BY LAWS OF THE COLONY COUNCIL A NON-STOCK CORPORATION NOT FOR PROFIT UNDER THE LAWS OF THE STATE OF VIRGINIA

ARTICLE I General These are the By Laws of the Colony Council, herein called "Council", a non-stock corporation not-for-

profit formed under the laws of the State of Virginia and organized for the purpose of serving as the Council of Owners of a Condominium pursuant to Chapter 4.1 of Title 55, Code of Virginia of 1950, as amended, herein called the Horizontal Property Act, which time share condominium is identified by the name The Colony, created by the Amended and Restated Master Deed of Hightower Enterprises, dated February 4, 1976, and any amendments thereto recorded in the land records of the Clerk's Office of the Circuit Court of the City of Virginia Beach, Virginia, described on Exhibit "A" attached to said Master Deed and hereafter called "Master Deed",

1. Office

The office of the Council will be at 1301 Atlantic Avenue, Virginia Beach, Virginia.

2. Fiscal Year '.

The fiscal year of the Council shall be the calendar year.

3.The seal of the corporation shall bear the name of the corporation, the word "Virginia" and the word "Seal", an impression of which is as follows:

4. Applicability

The provisions of these By Laws are applicable to the above described property including the buildings, improvements and structures thereon as well as all easements, rights and appurtenances thereunto belonging and the use, occupancy, sale, lease or other transfer thereof. All Owners of the time share units, all occupants or users of the premises and the agents and servants of any of them are subject to the provisions of the above described Master Deed, these By Laws, and the applicable laws of the Commonwealth of Virginia.

5. Personal Application All present and future owners, co-owners, tenants, future tenants, their guests, licensees, servants, agents, employees and any other person or persons that shall be permitted to use the facilities of the Condominium shall be subject to these By Laws and to the Rules and Regulations adopted by this Council to govern the conduct of its members. Acquisition, rental or occupancy of any of the time share units in the Condominium shall constitute an acknowledgement that the said owner, co-owner, tenant, or occupant has accepted and ratified these By Laws, the provisions of the Master Deed, and the Rules and Regulations, and will comply with them.

6. Definitions

Unless it is plainly evident from the context that a different meaning is intended, all terms used herein shall have the same meaning as they are defined to have in the Master Deed and in Section 79.2 of Title 55, Code of Virginia as amended.

,'\RTICLE II

Meetings of Members 1. Members

Every person, group of persons., corporation, trust or other legal entity or any combination thereof, which is the record Owner of one or more Unit Weeks of a unit committed to interval ownership in the Condominium project, shall be a member of the corporation; provided, however, that any such person or entity holding such interest solely as security for the performance of an obligation shall not be a member.

2. Voting Notwithstanding any other provision of these By Laws, each Owner of a Unit Week in a unit committed to interval ownership shall be entitled to cast one vote attributable to the Unit Weeks owned. In order to cast a vote and exercise the privileges of membership, the owner must be in good standing with respect to all dues, fees, and assessments and in compliance with all rules and regulations of the Council.

The vote of the owners of a condominium unit owned by more than one person, or by a corporation or other entity and the vote of the owners of a Unit Week in a condominium unit dedicated to interval ownership where such week is owned by more than one person or by a corporation or entity, shall be cast by one person designated in writing and signed by all of the owners of the unit and filed with the Secretary of the Council and shall be valid until changed in writing.

3. Annual Meeting The annual members' meeting shall be held at such time and place within the state of Virginia as designated by the Board of Directors (the Board) on the fourth Wednesday in March of each year, unless otherwise designated by the Board, for the purpose of electing Directors and tral1Sacting any other business authorized to be transacted by members; provided, however, if that day is a legal holiday, the meeting may be held at the same hour on the next day which is not a holiday.

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4. Special Meetings

Special members' meetings shall be held whenever called by the President or Vice President by a majority of the Board, and must be called by such officers upon receipt of a written request fro members entitled to cast one-third (1/3) of the votes of the entire membership.

5. Notice Notice for all members' meetings stating the time and place and the objects for which the meeting is called shall be given by the President or Vice President or Secretary unless waived

writing. Such notice shall be in writing to each member at his address as it appears on the books I the Council and shall be mailed not less than twenty-one (21) days for an annual meeting or seven ( days for a special meeting nor more than fifty (50) days prior to the date of the meeting. Proof of SU( mailing shall be given by the affidavit of the person giving the notice. Notice of meeting may I waived before or after meetings.

The Property Manager shall be entitled to notice of all membership meetings, and shall 1 entitled to attend the Council's meetings and may designate such person(s) as it desires to attend SU( meetings on its behalf.

6. Quorum A quorum at members' meetings shall consist of the presence in person or by proxy of member entitled to cast one fourth (1/4) of the votes of the entire membership. The acts approved by a majority of the votes present in person or by proxy at a meeting where a quorum is present shall constitute it acts of the members, except where approval by a greater number of members is required by the Mast( Deed, the Articles of Incorporation or these By Laws.

7. Proxy

Votes may be cast in person or by proxy given to another member only. A proxy may be made by any person entitled to vote and shall be valid only for the particular meeting designated their Proxies must be in writing and dated and must be submitted to the Secretary of the Council no less than two (2) days prior to the date and time of the meeting to which they apply in order to be valid for such meeting. In the event that more than one (1) proxy for a given week(s) is received from a member only the proxy which has the latest date shall be counted.

