SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                FORM 10-K/A-No.3

         [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the Fiscal Year Ended December 31, 1996

                                     OR

           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

        For the transition period from __________________ to ________________

                      Commission File No. 0-13556

                        Cluster Housing Properties
                  (A California Limited Partnership)

              (Exact name of registrant as specified in its charter)

                         California 04-2817478

              (State  or  other   jurisdiction   of   (I.R.S.
               Employer    incorporation    or   organization)
                           Identification No.)

          5110 Langdale Way, Colorado Springs CO 80906

          (Address of principal executive offices) (Zip Code)

                            (719) 527-0544
          (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Units of Limited 
Partnership Interests

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 and 15(d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes _X_ No ___

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of  Registrant's  knowledge in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

Aggregate  market  value  of  voting  securities  held  by  non-affiliates:  Not
applicable, since securities are not actively traded on any exchange.

Documents incorporated by reference:  None

The Exhibit Index is located on page ______



     EXPLANATORY NOTE:  This Amendment is being filed to include a signed
Report of Independent Accountants.


<PAGE>


                                                      PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K

(a)      1,2          See Page F-2
         3            See Exhibit Index contained herein

(b)      Reports on Form 8-K

         The  Partnership has not filed and was not required to file any reports
         on Form 8-K during the last quarter of 1996.

(c)      See Exhibit Index contained herein

(d)      See Page F-2.



<PAGE>


                                                    SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.





CLUSTER HOUSING PROPERTIES

By: GP L'Auberge Communities, L.P., a California
Limited Partnership, General Partner

By: L'Auberge Communities, Inc., its General Partner


By: __/s/ Earl C. Robertson_________________________________
Earl C. Robertson, Executive Vice President
and Chief Financial Officer

Date: October 20, 1997




Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

       Signature                                 Title               Date



__/s/ Stephen B. Boyle       Director, President and      October 20, 1997
  --------------------
  STEPHEN B. BOYLE           Principal Executive
                             Officer of L'Auberge Communities, Inc.



__/s/ Earl C. Roberston    Executive Vice President and      October 20, 1997
  ---------------------
  EARL C. ROBERTSON        Principal Financial Officer of
                           L'Auberge Communities, Inc.



<PAGE>








                                 APPENDIX A
                          CLUSTER HOUSING PROPERTIES
                    (A California Limited Partnership)
                              AND SUBSIDIARIES
                                 ---------








                      CONSOLIDATED FINANCIAL STATEMENTS

               ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                       For the Year Ended December 31, 1996




<PAGE>





                               CLUSTER HOUSING PROPERTIES
                          (A California Limited Partnership)
                                   AND SUBSIDIARIES
                                    ---------
            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Accountants                                       F-3


Consolidated Balance Sheets at December 31, 1996 and 1995               F-4


Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994                                  F-5


Consolidated Statements of Partners' Equity (Deficit)
for the years ended December 31, 1996, 1995 and 1994                   F-6

Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994                              F-7 -- F-8


Notes to Consolidated Financial Statements                        F-9 -- F-16


All  Schedules  are omitted as they are not  applicable,  not  required,  or the
information is provided in the financial statements or the notes thereto.



<PAGE>











                                         Report of Independent Accountants


To the Partners of
Cluster Housing Properties
(a California Limited Partnership):

         We have audited the accompanying consolidated balance sheets of Cluster
Housing  Properties (a California  Limited  Partnership)  and subsidiaries as of
December  31,  1996  and  1995,  and  the  related  consolidated  statements  of
operations,  partners'  equity  (deficit)  and cash  flows for each of the three
years in the period ended December 31, 1996. These financial  statements are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles used and significant  estimates made by the
General Partners of the Partnership, as well as evaluating the overall financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects, the consolidated financial position of Cluster
Housing  Properties (a California  Limited  Partnership)  and subsidiaries as of
December 31, 1996 and 1995 and the consolidated  results of their operations and
their cash flows for each of the three years in the period  ended  December  31,
1996 in conformity with generally accepted accounting principles.




