Third Board Answers Member Queries

On Friday, March 26, during a prerecorded broadcast in the Community Center board room, the Third Mutual Board of Directors provided answers to questions raised by residents during the ballot initiative project. 

The broadcast  will air on Village Television (TV6) on Wednesday, March 31, at 5:30 p.m. and again on Thursday, April 1, at 2 p.m. Third members can view the Third Q&A recorded broadcast on the Village YouTube channel here


Insurance requirements for Third Mutual: As spelled out in Article 11 of the current CC&Rs, Third Mutual is required to insure for full replacement value of structures. Formerly, that dollar figure was $700 million. However, in 2020, insurance companies demanded a reevaluation because one had not been done for 20 years. The current evaluation is $1.6 billion. An insurance task force is now working on our insurance needs and costs. An insurance update is presented at each board meeting. Until 2020, the insurance companies, mainly Travelers, were satisfied with the evaluation used by the Village. Last year, Travelers, which insures the primary level (the first $50 million) for the Village, indicated they would not continue insuring Third Mutual without a new, independent evaluation. 

Probable maximum loss (PML): Currently, the PML multiplier for Third Mutual is $145 million. That figure, based on the total original insurance evaluation of $700 million, is now considered insufficient by the vast majority of our lenders, nor is it considered appropriate by the federal agencies that purchase most of the loans. One major catastrophe could easily cost $500 million to $700 million. Insuring for some multiplier of the PML would only work with a sufficiently large multiplier. Even one or two times the current PML multiplier of $145 million would leave us vastly underinsured. 

Role of attorneys: The current CC&Rs stipulate we must insure for 100% replacement cost. This had nothing to do with current or past attorneys. 

Insurance costs: The total premium cost for all the insurances Third Mutual is responsible for obtaining and maintaining for 2021 is $4.9 million. The Disaster Fund, which is not a reserve fund, can and was used to help underwrite the cost of the increased premiums for this year and this year only. For 2021 approximately $2.8 million is being used from the Disaster Fund to help cover insurance premiums. The Disaster Fund cannot continue to underwrite insurance premiums for more than this single year. Special assessments for insurance are not anticipated. There is a separate line item for insurance in Third Mutual’s budget. 

The Third Mutual Board understood the impact of the anticipated rising insurance premium and sought to partially offset the cost by raising the monthly HOA by $20. While the board was aware there would be other rising costs, such as outside services and employee compensation, which would have to be factored into the budget for 2021, the Third Board made a conscious decision not to raise the monthly HOA by more than $20. While the vast majority of the $20 increase will go to the increased cost of insurance premiums with the balance coming this year from the Disaster Fund, the budget for 2021 also reflects increases in other areas. The other option for the Third Mutual would have been to reduce or curtail other services if the HOA dues were not increased. Third Mutual cannot use legally mandated reserves to pay for insurance. Insurance costs fluctuate and we are currently in negotiations with our new insurance broker.

Replacement cost: Replacement cost is the actual cost to replace an item or structure at its pre-loss condition and upgraded to meet codes. The replacement cost is different from the sale price which relates to market value. Market value helps determine the sale price of the manor.

Relationship of lender to cost of Third’s insurance: No single lender drives the cost of Third’s insurance. 

Shared cost of manors: At this time, there are no plans to change the current shared cost method of assessments on manors to a model based on the square foot size of manor. 

HO-6 and owner responsibility: Owners are strongly urged to protect themselves and their property not covered by the mutual with an HO-6 insurance policy. Many lenders require such a policy. All homeowners should contact their insurance agent for guidance.   

Federal National Mortgage Association (FNMA; commonly known as Fannie Mae): Third Mutual cannot get out from under the thumb of 100% replacement cost of FNMA government ruling. Fannie Mae will accept a master insurance policy as demonstrated satisfaction of its insurance requirements for the units if the project’s legal documents allow for master insurance policies to cover both the individual units and the common elements. Third Mutual’s legal documents do allow for this. 

Member-suggested alternative ways to insure: 

  • Insure the submutuals individually: Unfortunately, doing this would be more costly than the current requirement of insuring the entire mutual for 100% of replacement cost.  
  • Partner with other communities to form a self-insurance cooperative. At this time, no formal research has been done on partnering with other communities; however, initial information suggests this would not be an option as there are insufficient reserve funds to participate in such an endeavor.
  • Research the possibility of help from FEMA in time of a major catastrophe. 
  • Address insurance separately on the next vote. The board is considering the potential of this option.