8. Adjourned Meetings

If any meetings of members cannot be organized because a quorum has not attended, the members who are present either in person or by proxy may adjourn the meeting from time to time until a quorum is present.

9. Order of Business

The order of business at annual members' meetings as far as practical at other member5 meetings, shall be:

(a) Election of the chairman of the meeting.

(b) Calling of the roll and certifying the proxies.

(c) Proof of notice of meeting or waiver of notice.

(d) Reading and disposal of any unapproved minutes. (e) Reports of Officers.

(t) Reports of committees.

(g) Election of inspectors of election. (h) Election of Directors (i) Unfinished business (j) New Business (k) Adjournment.

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10. Conduct of Meetings

All meetings of the Council and of the Board shall be conducted in accordance with R Rules of Order, Newly Revised, 9th Edition, or subsequent editions, and such special rules of the Board may from time to time adopt.

11. Transfer

The share of a member in the funds and properties of the Council cannot be as hypothecated or transferred in any manner except as an appurtenance to his unit.

12. Ljen

The Council shall have a lien on any outstanding memberships in order to secure payment sums due to become due from a member to the Council for any reason whatsoever.

13. Liquidation Rights

In the event of any voluntary or involuntary dissolution of the Council, each member s entitled to receive out of the assets of the Council available for distribution an amount equal proportion of such assets as that member's interval share of ownership of the common element to the whole, as indicated in the Master Deed.

ARTICLE III Directors 1. Membership

The affairs of the Colony shall be managed by a Board of not less than three (3) nor mo seven (7) Directors, the exact number to be determined at the time of election. Each member Board shall be an owner in good standing, as defined in Article II, Section 2.

2. Election of Directors (a) Election of Directors shall be held at the annual members' meeting. (b) A nominating committee of five (5) members shall be appointed by the Board not less than thirty (30) days prior to the annual members' meeting. The committee shall nominate one (1) person for each director whose term is expiring, and other nominations may be made from the floor.

(c) The election shall be by ballot (unless designated by unanimous consent) and by a plurality of votes for each of the nominees as there are vacancies to be filled. There shall be no cumulative voting.

(d) Except as to vacancies provided by removal of Directors by members, should a vacancy occur on the Board, a member may be appointed by the sitting Directors to fill the unexpired term of office, and shall be eligible for nomination to an elected term of office at the conclusion of the unexpired term.

(e) Any Director may be removed by concurrence of two-thirds (2/3) of the votes of the quorum of the entire membership, as defined in Article II, Section 6, at a special meeting of the members called for that purpose. The vacancy of the Board so created shall be filled by the members of the Council at the same meeting.

3. Term

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Each director shall be elected for a three (3) year term and hold office until his successor is duly elected and qualified or until he is removed in the manner elsewhere provided. An elected Director will be eligible for reelection at the expiration of his term of office.

4. Eligibility

Eligibility for election to the Board shall be limited to Council members in good standing (as defined in Article II, Section 2) and further limited as follows:

(a) Employees of the Council and their spouses shall not be eligible for election to the Board.

(b) Persons who are engaged in the provision of supplies, services or other contracts with the Council who receive or may be expected to receive more than $10,000.00 (ten thousand) in gross receipts for such business during any calendar year of service shall not be eligible for election to the Board.

(c) No immediate family member of a serving Director shall be eligible to serve on the Board until the expiration of the serving member's term. A family member is defined as a parent, child, or spouse of another member.

s. Organizational Meeting and Regular Meetings

The organizational meeting of a newly elected Board shall be held within ten (10) days of their election at such place and time as shall be fixed by the Directors at the meeting at which they were elected, and no further notice of the meeting shall be necessary. Thereafter, regular meetings of the Board may be held at such time and place as shall be determined by a majority of the Directors. Notice of regular meetings shall be given each Director, personally or by mail, telephone or telegraph at least three (3) days prior to the day named for each meeting.

The Property Manager shall be entitled to notice of all Directors' meetings and shall be entitled to attend the Directors' meetings and may designate such person(s) as it desires to attend such meetings on its behalf.

6. Special Meetings

Special meetings of the Directors may be called by the President and must be called by the Secretary at the written request of one-third (1/3) of the Directors. Not less than three (3) days' notice shall be given personally, or by mail, telephone or telegraph, which notice shall state the time, place and purpose of the meeting.

7. Waiver of Notice

Any Director may waive notice of a meeting before or after the meeting and such waiver shall be deemed equivalent to the giving of notice.

8. Quorum and Joinder in Meeting by Approval of Minutes

A quorum at Directors' meetings shall consist of a majority of the entire Board. The acts approved by majority present at a meeting at which a quorum is present shall constitute the acts of the Board, except where (if at all) approval by a greater number of Directors is required by the Master Deed, the Articles of Incorporation or these By Laws.

The joinder of a Director in the action of a meeting by signing and concurring in the minutes thereof shall constitute the presence of such Director for the purpose of determining a quorum.

Unanimous written consent of all Directors, before or after action taken, shall be valid Board approval.