COOPERS & LYBRAND L.L.P.
Denver , Colorado
February 28, 1997



<PAGE>



                         CLUSTER HOUSING PROPERTIES
                     (A California Limited Partnership)
                                AND SUBSIDIARIES

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  ----------


                                                                F-18


<TABLE>

                                             CLUSTER HOUSING PROPERTIES
                                         (a California Limited Partnership)
                                                  AND SUBSIDIARIES

                                             CONSOLIDATED BALANCE SHEETS

                                                 December 31, 1996 and 1995
                                               ---------------

                                                   ASSETS


                                             1996           1995

                                             ----           ----
Property, at cost:
<S>                                       <C>            <C>       
  Land                                    $3,677,028     $3,677,028
  Buildings and improvements              14,067,757     14,067,756
  Equipment, furnishings and               1,576,836      1,295,545
fixtures
                                        --------------- --------------

                                             19,321,621     19,040,329
Less accumulated depreciation               (4,810,314)    (4,418,093)
                                        --------------- --------------

                                            14,511,307     14,622,236

Cash and cash equivalents                   1,065,855        480,389
Short-term investments                                     1,067,446
                                               -
Real estate tax escrows                        41,632         44,055
Deposits                                        3,818          1,693
Accounts receivable                             2,605            631
Deferred expenses, net ofaccumulated
  amortization of $175,041 and                 19,450         58,351
$136,140                                 --------------- --------------

         Total assets                      $15,644,667    $16,274,801
                                       =============== ==============

                 LIABILITIES AND PARTNERS' EQUITY

Mortgage notes payable                      $8,559,930     $8,695,278
Accounts payable                               115,410         42,245
Accrued expenses                               195,794        164,298
Due to affiliates                                8,975         23,173
(Note 8)
Rents received in advance                        4,538         10,495
Tenant security                                 55,320         57,306
deposits
                                         --------------- --------------
                                              8,939,967      8,992,795
liabilities


Minority interest                                              (8,895)
                                                 -
Partners' equity                              6,704,700      7,290,901
                                        --------------- --------------

 Total liabilities and partners' equity      $15,644,667    $16,274,801
                                          ============= ==============

</TABLE>



<PAGE>

<TABLE>



                                     CLUSTER HOUSING PROPERTIES
                                 (a California Limited Partnership)
                                           AND SUBSIDIARIES
  
                              CONSOLIDATED STATEMENTS OF OPERATIONS

                        for the years ended December 31, 1996, 1995 and 1994
                             -------------



                                                     1996          1995             1994
                                                     ----          ----             ----
Revenue:
<S>                                                <C>            <C>              <C>       
   Rental income                                   $2,615,350     $2,725,119       $2,572,947
   Interest Income                                     56,391         83,222           58,128
                                                 ----------------------------------------------

Total Revenue                                       2,671,741      2,808,341        2,631,075

Expenses:
   Operations                                       1,237,828      1,084,870          991,569
   Interest expense                                   787,301        799,167          809,974
   Depreciation and amortization                      431,117        410,300          401,875
   General and administrative                         383,273        204,889          166,681
                                                 ----------------------------------------------

Total Expenses                                      2,839,519      2,499,226        2,370,099
                                                 ----------------------------------------------

Net income (loss)                                  ($167,778)       $309,115         $260,976
                                                 ==============================================

Net income (loss) allocated to:
  General Partners                                   ($1,678)        $15,456          $13,049

  Per unit Net income (loss) allocated to
    Investor Limited Partner
interest:
       32,421 units                                   ($5.12)          $9.06            $7.65
issued

</TABLE>


<PAGE>







                                     CLUSTER HOUSING PROPERTIES
                                 (a California Limited Partnership)
                                          AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
                          for the years ended December 31, 1996, 1995 and 1994
                                                -------------
<TABLE>

                                                                                  Investor         Total
                                                                  General         Limited        Partners'
                                                                 Partners         Partners        Equity

<S>                                                               <C>              <C>            <C>       
Balance at December 31, 1993                                      ($141,908)       $7,997,454     $7,855,546

Cash distributions                                                  (30,288)        (575,474)      (605,762)

Net income                                                            13,049          247,927        260,976
                                                               --------------  --------------- --------------

Balance at December 31, 1994                                       (159,147)        7,669,907      7,510,760

Cash distributions                                                  (26,449)        (502,525)      (528,974)

Net income                                                            15,456          293,659        309,115
                                                               --------------  --------------- --------------

Balance at December 31, 1995                                       (170,140)        7,461,041      7,290,901

Minority interest absorbed                                               -            (8,895)        (8,895)