Third Mutual maintenance responsibilities: No changes in maintenance responsibilities were proposed. The initial matrix that was attached to the CC&R revision contained errors. Once the errors were identified a new matrix was created to properly reflect the responsibilities. There was no intent to shift any additional responsibilities for maintenance to the owner. The list was intended solely to clarify, as required by Davis-Stirling, those responsibilities that belong to a mutual from those belonging to an owner. No comprehensive list previously existed. As soon as the errors were identified, a new matrix was created to properly reflect these responsibilities. 

The association maintains structure, plumbing, landscaping, security, amenities, administration and more. Owners, as always, are completely responsible for any and all alterations/additions to the original footprint of their manor. For example, owners are responsible for new windows, replacement of original garage doors, doorbells, screened doors, solar tubes and skylights, to name but a few.

Charges for maintenance: Maintenance charges do not change with a change in ownership. 


30% Lease Cap: In the proposed CC&Rs, Third Board sought to have a two-year waiting period for lessees when investors purchased here. On September 28, 2020, at about the same time the proposed CC&Rs were on the way to the printers, the state legislature redefined lease waiting periods by passing AB3182 making the proposed lease change a moot point. AB3182 requires a minimum lease of 30 days which, unfortunately, allows for short term rentals. That limit endangers the ability of prospective residents to obtain mortgages when the cap on rentals is reached. Changing the 30% lease cap in place since 2008 would require a vote by the membership. In response to one member’s question, a leasing change is not relevant to insurance.

Leasing policy: Third Mutual’s leasing policy is found on the Village website at under Third Mutual and is included in Documents. Call Resident Services at 949-597-4600 to request a copy of the leasing policy if you cannot retrieve it from the website. Leasing applications are handled in Resales at VMS.

Civil Code 4174: Does not define the responsibilities of tenants, as one member queried.


  • Third Board and VMS continuously work on improving service including callbacks.
  • Third Board will provide advance information prior to bringing forward any proposed changes to the CC&Rs.
  • A request by a resident real estate agent to form a committee to obtain feedback regarding real estate changes has been forwarded to the VMS Board for consideration.
  • Some of the difficulties related to communication include the COVID-19 restrictions on town hall-style meetings. There were also limitations on available time slots on TV6 for opposition responses. 
  • One member who was in opposition to the proposed changes, wrote letters to membership stating: “Opposition was not provided equal opportunity under Civil Code 5821.” The board believes the member was given equal opportunity.

General member comments related to communication:

  • Communication via computer was mentioned as a problem for those unable to receive communications via the internet. The board uses regular mail and TV6 to reach out to members who do not have internet.
  • One member suggestion is that everyone needs education. The board agrees. Ongoing communication and education are available via committee and board meetings.
  • Another commented on the long campaign being drawn out with the process misunderstood. While the board understands, the urgency to notify its members was paramount and drove the board’s actions.
  • Another suggestion was to have more open meetings. Given the constraints imposed by COVID-19, the board believed that need was being addressed as much as possible, by creating the opportunity for member participation in Third Committee and Zoom meetings. 
  • One member stated: “We need to work together, and also Third Board needs to form a task force to formulate governing documents.” Another member stated “It seems like we were disassembling everything as we have plenty of money to run our affairs.” All member comments are considered and will be addressed as we move forward.
  • One member asked why Article 11 of the CC&Rs, which has been in place since 1988, is now interpreted differently. This answer cannot be given without the questioner explaining exactly what parts of Article 11 they feel are being interpreted differently.

Additional Comments and Suggestions

  • One member asked “Why was there only one ‘Yes’ and one ‘No’ on the voting boxes on the ballot?” These were the only choices because the proposed changes were presented as one package. 
  • One comment stated: “The residents should have the right to vote on the use of common area.” If such a vote were taken, it would need to be included in the CC&Rs.
  • One member stated “I’d like you to send proposals to the community for comments prior to formalizing a vote.” Third is exploring ways to improve communication and participation because voter apathy was an issue in the special election. 
  • Another question was “Why rewrite the CC&Rs?” The existing CC&Rs are antiquated and cumbersome and need to be updated to permit the mutual to function effectively and efficiently. This is a living document.
  • Could changes have been “redlined?” The proposed CC&Rs represented a new document, written from the ground up, hence no option for a redline existed.
  • In response to a member question regarding quorum, both closed and open meetings need a quorum if a vote is to take place.
  • Regarding a Federal Housing Administration (FHA) question, Third Mutual has never been FHA certified. 
  • Why consolidate the mutuals? The board believes HOA consolidation is necessary for the mutual to function effectively. For the same reason, it would not make sense to divide into the eight different housing types, as suggested by one member, due to the added expense, administrative time and additional employees needed for staff to discharge their duties under such a governance model. Another suggestion was made to form an architectural standards and control committee for every HOA. There also is not sufficient staff or board member time or scheduling capacity to accommodate and support this suggestion. All comments are appreciated and being taken into consideration.

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