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9. Adiourned Meetings

If at any meeting of the Board there be less than a quorum present, the majority of those present may adjourn the meeting from time to time until a quorum is present. At any adjourned meeting an business which might have been transacted at the meeting as originally called may be transacted without further notice.

10. Presiding Officer

The presiding officer at Directors' meetings shall be the President, and in his absence the Vic President. In the absence of the presiding officer, the Directors present shall designate one of their number to preside.

1.1. Order of Business

The order of business at Directors' meetings shall be: (a) Calling of roll.

(b) Proof of due notice of meeting.

(c) Reading and disposal of any unapproved minutes. (d) Reports of officers and committees. (e) Election of officers, if applicable. (t) Unfinished business. (g) New Business. (h) Adjournment

12. Powers and Duties All of the powers and duties of the Board existing under the Horizontal Property Act, Master Deed, Articles of Incorporation and these By Laws shall be exercised exclusively by the Board, it~ agents, contractors or employees, subject only to approval by the owners when such is specifically required. The powers and duties of the Board shall include but not be limited to:

(a) Adopting Rules and regulations for the use, occupancy and maintenance of the condominium to promote the enjoyment thereof by the owners and to designate the time of day when owners of unit weeks shall take possession of their units and vacate same.

(b) To enter into reciprocal exchange programs. (c) To contract for the management of the condominium at a rate of compensation to be determined by the Board, and to delegate to such contractor all of the powers and duties of the Council, except those which may be required by the Master Deed to have approval of the Board or membership of the Council. To contract for the management or operation of portions of the common elements or facilities susceptible to separate management or operation thereof and to lease or concession such portions.

ARTICLE IV Protection

1. ~

The Board may require that all officers, agents and employees handling or responsible for funds furnish adequate fidelity bonds.

2. Indemnification

Every Director and officer shall be indemnified by the Council against all expenses and liabilities, including counsel fees reasonably incurred by or imposed upon him in connection with any proceeding to which he may be a party, or in which he may become involved by reason of his being or having been a Director or officer, or any settlement thereof, whether or not he is in office at the

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time, except in such cases where he is adjudged guilty of willful misfeasance or malfeasance in the performance of his official duties, provided that any such settlement must be approved by the Board.

ARTICLE V Officers The executive officers of the Council shall be a President, who shall be a Director, a Vice President,

who shall be a Director, a Treasurer, a Secretary and an Assistant Secretary, all of whom shall be elected annually by the Board and who may be preemptively removed by a majority vote of the Directors at any meeting. Any person may hold two or more offices except that the President shall not also be the Secretary or Assistant Secretary. The Board shall from time to time elect such other officers and designate their powers and duties as the Board shall find to be required to manage the affairs of the Council.

1. President

The President shall be the chief executive officer of the Council. He shall have all the power~

and duties which are usually vested in the office of President of a council, including but not limited to. the power to appoint committees from among the members from time to time, as he may in hi~ discretion determine appropriate to assist in the conduct of the affairs of the Council.

2. Vice President

The Vice President shall, in the absence or disability of the President, exercise the powers and

perform the duties of the President. He shall also generally assist the President and exercise such other powers and perform such other duties as shall be prescribed by the Directors.

3. Secretary The Secretary shall keep accurate records of the acts and proceedings of all meetings of owner: and Directors, in accordance with requirements of these By Laws. He shall attend to the giving an< serving of all notices to the members and Directors and other notices required by law. He shall have general charge of the membership records of the Council, and shall keep at the registered or principal office of the Council, a record of owners, showing the name and address of each owner and the number of votes held by each. He shall have custody of the seal of the Council and affix the same t< instruments requiring a seal when duly signed. He shall keep the records of the Council, except those of the Treasurer, and shall perform all other duties incident to the office as may be required by the Directors or the President. The Assistant Secretary shall perform the duties of the Secretary when the Secretary is absent.

4. Treasurer

The Treasurer shall have custody of all property of the Council, including funds, securities an evidence of indebtedness. He shall keep the books of the Council in accordance with good accounting.

practices, and shall be responsible for full and accurate accounts of the finances of the Council. Further he shall cause a true statement of its assets and liabilities as of the close of each fiscal year and of the results of its operations, all in reasonable detail, to be made and filed at the registered or principle office of the Council within three (3) months after the end of such fiscal year. The Treasurer shall perform all other duties incident to his office.

5. Compensation

The compensation of all employees of the Council shall be fixed by the Directors. The compensation of all officers and Directors of the Council, if any, shall be fixed by the vote of the membership. If any Director is employed by the Council, he will immediately relinquish term on the Board.

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Management

1. Management and Common Expenses The Council shall manage, operate and maintain the Condominium project and, for the benefit of the Condominium units and the Owners thereof, shall enforce the provisions hereof and may payout of the common expense fund herein elsewhere provided for the following:

(a) The cost of providing water, sewer, garbage and trash collection, electrical, gas and other necessary utility services for the common elements and, to the extent that the same are not separately metered or billed to each Condominium, for the Condominium units.

(b) The cost of fire and extended liability insurance and the cost of such other insurance as the Council may effect.

(c) The cost of the services of a person or firm to manage the project to the extent deemed advisable by the Council together with the services of such other personnel as the Board of the Council shall consider necessary for the operation of the Condominium project.

