THE VILLAGE OF ESCAYA DISCLOSURE REGARDING EXISTENCE AND MITIGATION OF VOCs AND METHANE AND UPDATE TO OTAY LANDFILL DISCLOSURE THE UNDERSIGNED BUYER (“BUYER”) ACKNOWLEDGES THAT BUYER HAS BEEN INFORMED OF THE FOLLOWING FACTS CONCERNING BUYER’S PURCHASE OF A RESIDENTIAL LOT (“RESIDENTIAL LOT”) WITHIN THE VILLAGE OF ESCAYA AND HAS INVESTIGATED THEM TO BUYER’S SATISFACTION AND HAS RECEIVED A COPY OF THIS DISCLOSURE FOR BUYER’S RECORDS. I. Groundwater and Sub Surface Soil Contamination. A. Background. During construction of the extension of Heritage Road, an area of perched groundwater was encountered. The Master Developer engaged an environmental consultant, TRC Solutions, Inc. (“TRC”), to test the groundwater. It was determined that the groundwater was impacted with certain volatile organic compounds (“VOCs”) commonly associated with petroleum products. In connection with the investigation of the impacted groundwater, TRC subsequently performed soil gas testing within the Village of Escaya to further assess the site. This soil gas testing identified elevated levels of methane and VOC’s within certain areas of the community. The sources of the methane and the VOCs are not currently known. The Master Developer proceeded to enroll in the County of San Diego’s Department of Environmental Health (“DEH”) Voluntary Assistance Program (Case DEH2017-LSAM000443) (the “VAP Case”) in order to obtain the assistance of DEH in investigating and pursuing the longterm remediation of the environmental issues posed by the impacted groundwater and soil gas. Methane is a lighter than air, colorless, odorless gas, which is non-toxic. It is the primary constituent (about 85%) of the natural gas used to provide heat in homes, heat for water heaters and the gas that is burned in kitchen stoves and ranges. Decomposition of accumulated organic matter may produce underground methane gas. Methane soil gas can be found in areas in proximity to landfills. Methane is also present in the atmosphere at low levels. Methane is potentially combustible if present within a confined space at concentrations greater than approximately 5.0% or approximately 50,000 parts per million by volume (“ppmv”). In very high concentrations of 500,000 ppmv or more, in a confined space, methane gas may lower the oxygen concentration to the point that the methane gas causes unconsciousness or suffocation. VOCs are both manmade and naturally-occurring compounds that are primarily present in fuels, vehicle oils and lubricants and are used as solvents to clean metals and/or in the dry-cleaning industry. Some VOCs are known to be carcinogens, and cancer risk is increased with increasing exposure to concentrations of VOCs over time. Methane and VOC impacted soil gasses can migrate upward (vertically) and outward (horizontally) as a vapor. This will occur in higher concentrations if the soil gas is under pressure, such as leaking from pressurized gas lines or some naturally occurring subsurface gas deposit. None of the soil gas tested by TRC in the community was found to be under pressure. While the migration of vapors from the subsurface through outdoor ground surfaces into the atmosphere is common in nature and is typically harmless, if the vapors are blocked by a structure, they can potentially accumulate under and migrate through building foundations into indoor air, a process commonly referred to as vapor intrusion. Additional general information about vapor intrusion can be found by visiting the U.S. EPA’s website at www.epa.gov/vaporintrusion. Subdivisions impacted with underground methane and/or VOC soil gas are common. Residences in such subdivisions routinely have been constructed with certain soil gas mitigation measures, which may include, among other things, sub-slab vapor barrier systems, sub-slab ventilation and membrane barriers, soil gas SMRH:483731763.5 082917 -10WR7-242896 ventilation control systems and in some cases application of vapor barriers on the surface of slabs and foundations. B. Environmental Consultant Recommendations. Based on its initial testing of the soil gases, TRC concluded that for structures in certain areas within the Village of Escaya, mitigation measures are warranted to address the presence of methane and VOCs in soil gas. In a subsequently performed Site Assessment and Human Health Vapor Risk Assessment Report published in August of 2017 (“Human Health Vapor Risk Assessment”), TRC recommended implementing methane and VOC