August 25, 2000


All Members
Elizabeth Terrace Homeowners Association
c/o Ms. Nina Topic
1930 Eddy Street, No. 303
San Francisco, CA 94115

          Re: Elizabeth Terrace HOA v. Essie Collins, et al.

Dear Members:

As you know, my firm was engaged to assist your Association in investigating the construction problems with your buildings and resulting property damage and to take legal action to pursue your claims. The Law Offices of Ann Rankin has been assisting associations with such investigations and claims since 1982 and has a great deal of experience in this area. In December of 1999, we filed a lawsuit on behalf of the Association for construction defects and property damage against the developer and the general contractor. Since that time, various responsible subcontractors have been brought in as defendants. The Association hired the firm of Aquatech Consultancy, Inc. to do a comprehensive and detailed investigation of the construction problems with your buildings and resulting property damage. In August of 2000, the Association produced a comprehensive statement of claims and estimate for repairs prepared by their experts. The following is a summary of the reports' findings. (Copies of this report are in the Disclosure file maintained by the Board of Directors.)

The following is a list of the defective conditions and damages discovered to date and reported by Aquatech:

1. Improper installation of siding, trim, building paper and sheet metal flashing.

2. Damaged sheet rock and plywood sheathing.

3. Improperly installed window flashing and parapet coping

4. Defective garbage chute opening.

5. Improperly installed gang roof vent at south end of roof.

6. Defective installation of caulking.

Saarman Construction Company has prepared an estimate for repairs based on the Aquatech statement of claims. The total costs are estimated to be $330,577.00. These claims have not been proven at trial.

The defendants have asserted that some of the claims are barred by applicable statute of limitations; that many of the problems are caused by improper building maintenance by the homeowners; and that repairs, if any, can be done for a lot less than the amount of the Saarman estimate. If this case goes to trial, the jury will listen to the evidence and decide whether there are any defects that are the defendants' responsibility; whether there are statute of limitation problems; and how much any repairs should cost.

This case is presently assigned to a Special Master. A Special Master is an experienced constructive defect attorney appointed by the Court to oversee discovery and settlement matters. His job is to keep discovery costs down and help negotiate a settlement. Some limited discovery has been allowed, such as, the production of documents. At this time, all efforts are being made to provide the defendants the information they need to be in a position to try and settle this case. We expect an initial settlement conference will be scheduled in late 2000.

Please be aware that you must disclose known defective conditions when you sell your property. Otherwise, a potential buyer could sue you for fraud once he or she discovered the problems.

A Disclosure File containing this and any future letters about the property damage and other problems at your complex will be maintained with your Board of Directors. Please call your Board President, Ms. Nina Topic, if you would like to review the file. I will prepare letters like this one for distribution to the members when important developments occur. To avoid ruining the Associations's budget, please do not have your real estate agent or your lender call me. I will be unable to answer such inquiries without Board approval, as handling such calls takes my time and costs the Association money. The purpose of having the Disclosure File is to give the Association members a way to obtain information without running up excessive costs. Your members will also be able to access the disclosures on our Website, but they will need a password in order to do so. Our secretary, Kate Bechtold can provide you with the password.

The Board members and I will continue to keep you informed of developments.

Very truly yours,



Jane K. Penhaligen