(d) The cost of providing such legal and accounting services as may be considered necessary to the operation of the Condominium projects.

(e) The cost of painting, maintaining, replacing, repairing and landscaping and such furnishings and equipment for the common elements as well as those units committed to interval ownership as the Board shall determine are necessary and proper, and the Board shall have the exclusive right and duty to acquire the same.

(t) The cost of any and all materials, supplies, labor, services, maintenance, repairs, taxes, assessments or the like which the Council is required to secure or pay for by law, or otherwise, or which in the discretion of the Board shall be necessary or proper for the operation of the common elements and those units committed to interval ownership.

(g) The cost of the maintenance or repair of any Condominium unit in the event such maintenance or repair is reasonably necessary in the discretion of the Board to protect the common areas or to preserve the appearance or value of the Condominium project or is otherwise in the interest of the general welfare of all Owners of the Condominium units.

(h) Any amount necessary to discharge any lien or encumbrance levied against the Condominium project, or any portion thereof, which may, in the opinion of the Board, constitute a lien against any of the common elements or those units committed to interval ownership rather than the interest of the Owner of any individual Condominium unit.

2. Out}: to maintain

Each Owner of Unit Weeks in a unit committed to interval ownership agrees:

(a) To pay his proportionate share of the cost of the maintenance and repair of all interior and exterior components of said unit, the cost of maintenance, repair and replacement of all appliances, furniture, carpeting, fixtures, equipment, utensils, and other personal property within said unit, and such other costs of repair, maintenance, upkeep and operation of the unit as is

necessary to the continued enjoyment of said unit by all said owners of Unit weeks herein.

(b) Not to make, cause or allow to be made, any repairs, modifications, alterations, or replacements to the common elements, limited common elements, outside or exterior portion of the buildings whether within a unit or part of the limited common elements or common elements, exterior or interior of his unit, or of the furnishings, appliances, personal property, or decor thereof, without the prior written consent of the Property Manager, the Board, and all other Owners of Unit weeks therein.

(c) Expenses of repairs or replacements to the unit or its components, furnishings, carpeting, appliances or other property, real, personal, or mixed, occasioned by the specific use or abuse

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of any Owner of Unit weeks in any unit, or any licensee or tenant of said Owner, shall be borne in their entirety by said Owner.

(d) The Property Manager, and thereafter the Board shall determine the interior color scheme, decor and furnishings of each such unit, as well as the proper time for redecorating and replacements thereof.

3. Access at Reasonable Times For the purpose solely of performing any of the repairs or maintenance required or authorized by these By Laws, or in the event of a bona fide emergency involving illness or potential danger to life or property, the Council, through its duly authorized agents or employees, shall have the right, after reasonable efforts to give notice to the Owner or occupant, to enter any Condominium unit at any hour considered to be reasonable under the circumstances.

4. Easements for Utilities and Related Purposes The Council is authorized and empowered to grant (and shall from time to time grant) such licenses, easements and/or rights of way; for sewer lines, water lines, electrical cables, telephone cables, gas lines, storm drains, underground conduits and/or such other purposes related to the provision of public utilities to the Condominium project as may be considered necessary and appropriate by the Board for the orderly maintenance, preservation and enjoyment of the common elements or for the preservation of health, safety, convenience and/or welfare of the Owners of the Condominium units.

5. Parkin2: and Storage

For a Condominium unit committed to interval ownership, use of a parking space assigned to such unit shall be limited to the period of ownership of Unit weeks each year. Upon request, the Property Manager may so assign additional parking spaces for which the Board may require a reasonable rental.

6. Limitation of Liability The Council shall not be liable for any failure of water supply or other services to be obtained by the Councilor paid for out of the common expense funds, or for injury or damage to person or property caused by the elements or by the Owner of any Condominium unit, or any other person, or resulting from electricity, water, snow or ice which may leak or flow from any portion of the common elements or from any pipe, drain, conduit, appliance or equipment. The Council shall not be liable to the Owner of any Condominium unit for loss or damage, by theft or otherwise, of articles which may be stored upon any of the common elements. No diminution or abatement of common expense assessments, as herein elsewhere provided, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the common elements or from any action taken by the council to comply with any law, ordinance or with the order or directive of any municipal or other governmental agency.

ARTICLE VII

Fiscal Management 1. Determination of Maintenance Fee

(a) The Board of the Council shall fix and determine from time to time, the sums necessary and adequate for the maintenance fee on Condominium units committed to interval ownership. The maintenance fee for such units shall include the following:

The particular Unit Weeks Owner's share of common expenses;

Repair and upkeep of units for normal wear and tear (e.g., repainting interior walls) Repair and replacement of furniture, fixtures, appliances, carpeting, utensils;

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Casualty and/or liability insurance on the unit; Utilities for the subject unit; Personal property taxes; Real estate taxes;

Any other expenses incurred in the normal operation and maintenance of the unit which cannot be attributed to a particular Unit Week Owner.

The maintenance fee for each unit shall be prorated among all Owners of Unit Weeks in

.

a specific unit by applying a fraction, the numerator of which is the number of umt weeks

owned by a specific Owner, the denominator of which is 5.1, to the total of all such expenses per unit on an annual basis. The foregoing shall not apply to any Unit Week conveyed to the Council for; any purpose or reason.