Cash distributions                                                  (20,476)        (389,052)      (409,528)

Net income                                                           (1,678)        (166,100)      (167,778)
                                                               --------------  --------------- --------------

Balance at December 31, 1996                                      ($192,294)       $6,896,994     $6,704,700
                                                               ==============  =============== ==============

</TABLE>


<PAGE>




                            CLUSTER HOUSING PROPERTIES
                      (a California Limited Partnership)
                                AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                     for the years ended December 31, 1996, 1995, 1994

<TABLE>
                                                                   1996             1995           1994
                                                                   ----             ----           ----
Cash flows from operating activities:
<S>                                                                  <C>              <C>            <C>    
  Interest received                                                  $80,257          $82,408        $55,610
  Cash received from rental income                                 2,607,383        2,716,163      2,569,838
  General and administrative                                       (370,245)        (201,143)      (159,895)
expenses
  Operations expense                                             (1,179,822)      (1,039,036)      (968,373)
  Interest paid                                                    (787,816)        (799,636)      (810,404)
                                                                                               --------------
                                                               --------------  ---------------

Net cash provided by operating activities                            349,757          758,756        686,776

Cash flows from investing activities:
  Purchase of fixed assets                                         (281,346)        (148,127)        (6,392)
  Cash received from short-term investments                        1,043,580          327,298         32,545
                                                               --------------  --------------- --------------
Net cash provided by investing activities                            762,234          179,171         26,153

Cash flows from financing activities:
  Distributions to partners                                        (389,052)        (528,974)      (605,762)
  Deposits                                                           (2,125)            (358)           (95)
  Principal payments on mortgage notes payable                     (135,348)        (123,613)      (112,822)
                                                               --------------  --------------- --------------

Net cash used by financing                                         (526,525)        (652,945)      (718,679)
activities
                                                               --------------  --------------- --------------
                                                                                      
Net increase (decrease) in cash and cash                             585,466          284,982        (5,750)
equivalents

Cash and cash equivalents at beginning of  the period                480,389          195,407        201,157
                                                               --------------  --------------- --------------

Cash and cash equivalents at end of the period                    $1,065,855         $480,389       $195,407
                                                               ==============  =============== ==============



Non cash financing activities:
   Accrual of distributions to                                       $20,476
partners
</TABLE>



<PAGE>




                                         CLUSTER HOUSING PROPERTIES
                                     (a California Limited Partnership)
                                              AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

            for the years ended December 31, 1996, 1995, 1994


                                                -------------

Reconciliation   of  net  income  (loss)  to  net  cash  provided  by  operating
activities:

<TABLE>


                                                                   1996             1995           1994
                                                                   ----             ----           ----
<S>                                                               <C>                <C>            <C>     
Net income (loss)                                                 ($167,778)         $309,115       $260,976
Adjustments to reconcile net income (loss) to net cash
  provided by operating
activities:
  Depreciation and amortization                                      431,117          410,300        401,875
Change in assets and liabilities net of effects
of investing and financing
activities:
    Decrease in real estate tax                                        2,423            7,750         14,568
escrows
   (Increase) decrease in accounts and interest receivable            21,951          (1,445)        (1,153)
    (Increase) decrease in deposits and prepaid expenses                   -            2,033        (2,033)
    Increase in accounts payable and accrued expenses                 84,185           35,871          8,679
    Increase (decrease) in due to affiliates                        (14,198)            4,088          6,973
    Increase (decrease) in rent received in                          (5,957)          (3,526)          4,446
advance
    Decrease in tenant security                                      (1,986)          (5,430)        (7,555)
deposits
                                                               --------------  --------------- --------------

Net cash provided by operating activities                           $349,757         $758,756       $686,776
                                                               ==============  =============== ==============

</TABLE>


<PAGE>



1.  Organization of Partnership:

Cluster   Housing   Properties   (a   California   Limited   Partnership)   (the
"Partnership"),  formerly Berry and Boyle Cluster Housing Properties, was formed
on August  8,  1983.  The  Partnership  issued  all of the  General  Partnership
Interests  to three  General  Partners  in exchange  for  capital  contributions
aggregating  $2,000.  Stephen B. Boyle and GP L'Auberge  Communities,  L.P.,  (a
California Limited  Partnership),  formerly Berry and Boyle Management,  are the
General  Partners.  In  September,  1995,  with the consent of Limited  Partners
holding a  majority  of the  outstanding  Units,  as well as the  consent of the
mortgage  lenders  for the  Partnership's  three  properties,  Richard  G. Berry
resigned as a general partner of the Partnership.