mitigation measures for structures located within certain areas of the Village of Escaya. TRC has concluded that with the implementation of appropriately designed mitigation measures, which have been approved by a California licensed Professional Engineer with expertise in methane and VOC mitigation, the potential physical hazard from methane and the potential risk to human health from VOCs in the subsurface soil gas is considered insignificant for the occupants of residences located in the impacted areas. The Human Health Vapor Risk Assessment Report is available for review upon request. C. Mitigation Measures. The Guest Builders engaged Methane Specialists, a mitigation consulting engineer, to design mitigation measures for some of the impacted residences. Methane Specialists is an engineering firm knowledgeable in soil gas investigation and mitigation protocols that has conferred with TRC and studied the data related to the surface and subsurface investigation by TRC. Based thereon and an analysis of the applicable building plans for the impacted residences, Methane Specialists developed plans and specifications for each residence that will be described in the disclosure statement provided by the Guest Builder from whom you are purchasing a residence ("Mitigation Measures"). The Mitigation Measures are designed to prevent the intrusion of soil gasses into the associated residence and will be implemented by the Guest Builders before installation and construction of the foundations, slabs and footings for the residences. DEH has reviewed specimen copies of the plans and specifications for the Mitigation Measures designed by Methane Specialists and has concluded that, if installed in accordance with Methane Specialists' plans and specifications prior to construction of the residential structural slabs and footings, the proposed Mitigation Measures will effectively address potential methane or VOC impacts to new residences ("Standard Mitigated Residence"). Not all residences that have been determined to be impacted by methane and VOC soil gas in the Village of Escaya have had Mitigation Measures installed prior to construction of the residential structural slabs and footings as some residences had their structural slabs and footings constructed before the Mitigation Measures had been designed and approved. Those residences include all of the model homes and certain other residences located in Indigo, Valencia and Castellana Neighborhoods (“Alternative Mitigated Residences”). (The Standard Mitigated Residences and the Alternative Mitigated Residences are referred to collectively herein as “Mitigated Residences”). Buyers of Alternative Mitigated Residences have been advised and have received written documentation concerning the alternative mitigation measures that have been taken such that the potential physical hazard from methane and the potential risk to human health from VOCs in the subsurface soil gas has been reduced to insignificant for the occupants of those residences and advised as to the guidelines, maintenance, monitoring, use and disclosure obligations associated with the ownership of an Alternative Mitigated Residence. Buyers of Mitigated Residences will be responsible for ensuring they comply with all maintenance and use restrictions associated with the Mitigation Measures or alternative mitigation measures (as applicable), as provided by the Guest Builders. Failure to comply with these requirements, or any other monitoring and maintenance requirements included in the manufacturer's maintenance specifications provided to Buyer by the Guest Builders for the Mitigation Measures and alternative mitigation measures, could result in a buildup of soil gas. Improvements that may be made to a Mitigated Residence and landscaping that may be installed, may be limited as a result of the existence of the Mitigation Measures or alternative mitigation measures, as applicable. Owners of a Mitigated Residence intending to make any improvements to their Mitigated Residence will be required to comply with any requirements imposed by the County of San Diego, the City of Chula Vista or any other governmental agency, as well as Owner's Qualified Consultant, all at such Owner's expense. "Qualified Consultant" means a California Registered Professional Engineer who has sufficient experience with sub-slab vent pipe and membrane soil gas control systems. SMRH:483731763.5 082917 -20WR7-242896 Master Developer and/or the