(b) When the Board has determined the amount of any maintenance fee, the Treasurer of the Council shall mail or present to each Owner of Unit Weeks a statement of said maintenance fee. All maintenance fees shall be payable to the Treasurer of the Council and, upon request, said Treasurer shall give a receipt for each payment made to him, if requested by Unit Owners.

2. Replacement Reserve The Council shall establish and maintain a reserve fund for replacements by the allocation and payment annually to such reserve fund of an amount to be designated from time to time by the Board and which shall not be less than 4% of the total annual maintenance fee levied pursuant to the provisions of this Article VII. Such fund shall be conclusively deemed to be a common expense. Such fund shall be deposited in a special account with a lending institution, the accounts of which are insured by an agency of the United States of America, or may, in the discretion of the Board, be invested in obligations of, or fully guaranteed as to principal by, the United States of America or other fund(s) or investments deemed appropriate by the Board (e.g., Money Market funds or others). The reserve for replacements may be expended only for the purpose of effecting the replacement of the common elements and equipment of the project and for operating contingencies of a non-recurring nature. The amounts required to be allocated to the reserve for replacements may be reduced, by appropriate resolution of the Board, upon the accumulation in such reserve for replacements of $100,000.00. The proportionate interest of any Owner in any reserve for replacements shall be considered an appurtenance of his Condominium unit and shall not be separately withdrawn, assigned or transferred or otherwise separated from the Condominium unit to which it appertains and shall be deemed to be transferred with such Condominium unit.

3. Budget The Board shall adopt a budget for each fiscal year which shall include the estimated funds required to defray the common expenses and to provide and maintain funds for the foregoing reserves according to good accounting practices. Copies of the budget and assessment shall be transmitted to each member at least thirty (30) days before the start of the fiscal year for which it has been prepared.

4. Late Payment Maintenance fees for units committed to interval ownership shall be due and payable January 1. of each year. A late charge of $25.00 will apply to each maintenance fee not paid within twenty (20) days after Council has, by written notice, mailed to the members' addresses shown on Council records, notice of the non-receipt of such payment, but in no event will such late charge be applied prior to the 21st day of January. An additional late charge of $25 per quarter thereafter will be added to the delinquent account until the account is fully paid. Interest shall also apply to past due payments at the rate of eighteen (.18) per cent per annum.

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5. Emergency and Special Assessments

Assessments for special expenses or emergencies which cannot be paid from the annual maintenance fee or replacement reserve fund for common expenses or capital replacements or improvements or such other purposes as the Board may consider appropriate, may be made at the discretion of the Board by a vote of not less than eighty (80 %) percent of the Board. The due date for any such emergency or special assessments shall be determined by the Board at that time.

6. Depository

The depository of the Council shall be such bank or banks as shall be designated from time to time by the directors and in which the monies of the Council shall be deposited. Withdrawal of monies from such accounts shall be only by checks signed by such persons as are authorized by the Board.

All sums collected by the Council from assessments and maintenance fees may be co-mingled in a single fund or divided into more than one fund, as determined by the Board of the Council.

7. AJJ5JjJ.

An audit of the accounts of the Council shall be conducted at the discretion of the Board, except that an audit will be conducted at least once every five (5) years. Said audit shall be prepared by such accountant as the Board determines, and a copy of said report shall be available to the members of the Council in the office of said Council, and with the Treasurer of the Council. Such report shall be available not later than three (3) months after the end of the year for which the report is made.

8. ~ Each owner is obligated to pay the charges levied and assessed against his unit as established by the annual maintenance fee, and such amount shall constitute a lien against said Owner's interest in the unit from the date of assessment until the date of full payment. Any lien shall be limited to the Unit Weeks owned by the Owner against whom the lien is filed and shall not affect the Unit Weeks of any other Owner. In addition, no such lien shall affect the furniture in the unit, said furniture being owned by the Council.

The lien hereinabove set forth shall be inferior only to general and special assessments for real estate taxes, purchase money deeds of trust executed simultaneously with the first sale of any unit and subsequent first deeds of trust, recorded prior to the date of assessment of said lien, or recorded after receipt of a written statement from the Board that the payments on said lien were current as of the recordation date of such deed of trust or mortgage instrument.

9. Subordination and Mortgage Protection Notwithstanding any other provisions hereof to the contrary, the lien of any assessment levied pursuant to these By Laws upon any Condominium unit in the project shall be subordinate to, and shall in no way affect the rights of, the holder of any indebtedness secured by any recorded purchase money deed of trust as defined in (8) or first mortgage (meaning a mortgage with priority over other mortgages) upon such interest made in good faith and for value received. Provided, however, that such subordination shall apply only to assessments which have become due and payable prior to a sale or transfer of such Condominium unit pursuant to a decree of foreclosure, or any other proceeding in lieu of foreclosure. Such sale or transfer shall not relieve the purchaser at such sale of the Condominium unit from liability for any assessments thereafter becoming due, nor from the lien of any such subsequent assessment, which said lien, if any be claimed, shall have the same effect and be enforced in the same manner provided therein.