A  total  of  2,000  individual   Limited  Partners  owning  32,421  units  have
contributed $16,210,500 of capital to the Partnership. At December 31, 1996, the
total  number of  Limited  Partners  was 1,967.  Except  under  certain  limited
circumstances, as defined in the Partnership Agreement, the General Partners are
not required to make any additional capital contributions.  The General Partners
or their affiliates will receive various fees for services and reimbursement for
various organizational and selling costs incurred on behalf of the Partnership.

The Partnership will continue until December 31, 2010, unless terminated earlier
by the sale of all, or substantially  all, of the assets of the Partnership,  or
otherwise in accordance  with the  provisions  of Section 16 of the  Partnership
Agreement.

2.  Significant Accounting Policies:

         A.  Basis of Presentation

         The  consolidated  financial  statements  include  the  accounts of the
         Partnership and its subsidiaries:  Sin Vacas Joint Venture (Sin Vacas),
         Autumn  Ridge Joint  Venture  (Autumn  Ridge) and Villa  Antigua  Joint
         Venture (Villa  Antigua).  All  intercompany  accounts and transactions
         have been  eliminated in  consolidation.  The  Partnership  follows the
         accrual basis of accounting.  Refer to Note 5 regarding the termination
         of the Joint Ventures.

         B.  Cash and Cash Equivalents

         The Partnership  considers all highly liquid debt instruments purchased
         with a maturity  of three  months or less to be cash  equivalents.  The
         carrying value of cash and cash equivalents approximates fair value. It
         is  the  Partnership's   policy  to  invest  cash  in  income-producing
         temporary cash  investments.  The  Partnership  mitigates any potential
         risk from such concentration of credit by placing investments with high
         quality financial institutions.

         C.  Short-term Investments

         At  December  31,  1995,  short term  investments  consisted  solely of
         various forms of U. S. Government backed securities,  with an aggregate
         par  value of  $1,075,000,  which  matured  in  February,  1996.  As of
         December 31, 1996,  there were no short term  investments.  Investments
         are recorded at amortized cost, which approximates market value.

         D. Significant Risks and Uncertainties

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

         E.  Depreciation

         Depreciation  is provided  for by the use of the  straight-line  method
         over estimated useful lives as follows:

                  Buildings and improvements                    39-40 years
                  Equipment, furnishings and fixtures            5-15 years

         F.  Deferred Expenses

         Costs of obtaining mortgages on the properties are being amortized over
         the mortgage term using the straight-line  method,  which  approximates
         the  effective  interest  method.  Fees paid to certain of the property
         developers were amortized over the term of the services  provided using
         the straight-line  method.  Any unamortized costs remaining at the date
         of a refinancing are expensed in the year of refinancing.

         G.  Income Taxes

         The Partnership is not liable for Federal or state income taxes because
         Partnership  income or loss is allocated to the Partners for income tax
         purposes. If the Partnership's tax returns are examined by the Internal
         Revenue  Service  or state  taxing  authority  and such an  examination
         results in a change in Partnership  taxable income (loss),  such change
         will be reported to the Partners.

         H. Rental Income

         Leases require the payment of rent in advance,  however,  rental income
         is recorded as earned.

         I. Long-Lived Assets

         The Partnership's  long-lived assets include property and equipment. On
         a quarterly basis, the partnership  evaluates the recoverability of the
         rental properties using undiscounted cash flows from operations.

         J. Reclassification

         Certain items in the financial  statements for the years ended December
         31,  1995  and 1994  have  been  reclassified  to  conform  to the 1996
         presentation.