Guest Builder of a Mitigated Residence may provide Buyers of Mitigated Residences with guidelines for the performance of certain improvements and work or certain actions upon or related to the Mitigated Residence which may impact the operation of the Mitigation Measures or alternative mitigation measures, as applicable, in which case Buyer should closely review and adhere to such guidelines when performing any work or action that may impact the Mitigation Measures or alternative mitigation measures, as applicable. Buyer, the Community Association and any Neighborhood Association shall confirm with a Qualified Consultant that any contractors performing any construction, maintenance or other work on or near any component of a Mitigation Measure or alternative mitigation measure have sufficient training and/or experience with respect to such work. A description of the Mitigation Measures or alternative mitigation measures installed in Mitigation Residences, restrictions related to the Mitigation Measures or alternative mitigation measures, restrictions related to the use and improvement of Mitigated Residences, maintenance obligations of owners associated with the Mitigation Measures or alternative mitigation measures and notification and disclosure obligations of Buyer will also be set forth in the Community Declaration, as may be modified, supplemented or revised in a supplementary declaration, recorded against the residences within each phase, as applicable. Buyer and all future owners of Buyer's Residence will be required to comply with the restrictions, use, maintenance and disclosure obligations set forth in the Community Declaration and any supplementary declaration. D. Notification Obligations. Each Owner of a Mitigated Residence will be responsible for notifying any tenant, lessee or subsequent purchaser of a Mitigated Residence regarding the existence of methane and VOCs in the Village of Escaya, the Mitigation Measures or alternative mitigation measures for the Mitigated Residence, if any, and any changes to the Mitigation Measures or alternative mitigation measures made by such Owner, and delivering to such tenant, lessee, or subsequent purchaser any and all disclosures and other information relating to the Mitigation Measures or alternative mitigation measures. By accepting a deed to the residence, each Owner agrees to indemnify and hold Master Developer, Guest Builders and their successors and assigns and their respective officers, directors, shareholders, members, partners, employees, contractors, consultants, engineers, attorneys, representatives and agents, free and harmless from and against any and all claims, damages, losses or other liability (including, without limitation, attorney’s fees) arising from any breach by such Owner of its covenants contained herein. E. Heritage Road. In connection with the VAP Case, use of Heritage Road may also be periodically impacted to allow for environmental testing and remedial activities. II. Otay Landfill. The Otay Landfill disclosures regarding Groundwater and Methane have been updated. The updated disclosures are set forth below. A. Groundwater. In addition to the impacted groundwater disclosed in Section I above, according to the Phase I Environmental Site Assessment for the Community prepared by Geocon on June 18, 2015 (“Phase I Report”), volatile organic compounds (“VOCs”) were also detected in the landfill groundwater as a result of the Otay Landfill activities. VOCs are both manmade and naturally-occurring chemicals that are primarily present in fuels and are used as solvents. Whether the impacted perched groundwater disclosed in Section I above is associated with the Otay Landfill or other adjacent property uses is unknown at this time. One of the objectives of the VAP Case is to determine the source(s) of the VOCs detected in groundwater and investigate the feasibility of remediating same. Groundwater within the Otay Landfill is monitored on a semiannual or more frequent basis and the San Diego Regional Water Quality Control Board as well as County of San Diego's Department of Environmental Health plan to continue monitoring of groundwater until 2030 or longer. A copy of the Phase I Report is available for review upon request. B Methane. Methane gas is produced by the decomposition of material within the Otay Landfill. The Air Toxics Health Risk Assessment for Otay Ranch Village 3 North prepared by SCS Engineers in June 2014 (“Air Toxics Health