may paint, hang wallpaper, install paneling, mirrors, etc. However, if the alterations modify the structure in any way, you MUST HAVE APPROVAL FROM THE GENERAL MANAGER PRIOR TO ANY WORK BEING DONE.

This would include, but not be limited to:

• Enclosing under the bath sinks
• Installation of ceiling fans or any other electrical fixture
• Modification of doors or doorways
• Enclosure of patios or installation of patio covers
• Removal or installation of anything that is part of the permanent structure
• Storage sheds
• Enclosing balconies (screen/glass)

Real property is all improvements made to it and attached or otherwise a part of the building or grounds.

Example: If a member installed a stove in their unit that is hard wired (direct wire to electricity), when they move, that stove would have to stay on the property as an attachment and therefore "real property." Ceiling fans become Scottsdale East Homes property once they are installed. Items attached to the building such as built-in bookcases or shelving attached to the walls would also be considered real property.

Personal property is all property that isn't attached.
Example: Furniture, clothes, etc.

We sincerely hope this information has answered some of your questions, and we do encourage you to ask more. Cooperatives are an effective means of providing low-cost housing to many people, for a minimal investment. There is much to learn about co-ops, and just a few pages of a brochure cannot possibly address all issues. We will be happy to clarify any areas of concern to you.

By-laws (PDF)

Block Fence Rules and Regulations

Complaints

Crime Free Lease Addendum (PDF)

Evictions

Ground Rules and Regulations (PDF)

Important Charges and Fees

Maintenance

Member Manual (PDF)

No Pet Policy

Occupancy Agreement (PDF)

Parking Rules and Regulations

Pool Rules

Utilities