<PAGE>



3. Property, at Cost

Property, at cost, consisted of the following at December 31, 1996:
<TABLE>

                                   Initial Cost                                  Costs Capitalized     Gross Amount At Which Carried
                                        to                                         Subsequent to                at Close of Period
                                   Partnership                                      Acquisition
                      ----------------------------------------- ------------------------------------  ------------------------------

                             Buildings     Equipment                Buildings   Equipment           Buildings     Equipment
      Property                  and       Furniture                   and      Furniture               and        Furniture
     Description     Land   Improvements  & Fixtures     Land     Improvements & Fixtures  Land   Improvements   & Fixtures   Total
------------------------------------------------------------ ------------------------------------ ----------------------------------
Villas at Sin Vacas,
  a 72-unit
residential
  rental complex
located
<S>                    <C>      <C>         <C>      <C>        <C>       <C>        <C>         <C>            <C>     <C>       
  in Tucson, Arizona   $799,913 $3,948,060  $344,615 $22,146    $75,678   $190,059   $822,059    $4,023,738   $534,674  $5,380,471

Pinecliff, a 96-unit
 residential rental
 located in
  Colorado Springs,
  Colorado            1,242,061  5,981,166  380,288  -          81,889    169,811   1,242,061   6,063,055      550,099   7,855,215

Villa Antigua, an
88-unit
  residential rental
  complex located in
  Scottsdale, Arizona 1,610,646  3,942,388  376,709   2,262     38,576    115,354  1,612,908     3,980,964      492,063  6,085,935
                      --------------------------------------  ------------------------------    ------------------------------------

                     $3,652,620  $13,871,614   $1,101,612  $24,408  $196,143 $475,224  $3,677,028 $14,067,757 $1,576,836 $19,321,621
                     ===================================== ======================================================================== 

Depreciation expense for the years ended December 31, 1996, 1995 and 1994 and accumulated
depreciation
    at December 31, 1996 and 1995 consisted of the following:
                                                                                            Accumulated Depreciation
                                                  Depreciation                                    December 31,
                                                     Expense
                                          1996          1995            1994                  1996           1995
                                   -----------  ------- ----      ----------                  ----           ----
Buildings and improvements             $351,694       $351,694       $351,695              $3,639,807      $3,288,113
Equipment, furnishings and               40,527         19,709         11,283               1,170,507       1,129,980
fixtures
                                   -------------------------------------------             ---------------------------

                                       $392,221       $371,403       $362,978              $4,810,314      $4,418,093
                                   ===========================================             ===========================
</TABLE>

Each of the properties is encumbered by a nonrecourse mortgage note payable (see
Note 6).


<PAGE>


4.  Cash and Cash Equivalents:

Cash and cash  equivalents  at  December  31,  1996  and 1995  consisted  of the
following:


                                                     1996          1995
                                                     ----          ----
Cash on hand                                       $ 854,769       $ 30,848
Certificate of depo                                  211,086        100,000
Money market accoun                                 ________        349,541
                                                   
                                                   $1,065,855       $480,389

5.  Joint Venture and Property Acquisitions:

The  Partnership  has invested in three  properties  located in  Scottsdale  and
Tucson,  Arizona and Colorado Springs,  Colorado. The success of the Partnership
will  depend upon  factors  which are  difficult  to predict  including  general
economic and real estate market conditions,  both on a national basis and in the
areas where the Partnership's investments are located.

Sin Vacas

On October 25, 1985,  the  Partnership  acquired a majority  interest in the Sin
Vacas Joint Venture,  which owns and operates the Villas at Sin Vacas, a 72-unit
residential  property located in Tucson,  Arizona.  Since the Partnership owns a
majority interest in the Sin Vacas Joint Venture, the accounts and operations of
the Sin Vacas Joint Venture have been consolidated into the Partnership.

The co-venture  partner was an affiliate of Evans Withycombe,  Inc.  ("EWI"),  a
Phoenix based residential development,  construction and management firm. EWI is
also the developer of the Villa Sin Vacas property.

The Partnership made initial cash payments in the form of capital  contributions
totaling $2,458,507 and funded $398,949 of property acquisition costs which were
treated as a capital  contribution  to the joint  venture.  Since  completion of
construction,   the  Partnership  has  made  additional  contributions  totaling
$275,167.  At December 31, 1996, the total capital contributions and acquisition
costs incurred were $2,713,937 and $418,686, respectively.