No amendment to this section shall affect the rights of the holder of any such mortgage (or the indebtedness secured thereby) recorded prior to recordation of such amendment unless the holder thereof (or any of the indebtedness secured thereby) shall join in the execution of such amendment.

The Board may, in their sole and absolute discretion, extend the provisions of this Section to the holders of mortgages (or the indebtedness secured thereby) not otherwise entitled thereto.

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10. Additional Default

Any recorded first mortgage secured on a Condominium unit in the project may provide that any

default by the mortgagor in the payment of any assessment levied pursuant to these By Laws, or any installment thereof, shall likewise be a default in such mortgage (or the indebtedness secured thereby) by reason of Article VII Section 8 of this Article and shall not be diminished by reason of such failure.

11. Payment of Lien After Transfer '

Upon the voluntary sale or conveyance of a unit, there shall be paid or provided from the sales proceeds or by the grantee, an amount sufficient to satisfy any unpaid portion of assessments due and payable as of the date of conveyance. Any purchaser or lender in connection with any such sale or conveyance shall be entitled to a statement furnished by the Board, setting forth in detail the amount of any unpaid assessment owed by the Seller, or Borrower, and such Purchaser of Lender shall be entitled to rely on such statement and shall have no liability for, nor shall the unit be encumbered with, an amount of unpaid assessments greater than that shown in said statement. No owner shall be liable for the payment of any part of the common charges assessed against his unit subsequent to a sale, transfer or other conveyance by him (made in accordance with the provisions of these By Laws) of such unit. In addition, any owner may, subject to the terms and conditions specified in these By Laws, provided that his unit is free and clear of liens and encumbrances other than a permissible first mortgage and statutory lien for unpaid common charges, convey his unit to the Board, or its designee, corporate or otherwise, on behalf of all other owners, and in such event be exempt from common charges thereafter assessed.

12. .Default in Payment of Lien

The Board shall have the right and duty to take all appropriate actions and steps to collect any

maintenance fees or assessments which shall remain unpaid for a period of more than thirty (30) days from the due date thereof. The Board may institute a suit to recover a money judgment for the same, together with interest thereon and reasonable expenses of collection, including attorney's fees, without foreclosing or waiving the lien hereinbefore provided.

13. Enforcement The lien for unpaid assessments or maintenance fees may be enforced and foreclosed in such manner as may from time to time be provided by the laws of the Commonwealth of Virginia.

Pursuant to Section 55-79.13, Code of Virginia of 1950, as amended, assessments constitute a lien upon a unit week upon default in the payment of an assessment or any installment thereof for thirty (30) days after the due date and upon the recordation thereafter of a memorandum of lien in the Clerk's Office of the Virginia Beach Circuit Court. The lien for unpaid assessments shall also secure reasonable attorney's fees incurred by the Council incident to the collection of such assessment or enforcement of

such lien. The Memorandum of Lien shall substantially set forth the following information: The name of the Council as claimant; the name of the delinquent unit week Owner(s); a brief description of the unit week to be affected, the amount claimed, a brief explanation of what assessment remains unpaid, and the date from which the interest is claimed. The Memorandum shall be executed by the President or the Vice President and acknowledged in the manner of deeds. The lien so created may be enforced in the Circuit Court of the City of Virginia Beach, Virginia, by a bill filed therefore.

Should a Unit Owner fail to pay a maintenance fee or an assessment for common expenses as required under the terms of these By Laws and the Master Deed for the period of time specified herein whereby said maintenance fee or assessment becomes delinquent, the Council may deny the Unit Owner and/or the authorized user of the facilities the use and enjoyment of same until such time as all maintenance fees or assessments are paid. The Council shall further have the right in its sole discretion to suspend any Unit Owner and/or authorized user of said facilities from the use of same for any infraction of the promulgated Rules and Regulations pertaining to said facilities. Should the Unit Owner or the authorized user of said facilities rights to use same be suspended, there shall be no reduction in

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maintenance fees or assessments due and payable by said Unit owner or authorized user. I n the case of a Condominium unit committed to interval ownership, all sanctions as outlined above for failure to pay a maintenance fee or an assessment, shall be limited to the delinquent Unit Week Owner and shall be of no force and effect against non-delinquent Owners of Unit Weeks in such Condominium unit committed to interval ownership.

ARTICLE VIII Use 1. Restrictions on Use of Units

To assist the Condominium in providing for congenial occupancy and protection of the value of the units, it is necessary that the Board have the right and authority to exercise reasonable controls over the use of the units.

No apartment shall be used for other than residential purposes, except any occupied by the Property Manager.

No parking space, whether assigned to a unit week owner or not, shall be used for the storage of a boat, boat trailer, camper or house trailer without the prior approval of the Board.

The common elements shall be used only by the owners or other residents and their bona fide guests. The use of the recreational facilities by guests is subject to the Rules and Regulations of the Board.

No owner or other resident of the Condominium shall post any advertisements or posters of any kind in or on the exterior of any unit except as authorized by the Board.

No clothing, laundry, rugs or wash shall be hung from or spread upon or from any patio, balcony, window or exterior portion of a unit or in or upon any common element. All window drapes must have white linings.

