PRESIDENT’S MESSAGE

PRESIDENT’S MESSAGE

THERE IS IMPORTANT INFORMATION IN THIS MESSAGE YOU NEED TO KNOW

FIRST: Your board of directors at its November meeting voted unanimously to seek the assistance of the State of Sonora (and/or other agencies) in requiring the developer to provide water and sewer to Cholla as was required by the State in the Regularization process, the oversight of the process by the State ending in 1995. Today, after 11-12 years we remain an irregular subdivision under Mexican Law. The cost for electric, water and sewer in 1995 was $3,000,000, but at the time the developer did not have the funds to provide water and sewer, so to faithfully provide those utilities, it pledged property on or near Sandy Beach as security for a loan to accomplish the same. It has now been 11 years (almost 12 years) since the State’s involvement ended. In the interim, the developer has sold 90-95% of all property in Cholla, the estimated value of all sales being in the neighborhood of $15-20,000,000 — far, far more than necessary to have provided the State-mandated water and sewer. The story is much longer, but you get the idea – there are too few lots remaining to be sold in Cholla to finance water and sewer, and the previous sales revenues have been used elsewhere; hence, the need to seek State assistance.

SECOND: The developer is in the process of doing a third survey of Cholla and is in the process of “Rectifying” lots (changing lot sizes and dimensions to conform to one‘s home). This “Rectification” has come about as a result of serious errors in the first two surveys. The first “survey” during the Regularization process (upon which original lot sizes and dimensions were erroneously based) was based upon a fly-over by a plane. It was then determined that due to terrain features, that “survey” was grossly erroneous and property disputes resulted. A second survey was done, but it, too, was erroneous because it did not “close”, meaning that when starting at the beacon on Pelican Point and then applying all lot dimensions as one went from one end of Cholla to the other and back again, it did not end or “close” back at the beacon; consequently, a third survey that will “close”.

Unfortunately, in this entire process, the new survey, when applied to the ground, was found to create property lines cutting through homes and otherwise creating havoc. Consequently, the developer has been working at trying to make one’s home whole and not being cut off by a neighbor’s property. This has required giving and taking property here and there in the developer’s attempt to provide the owner as near as possible the same square footage they purchased initially. As one might expect from the gross errors of the first survey, it has been impossible to provide exactly the same square footage in all cases – in some cases owners are asked to pay additional for additional property; in others, the company is paying the owner for a shortage. In both cases, current prices (in the area of $10-15/sq.ft.) of property are being used; if you feel you are not paying/receiving what is proper, you should contact us.

As the developer works through the process, if your lot dimensions have had to be “rectified”, you will be provided a record of the survey as it applies to your lot and you will be asked to accept the findings. Upon acceptance, you will be asked to sign the document so that it can be delivered to Bancomer, the Trustor for all our properties. Unless you wish to create a new trust with new dimensions at the cost of a new trust (probably in the area of $2,500-3,000), Bancomer has confirmed to us that you can merely attach your finalized lot dimensions to your trust document and that the said document will be used upon transfer of your trust by sale or death.Most board members attended a slide presentation of the three surveys and the manner in which the developer is attempting to “rectify” lots. Unanimously, it was felt that the developer was making a good faith effort at the rectification and that doing so was the only reasonable way of settling property lines and disputes.

ELECTRICAL (and water and sewer): Some time there was rumor that all of Cholla was being required by the electric company, CFE, to go underground with electric at a cost of about $7,000/lot. We had a meeting with CFE, and CFE confirmed to us that the only areas where they require underground electric are Manzanas 27, 29, and 30, as well as an area owned by a developer adjacent to the large, long curve near the entrance to Cholla. Otherwise, going underground in any other area of Cholla is strictly optional to the owners involved.

As to NEW electric services, the developer has asked CFE to not provide electrical service unless all debt claimed by the developer is paid. This would include even any additional property you are asked to pay for pursuant to the new survey and rectification. CFE has made it clear based on our meeting with them that they have no such requirement and that you can make application for service without having paid for any such additional land. Further, you may hire your own electrical contractor, and you do not have to use the contractor used by the developer. In other words, unless you owe the developer for the electrical infrastructure (such as those discussed above re underground or those set forth below who did not pay for utilities by about April, 1995), you need not pay the developer to acquire electrical service; all you need to do is make application to CFE.

As to NEW electric services, the developer has asked CFE to not provide electrical service unless all debt claimed by the developer is paid. This would include even any you are asked to pay for pursuant to the new survey and rectification. CFE has made it clear based on our meeting with them that they have no such requirement and that you can make application for service without having paid for any such additional land. Further, you may hire your own electrical contractor, and you do not have to use the contractor used by the developer. In other words, unless you owe the developer for the electrical infrastructure (such as those discussed above re underground or those set forth below who did not pay for utilities by about April, 1995), you need not pay the developer to acquire electrical service; all you need to do is make application to CFE.

In some instances, the developer has claimed a $5,000 payment to provide electrical service. As best we can tell, there are only about three (3) lots for which such a payment would be appropriate. Those lots were involved in the original Regularization process, the history for which is generally set forth under “History”, below.

As to NEW electric services, the developer has asked CFE to not provide electrical service unless all debt claimed by the developer is paid. This would include even any you are asked to pay for pursuant to the new survey and rectification. CFE has made it clear based on our meeting with them that they have no such requirement and that you can make application for service without having paid for any such additional land. Further, you may hire your own electrical contractor, and you do not have to use the contractor used by the developer. In other words, unless you owe the developer for the electrical infrastructure (such as those discussed above re underground or those set forth below who did not pay for utilities by about April, 1995), you need not pay the developer to acquire electrical service; all you need to do is make application to CFE.

In some instances, the developer has claimed a $5,000 payment to provide electrical service. As best we can tell, there are only about three (3) lots for which such a payment would be appropriate. Those lots were involved in the original Regularization process, the history for which is generally set forth under “History”, below.

HISTORY: In 1992, the State of Sonora determined that Cholla was an “irregular” subdivision in that electric, water and sewer were not provided by the developer, among other things. A “Technical Committee” was established (composed of the then Mayor of Penasco, a representative of the developer, a representative of the Vecinos, and representatives of several State agencies), which committee oversaw the Regularization process. The original cost estimate for electric, water and sewer was $3,000,000. Based upon the first survey (the fly-over) it was believed that there were 1500 lots in Cholla and that the cost for those utilities would be $2,000/lot, which amount the then owners of property (about 550) were required to pay. It was later determined that there were only 1250 lots in Cholla requiring, therefore, an additional payment by the then lot owners of $1,232.

If the then owners were given until April, 1995, to make the additional payment, in which event the developer agreed that it would be responsible for any additional costs that might arise in providing those utilities – not only to the then lot owners but also to those lots wherein ownership was still in the developer.

In the Regularization process the developer indicated that as lot sales in Cholla progressed, monies from those sales would be used to provide water and sewer. Since the “Technical Committee was a special committee established in 1992 to “Regularize” Cholla, and since all that remained was for the developer to provide water and sewer either through lot sales or through its pledge of property, the Committee was disbanded in 1995

CONCLUSION: The foregoing matters were discussed at length at the board meeting on October 22 at which time there were a significant number of members present. Their comments following the meeting indicated that the foregoing cleared up a number of questions they had and I felt that providing this information to the full membership in this Newsletter would be of value.