For the years ended December 31, 1996, 1995 and 1994 the Sin Vacas Joint Venture
had net loss of $67,846 and net income of $49,277, and $65,081, respectively

JANUARY 1, 1996 THROUGH MAY 13, 1996

Net cash from  operations (as defined in the joint venture  agreement) was to be
distributed as available to each joint venture partner quarterly as follows:

         First,  to the  Partnership,  an  amount  equal  to  8.75%  per  annum,
         noncumulative  (computed daily on a simple noncompounded basis from the
         date of completion funding) of the Partnership's capital investment, as
         defined in the joint venture agreement;

         Second, the balance 70% to the Partnership and 30% to the co-venturer.

All losses from operations and depreciation for the Sin Vacas Joint Venture were
allocated 99% to the Partnership and 1% to the co-venturer.

All profits from operations, to the extent of cash distributions, shall first be
allocated to the  Partnership and co-venturer in the same proportion as the cash
distribution. Any remaining profits are allocated 70% to the Partnership and 30%
to the co-venturer.

In the case of certain capital  transactions and distributions as defined in the
joint venture  agreement,  the  allocation of related  profits,  losses and cash
distributions,  if any, would be different than as described  above and would be
effected by the relative balances in the individual partners' capital accounts.

Villa Antigua

On June 11,  1987,  the  Partnership  acquired a majority  interest in the Villa
Antigua  Joint  Venture,  which  owns and  operates  Villa  Antigua,  an 88-unit
residential property located in Scottsdale,  Arizona. Since the Partnership owns
a majority  interest  in the Villa  Antigua  Joint  Venture,  the  accounts  and
operations of the Villa Antigua  Joint Venture have been  consolidated  into the
Partnership.

The co-venture  partner was an affiliate of Evans Withycombe,  Inc.  ("EWI"),  a
Phoenix based residential development,  construction and management firm. EWI is
also the developer of the Villa Antigua property.

The Partnership made initial cash payments in the form of capital  contributions
totaling $2,494,677 and funded $381,729 of property acquisition costs which were
treated as a capital  contribution  to the Villa  Antigua Joint  Venture.  Since
completion of  construction,  the Partnership has made additional  contributions
totaling  $85,440.  At December 31, 1996,  the total capital  contributions  and
acquisition costs were $2,580,117 and $381,729, respectively.

The Villa  Antigua  Joint  Venture  had net income of  $137,799,  $212,408,  and
$130,002 for the years ended December 31,1996, 1995 and 1994.

JANUARY 1, 1996 THROUGH MAY 13, 1996

Net cash from  operations (as defined in the joint venture  agreement) was to be
distributed as available to each joint venture partner quarterly as follows:

         First,  to  the  Partnership,   an  amount  equal  to  10%  per  annum,
         noncumulative  (computed daily on a simple noncompounded basis from the
         date of  completion  funding)  of the  Partnership's  adjusted  capital
         investment, as defined in the joint venture agreement;

         Second, the balance 70% to the Partnership and 30% to the co-venturer.

All losses from operations and  depreciation for the Villa Antigua Joint Venture
were allocated 99% to the Partnership and 1% to the co-venturer.

All profits from operations, to the extent of cash distributions, shall first be
allocated to the  Partnership and co-venturer in the same proportion as the cash
distributions; however, if for any taxable year there are no cash distributions,
profits are allocated 99% to the Partnership and 1% to the co-venturer.

In the case of certain capital  transactions and distributions as defined in the
joint venture  agreement,  the  allocation of related  profits,  losses and cash
distributions,  if any, would be different than as described  above and would be
effected by the relative balances in the individual partners' capital accounts.

Sin Vacas and Villa Antigua

MAY 14, 1996 THROUGH DECEMBER 31, 1996

On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans  Withycombe  Management,  Inc. and certain of its affiliates  ("EWI")
which  separated the interests of EWI and the  Partnership,  thus  affording the
Partnership  greater  flexibility  in  the  operation  and  disposition  of  the
properties.  In  consideration of a payment by the Partnership to EWI of $73,775
and delivery of certain mutual  releases,  EWI (i)  relinquished its contract to
manage  Sin Vacas and Villa  Antigua  and its option to  exercise  its rights of
first refusal with regard to the sale of those  properties and (ii) assigned all
of its  interest in the Sin Vacas  Joint  Venture  and the Villa  Antigua  Joint
Venture to the  Partnership  (while  preserving  the  economic  interests of the
venturer in these Joint Ventures),  which resulted in the dissolution of the Sin
Vacas Joint Venture and the Villa Antigua Joint Venture.  EWI may still share in
the cash flow  distributions  or proceeds from sale of the properties if certain
performance levels are met.