No animal, other than common household pets permitted by State and municipal laws and the Rules and Regulations, shall be kept or maintained in any unit. Common household pets shall not be kept or maintained for commercial purposes in any unit. The Board reserves the right to require the removal of any pet whose activities provoke two (2) or more written complaints within any period of interval occupancy. Animal owners shall be responsible for all costs incurred in cleaning and maintaining units and common areas resulting from the activities of such animals.

Owners shall exercise extreme care to avoid unnecessary noise or the use of musical instruments, radios, televisions and amplifiers that may disturb other owners particularly after 11:OO pm, or before 7:00a.m.

No owner, resident or lessee shall install wiring for electrical or telephone installation, television antennae, storm doors or windows, screens, machines or air conditioner units, etc.

No elements of the Condominium may be used for any unlawful, immoral or improper purpose. In the use of common elements of the Condominium, owners shall obey and abide by all valid

laws, ordinances and zoning and other governmental regulations affecting the same and all applicable Rules and Regulations adopted by the Board.

No nuisances shall be allowed on the Condominium property nor shall any use or practice be allowed which is a source of annoyance to the owners or which interferes with the peaceful possession or proper use of the Condominium by its owners.

The common elements shall be used only for the furnishing of the services and facilities for which they are reasonably suited and which are incident to the use and occupancy of the units. An owner shall not place or cause to be placed in the public walkways, parking lots or other common areas or common facilities, other than a patio or balcony to which such owner has sole access, any furniture, packages or objects of any kind. The public walkways shall be used for no purpose other than normal transit through them.

An owner shall grant a right ot- access to his unit to the Property Manager and/or any other person authorized by the Board for the purpose of making inspections or for the purpose of correcting any condition originating in his unit and threatening another unit or a common element, for the purpose of performing installations, alterations or repairs to the mechanical or electrical services or other common elements in his unit or elsewhere in the building or to correct any condition which violates the provisions of any mortgage covering another unit, provided that requests for entry are made in advance and that any such entry is at a time reasonably convenient to the owner. In case of an emergency, such right of entry shall be immediate whether the owner is present at the time or not.

2. Abating and Enjoining Violations by Owners The violation of any Rules or Regulations adopted by the Board or breach of any By Laws contained herein, or the breach of any provision of the Master Deed, shall give the Board the right, in addition to any other rights set forth in these By Laws: (a) to enter the unit in which, or as to which, such violation or breach exists and to summarily abate and remove, at the expense of the owner at fault, any structure, thing, or condition that may exist therein contrary to the intent and meaning of the provisions hereof, and the Board shall not thereby be deemed guilty in any manner of trespass, or (b) to enjoin, abate or remedy by appropriate legal proceedings, either by law or in equity, the continuance of any such breach.

3. Maintenance and Repair

Each owner shall be responsible for the care, upkeep, protection and maintenance of his unit, except to the extent that the obligation therefore is imposed on the Board by Article VI Section 1.

Each owner shall promptly report to the Board, the Property Manager or its agent any defect or need for repairs, the responsibility for the remedying of which is with the Council. An owner shall promptly reimburse the Council for any expenditures incurred in repairing or replacing any common unit and facility damaged through his fault.

4. Alterations. additions and Improvement~

Whenever in the judgment of the Board, the common elements shall require additions, alterations or improvements that have not been provided for through the annual budget or reserve funds, costing for same may be referred to Article VII, Section 5.

ARTICLE IX

Insurance, Destruction, Restoration and Distribution 1. Authority

The Board shall obtain casualty and liability insurance under such terms and for such amounts as shall be deemed necessary by the Board but not less than that amount required by Section 2 of this Article IX. The insurance premiums paid by the Board shall be charged as items of common expense. Such insurance coverage shall be written on the Condominium and shall provide for the insurance proceeds covering any loss in excess of $25,000.00 payable to the Insurance Trustee named, as hereinafter provided, or to its successor for the benefit of each owner according to his individual percentage interest in the Condominium as set out in Exhibit "F" of the Master Deed.

2. Coverage The Condominium shall be insured against casualty in an amount equal to the maximum insurable replacement value thereof (exclusive of excavations and foundations) as determined annually by the insurance company affording such coverage. Such coverage shall afford protection against loss or damage by fire, vandalism, malicious mischief, windstorm, water damage and other hazards covered by the standard extended coverage endorsement, insuring the buildings (including all of the units and

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the bathroom, kitchen and laundry fixtures and equipment, and the furniture and furnishings) together with all air conditioning, heating and other equipment, (but not including personal property supplied or installed by owners) and other Condominium property. The Condominium shall be insured against personal injury and property damage in such amounts and in such forms as shall be required by the Board which, however, in no event shall be less than $300,000.00 with respect to any individual and $1,000,000.00 with respect to anyone accident or occurrence and $100,000.00 with respect to any claim for property damage. All liability insurance shall contain cross-liability endorsements to cover the Council as a group, the Board and each individual owner. Workmen's Compensation insurance shall be obtained where necessary to meet the requirements of the law.

3. Insurance Trustee The Board shall have the right to designate the Insurance Trustee, and all parties beneficially interested in such insurance coverage shall be bound thereby.