Risk Assessment”) concluded as of the date of that report the offsite hazards from atmospheric and soil gas methane migration from the Otay Landfill were found to be less than significant. According to the Phase I Report, landfill gas monitoring reports indicated that methane gas concentrations for probes installed to monitor Otay Landfill methane gas were within SMRH:483731763.5 082917 -30WR7-242896 compliance parameters as of the date of the Phase I Report. However, as set forth in Section I above, methane has been detected in soil gas in certain areas of the Escaya Community so as to necessitate implementation of Mitigation Measures. No representation or warranty is made as to the future levels of methane. Buyers are advised that methane levels at the Otay Landfill are monitored for regulatory compliance purposes by the County of San Diego Air Pollution Control District which can be reached at (858) 586-2600 and the County of San Diego Department of Environmental Health which can be reached at (858) 694-2888. Methane is a lighter than air, colorless, odorless gas, which is non-toxic and noncarcinogenic, and which is the primary constituent (about 85%) of the gas burned in kitchen stoves and ranges. Methane is potentially combustible if present within a confined space at concentrations greater than approximately 5.0% by volume or approximately 50,000 parts per million by volume ("ppmv"). In very high concentrations, in a confined space, methane gas can dilute the air, thereby lowering the oxygen concentration to the point that the methane gas causes unconsciousness or suffocation. BY SIGNING BELOW, YOU ARE ACKNOWLEDGING THAT YOU HAVE READ, REVIEWED AND APPROVED OF THE CONTENTS OF THIS DISCLOSURE REGARDING EXISTENCE AND MITIGATION OF VOCs AND METHANE AND UPDATE TO OTAY LANDFILL DISCLOSURE. THIS DISCLOSURE SUPPLEMENTS OTHER DISCLOSURES PROVIDED BY SELLER TO BUYER RELATING TO THE RESIDENTIAL LOT. Lot: __________ Date: __________, 2017 _________________________ Buyer signature _________________________ Buyer name _________________________ Buyer signature _________________________ Buyer name SMRH:483731763.5 082917 -40WR7-242896 II. Cancellation Right. YOU, THE BUYER, HAVE A LEGAL RIGHT TO RESCIND (CANCEL) YOUR PURCHASE AND ANY CONTRACT TO PURCHASE, AND THE RETURN OF ALL MONEY AND OTHER CONSIDERATION THAT YOU HAVE GIVEN TOWARD THE PURCHASE. YOU MAY EXERCISE THIS RIGHT TO RESCIND UNTIL FIVE (5) BUSINESS DAYS AFTER THE DATE ON WHICH YOU RECEIVE AND ACKNOWLEDGE RECEIPT OF THIS NOTICE. YOU MAY EXERCISE THIS RIGHT TO RESCIND BY PROVIDING SELLER WRITTEN NOTICE OF YOUR ELECTION TO RESCIND ON THE ATTACHED CANCELATION ELECTION NOTIFICATION. THE ATTACHED CANCELATION ELECTION NOTIFICATION MUST BE RETURNED TO SELLER VIA EMAIL, OVERNIGHT DELIVERY RETURN RECEIPT REQUESTED, OR FAX AT: _________________________ ________________________ FAILURE TO RETURN THE CANCELATION ELECTION NOTIFICATION WITHIN FIVE (5) BUSINESS DAYS SHALL BE DEEMED TO BE AN ELECTION BY BUYER TO WAIVE BUYER’S CANCELLATION RIGHT AND TO PROCEED WITH THE CLOSE OF ESCROW PURSUANT TO THE TERMS OF THE PURCHASE AGREEMENT. ______________ Buyer’s Initials ACKNOWLEDGEMENT OF RECEIPT OF THIS NOTICE OF CANCELLATION RIGHTS: Lot: __________ Date: __________, 2017 _________________________ Buyer signature _________________________ Buyer name _________________________ Buyer signature _________________________ Buyer name SMRH:483731763.5 082917 -50WR7-242896 CANCELLATION ELECTION NOTIFICATION I HAVE RECEIVED A COPY OF THE DISCLOSURE REGARDING EXISTENCE AND MITIGATION VOCs AND METHANE. I HEREBY RESCIND (CANCEL) MY PURCHASE, OR CONTRACT PURCHASE, OF THE BELOW REFERENCED LOT IN THE VILLAGE OF ESCAYA. I AGREE COOPERATE WITH SELLER TO EXECUTE ANY ADDITIONAL DOCUMENTATION AS MAY DEEMED NECESSARY BY ESCROW HOLDER TO TERMINATE THE ESCROW. OF TO TO BE THIS CANCELLATION ELECTION NOTIFICATION MUST BE DELIVERED TO SELLER NO LATER THAN FIVE (5) BUSINESS DAYS AFTER THE DATE ON WHICH BUYER RECEIVED THE DISCLOSURE REGARDING EXISTENCE AND MITIGATION OF VOCs AND METHANE. THE CANCELATION ELECTION NOTIFICATION WHICH MUST BE RETURNED TO SELLER VIA E-MAIL, OVERNIGHT DELIVERY RETURN RECEIPT REQUESTED, OR FAX AT: _________________________ ________________________ _________________________ Buyer signature LOT: __________ Date: __________, 2017 _________________________ Buyer name _________________________ Buyer signature _________________________ Buyer name SMRH:483731763.5 082917 -60WR7-242896