Pinecliff

On July 16, 1986, the Partnership  acquired Pinecliff (formerly Autumn Ridge), a
96-unit  residential   property  located  in  Colorado  Springs,   Colorado  and
simultaneously  contributed  the  property  to the Autumn  Ridge  Joint  Venture
comprised of the Partnership and an affiliate of the property  developer.  Since
the Partnership owns a majority interest in the Autumn Ridge Joint Venture,  the
accounts and operations of the Autumn Ridge Joint Venture have been consolidated
into the Partnership.

The co-venture partner was Highland Properties, Inc. ("Highland") a Colorado
based residential development, construction and management firm.  Highland 
developed the property known as L'Auberge Pinecliff

The Partnership made initial cash payments in the form of capital  contributions
totaling $3,819,397 and funded $546,576 of property acquisition costs which were
treated as a capital  contribution  to the Autumn  Ridge  Joint  Venture.  Since
completion of  construction,  the Partnership has made additional  contributions
totaling  $318,811.  At December 31, 1996 the total  capital  contributions  and
acquisition costs incurred were $4,187,309 and $497,475, respectively.

For the years ended  December  31,  1996,  1995 and 1994 the Autumn  Ridge Joint
Venture had net income of $116,520, $149,652, and $153,418, respectively.

JANUARY 1, 1996 THROUGH JULY 2, 1996:

Net cash from  operations (as defined in the joint venture  agreement) was to be
distributed as available to each joint venture partner quarterly as follows:

         First,  to  the   Partnership,   an  amount  equal  to  8%  per  annum,
         noncumulative  (computed daily on a simple noncompounded basis from the
         date of completion funding) of the Partnership's capital investment, as
         defined in the joint venture agreement;

         Second, the balance 82% to the Partnership and 18% to the co-venturer.

All losses from operations and  depreciation  for the Autumn Ridge Joint Venture
were allocated 100% to the Partnership.

All profits from operations, to the extent of cash distributions, shall first be
allocated to the  Partnership and co-venturer in the same proportion as the cash
distribution. Any remaining profits are allocated 82% to the Partnership and 18%
to  the   co-venturer.   In  the  case  of  certain  capital   transactions  and
distributions  as defined in the joint  venture  agreement,  the  allocation  of
related profits, losses and cash distributions,  if any, would be different than
as  described  above and  would be  effected  by the  relative  balances  in the
individual partners' capital accounts.

JULY 3, 1996 THROUGH DECEMBER 31, 1996

On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland  Properties,  Inc.  ("Highland")  which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property.  In consideration of a payment
by the Partnership,  to Highland totaling $7,718, and delivery of certain mutual
releases,  Highland (i)  relinquished its option to exercise its rights of first
refusal  with regard to the sale of the  property  and (ii)  assigned all of its
interest in the L'Auberge  Pinecliff  Joint Venture to the  Partnership,  (while
preserving  the economic  interests  of the  venturer in these Joint  Ventures),
which  resulted in the  dissolution  of the L'Auberge  Pinecliff  Joint Venture.
Highland may still share in the cash flow distributions or proceeds from sale of
the properties if certain performance levels are met.

The Sin Vacas  Joint  Venture,  the Autumn  Ridge  Joint  Venture  and the Villa
Antigua  Joint  Venture  are  sometimes  collectively  referred to as the "Joint
Ventures".  These joint  ventures  were  effectively  terminated on December 31,
1996. The Partnership has eliminated various minority interests related to these
joint ventures,  as such, the Partnership owns 100% of the underlying  assets at
December 31, 1996.

6.  Mortgage Notes Payable:

All of the property  owned by the  Partnership  is pledged as collateral for the
nonrecourse  mortgage  notes payable  outstanding  at December 31, 1996 and 1995
which consisted of the following:

                            1996                 1995
                            ----                 ----
Villas at Sin Vacas       $2,428,851         $2,467,255
Pinecliff                  3,112,702          3,161,919
Villa Antigua              3,018,377          3,066,104
                           ---------          ---------

                          $8,559,930         $8,695,278         
                           =========          =========
Sin Vacas
Under the terms of the note, monthly principal and interest payments of $21,830,
based on a fixed  interest  rate of 9.125%,  are  required  over the term of the
loan. The balance of the note will be due on July 15, 1997.