All insurance policies purchased by the Board shall be for the benefit of the Council, each owner and his mortgagor, as their respective interests may appear, and shall provide that all proceeds payable as a result of casualty losses shall be paid to the Insurance Trustee, except that if the net proceeds are $25,000.00 or less, they shall be payable directly to the Board. All policies shall provide that adjustment of loss shall be made by the Board with the approval of the Insurance Trustee. The Insurance Trustee shall not be liable for payment of premiums, nor for the renewal of the policies, nor for the sufficiency of coverage, nor for the form or content of the policies, nor for the failure to collect any insurance proceeds. The sole duty of the Insurance Trustee shall be to receive such proceeds as are paid and to hold the same in trust for the purposes elsewhere stated herein, and or the benefit of the Council and the owners, but such shares need not be set forth upon the record of the Insurance Trustee.

4. Destruction. Restoration or Distribution

(a) Where two-thirds (2/3) or less of the units are substantially damaged or destroyed (for the purposes of this Section, the phrase" substantially damaged or destroyed" shall be deemed to mean damaged to an extent requiring repairs estimated to cost in excess of fifty (50) percent of the pre-damage value of the units), the insurance proceeds shall be applied to the cost of repairing the damage suffered by each damaged unit.

(b) Where more than two-thirds (2/3) of the units are substantially damaged or destroyed or where there is total destruction of all the units and where the same are not to be restored, the insurance proceeds shall be payable to all of the owners in proportion to their said respective individual percentage interests. In the event there is a recorded mortgage on a unit the share of the owner shall be held in trust for the mortgage thereof and the owner as their interests may appear.

5. Covenants for Benefits of Mortgagors

Proceeds of insurance policies received by the Insurance Trustee shall be distributed to or for the benefit of the owner entitled thereto, after first paying or making provision for the payment of the expenses of the Insurance Trustee, in the following manner:

(a) If the damage for which the proceeds were paid is to be repaired or reconstructed, the proceeds shall be paid to defray the cost thereof as elsewhere provided. Any proceeds remaining after defraying such costs to the owner shall be distributed to the owner and the mortgagor, if any, entitled thereto; all remittances to owners and their mortgagors being payable jointly to them. This is a covenant for the benefit of any mortgagor of a unit and may be enforced by him.

(b) If it's determined in the manner elsewhere provided that the damage for which the proceeds are paid shall not be reconstructed or repaired, the proceeds shall be distributed

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to the owner and the mortgagor, if any, entitled thereto. Remittance to a owner and his mortgagor shall be payable jointly to them. This is a covenant for the benefit of any mortgagor of a unit and may be enforced by him.

(c) In making distributions to owners and their mortgagors, the Insurance Trustee may rely upon a certificate of the Councilor Board as to the names of the owners and their respective shares of the distribution. Upon request of the Insurance Trustee, the Council or Board shall deliver such certificate forthwith.

6. Reconstruction If any part of the Condominium elements shall be damaged by casualty, the determination of whether or not to reconstruct or repair the same shall be made as follows:

(a) Where there is partial destruction, as defined in Article IX(4a) , there shall be compulsory reconstruction or repair.

(b) Where there is total destruction, which shall be deemed to mean destruction as defined in Article IX(4b), reconstruction or repair shall not be compulsory unless at a meeting which shall be called within ninety (90) days after the occurrence of the casualty, or, if by such date, the insurance loss is adjusted, then within thirty (30) days thereafter, eighty (80) percent of the owners vote in favor of such reconstruction or repair.

(c) Any such reconstruction or repair shall be substantially in accordance with the original plans and specifications under which the Condominium was originally constructed.

(d) Encroachments upon or in favor of units which may be created as a result of such reconstruction or repair shall not constitute a claim or basis for action by the owner upon whose property such encroachment exists, provided that such reconstruction was substantially in accordance with the plans and specifications under which the

Condominium was originally constructed. Such encroachments shall be allowed to continue in existence for as long as the building stands.

(e) The Insurance Trustee may rely upon a certificate of the Councilor the Board which certifies whether or not the damaged property is to be reconstructed or repaired and shall be binding upon the owner. The Councilor the Board, upon request of the Insurance Trustee, shall deliver such certificate as soon as practicable.

7. Assessments if insurance is inadequate

Immediately after a casualty causing damage to property for which the Council has the responsibility of maintenance and repair, the Board shall obtain reliable and detailed estimates of the cost to place the damaged property in as good a condition as it was before the casualty. Such costs may include professional fees and premiums for such bonds as the Board desires. If the proceeds of insurance are insufficient to defray such estimated costs, assessments shall made against all owners in proportion to their aforementioned individual percentage interests in sufficient amounts to provide funds to pay the estimated costs. If at any time during reconstruction and repair, or upon completion of reconstruction and repair, the funds for the payment of the costs thereof are insufficient, assessments shall be made against all the owners in proportion to their individual percentage interests in sufficient amounts to provide funds for the payment of such costs.

8. Disbursements The funds for payment of costs of reconstruction and repair after casualty, which shall consist of proceeds of insurance held by the Insurance Trustee and funds collected by the Council from assessments against owners, shall be disbursed in payment of such costs in the following manner:

(a) If the amount of the estimated costs of reconstruction and repair exceed the total of the annual assessments or maintenance fee for common expenses made during the year in which the casualty occurred, then the sums paid upon assessments to meet such costs shall be deposited by the Council with the Insurance Trustee. In all other cases, the Council