Pinecliff
Under the terms of the note,  monthly principal and interest payments of $27,976
are  required  over the term of the  loan,  based  on a fixed  interest  rate of
9.125%. The balance of the note will be due on July 15, 1997.

Villa Antigua
Under the terms of the note, monthly principal and interest payments of $27,128,
based on a fixed  interest  rate of 9.125%,  are  required  over the term of the
loan. The balance of the note will be due on July 15, 1997.

As these  mortgage notes payable are due in fiscal 1997,  the  Partnership  will
seek to renegotiate  these mortgage notes with its existing  lenders or seek new
sources of  financing  for these  properties  on a long term basis.  The General
Partners believe that existing cash flows from the properties will be sufficient
to support a level of borrowing that is at least equal to amounts outstanding as
of December 31, 1996. If the general  economic  climate for real estate in these
respective  locations were to  deteriorate  resulting in an increase in interest
rates for mortgage  financing or a reduction in the  availability of real estate
mortgage  financing  or a decline  in the  market  values of real  estate it may
affect the Partnership's ability to complete these refinancings.



Interest  included in Accrued  expenses in the  Consolidated  Balance  Sheets at
December 31, 1996 and 1995 consisted of the following:

                                             1996                      1995
                                             ----                      ----
         Villas at Sin Vacas                $9,235                 $   9,381
         Pinecliff                          11,835                    12,022
         Villa Antigua                      11,476                    11,658
                                             ------                 ---------
                                          $  32,546                 $  33,061
                                           ========                  ========

The  principal   balance  of  the  mortgage  notes  payable   appearing  on  the
consolidated  balance sheets at December 31, 1996 and 1995 approximates the fair
value of such notes.

7.  Partners' Equity:

Under the terms of the  Partnership  Agreement  profits are allocated 95% to the
Limited Partners and 5% to the General Partners; losses are allocated 99% to the
Limited Partners and 1% to the General Partners.

Cash distributions to the partners are governed by the Partnership Agreement and
are made,  to the extent  available,  95% to the Limited  Partners and 5% to the
General Partners.

The allocation of the related profits, losses, and distributions,  if any, would
be different  than  described  above in the case of certain events as defined in
the  Partnership  Agreement,  such as the sale of an  investment  property or an
interest in a joint venture partnership.

8.  Related-Party Transactions:

Due to affiliates at December 31, 1996 and 1995 consisted of reimbursable  costs
payable to L'Auberge Communities, Inc., an affiliate of the General Partners, in
the amounts of $8,975, and $14,278,  respectively. In 1995 distributions payable
to the Villa  Antigua  co-venturer  totaled  $8,895.  There was no  distribution
payable to the co-venturer in 1996.

For the years ended December 31, 1996, 1995 and 1994, general and administrative
expenses  included  $82,881,  $84,643,  and  $68,625,  respectively,  of  salary
reimbursements  paid to the  General  Partners  for certain  administrative  and
accounting personnel who perform services for the Partnership.

The officers and principal shareholders of Evans Withycombe, Inc., the developer
of the Villas at Sin Vacas and Villa Antigua  properties and an affiliate of the
co-venturers of those joint  ventures,  together hold a two and one half percent
cumulative profit or partnership voting interest in LP L'Auberge Communities,  a
California Limited Partnership, formerly Berry and Boyle, which is the principal
limited partner of GP L'Auberge Communities, L.P.

During the years  ended  December  31,  1996,  1995 and 1994,  Evans  Withycombe
received   property   management   fees  of  $32,475,   $84,187,   and  $79,692,
respectively.  These  fees were 5% of rental  revenue  in each time  period.  In
addition,  for the years  ended  December  31,  1996,  1995 and  1994,  $64,954,
$51,715,  and $49,083,  respectively,  of property  management fees were paid or
accrued to  Residential  Services  -  L'Auberge,  an  affiliate  of the  General
Partners. These fees were 4% of rental revenue in 1996, and 5% of rental revenue
in 1995 and 1994.

Villa Antigua  reimbursed  $35,885,  $34,707 and $34,878,  respectively  for its
proportionate  share  of the  1996,  1995 and 1994  real  estate  taxes to Villa
Antigua Phase II, which is an affiliate of the General Partners.