2015 Cooperative Housing Journal Articles of Lasting Value for Leaders of Cooperative Housing Published by Cooperative Housing Journal (ISSN 0589-6355) is published annually by the National Association of Housing Cooperatives, 1444 I Street, NW, Suite 700, Washington, D.C. 20005-6542; Tel 202/737-0797; E-mail: [email protected]; www.NAHC.coop. Chairman Ralph J. Marcus President Gregory Carlson Executive Vice President Fred Gibbs Secretary Anne Hill Treasurer Linda Brockway Editor Altoria Bell Ross Contributing Editors Stuart Saft Cheryl A. Sessions Editorial Board Manager: Douglas M. Kleine Herbert H. Fisher Randall Pentiuk Mark Shernicoff David J. Thompson Roger Willcox About NAHC The National Association of Housings Cooperatives is a nonprofit national federation of housing cooper- atives, other resident-owned or -controlled housing, professionals, organizations and individuals interested in promoting cooperative housing communities. Incorporated in 1960, NAHC supports the nation’s more than a mission families living in cooperative housing by representing cooperatives in Washington, D.C. and by providing education, service and information to cooperatives. The Cooperative Housing Journal is a mem- ber service providing information of lasting value on cooperative housing practices, theory and research. Mission Statement NAHC’s mission is to support and educate existing and new cooperative housing communities as the best and most economical form of homeownership. National Association of Housing Cooperatives 2 TABLE OF CONTENTS The Legal Hybrid of Housing Cooperatives By Julie D. Lawton .................................................................................................................... page 5 Cooperatives: Leadership with a Difference By Bruce J. Reynolds ................................................................................................................ page 13 The Mutual Housing Experiment Yields Affordable Homes for the Middle Class By Kristin M Szylvian .............................................................................................................. page 15 A Tale of Two Communities: The Economic Value of Living in a Resident-Owned Manufactured Community versus a Manufactured Rental Home Community By David J. Thompson ............................................................................................................ page 23 Case Study: Financing a Cooperatively Owned Rural Manufactured Home Community By Lance George and Jann Yankausas. ................................................................................ page 27 If you are interested in writing an article for a future issue of the Cooperative Housing Journal, contact the editor to provide an outline of your article idea. The opinions expressed in this publication are those of the authors and not necessarily those of the As- sociation. This publication is intended to provide accurate and authoritative information about the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting or other such professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. ©Copyright 2016 by the National Association of Housing Cooperatives. All rights reserved. 3 2015 Cooperative Housing Journal National Association of Housing Cooperatives 4 The Legal Hybrid of Housing Cooperatives By Julie D. Lawton What Is a Housing tive corporation providing them member can be evicted from co-ownership in the cooperative the home where he or she has Cooperative? corporation, and by extension, lived for years and be stripped of A housing cooperative is a co-ownership in the real prop- the equity the housing cooper- type of residential property, most erty owned by the cooperative ative member has invested into common in New York, a little corporation. In tandem with the housing cooperative. These less in Chicago and Washington, the purchase of the cooperative consequences exist whether D.C. Cooperatives are a form of share, each resident executes a the member’s violation is for residential property ownership proprietary lease providing the non-payment of housing pay- that were first built in the United cooperative member with the ments to the housing cooperative States in 1876 and were original- contractual right to reside in a or because of some non-financial ly designed as luxury multi-fam- specific unit of the real property violation such as subletting the ily dwellings for the upper class owned by the cooperative cor- unit or refusing to allow inspec- who wanted higher-end living in poration. The proprietary lease tions. This forfeiture of equity the city without the expense and can be short term, such as 12 can occur even when the value upkeep of a single family house. months, or long term, such as of the member’s equity is great- If you look at a housing coopera- 99 years and represents the oc- er than the amount owed to the tive, it often will look like a con- cupancy agreement between the housing cooperative. This result dominium - a multifamily build- resident and the cooperative cor- occurs partly because courts, ing with common areas set aside poration. As a member of the co- housing cooperatives and state for the use of the members of the operative corporation that owns and federal legislatures remain cooperative. A major difference the real property in which the confused about the legal struc- between a condominium and a member resides, the member is ture of a housing cooperative and housing cooperative is that an also a co-owner of the proper- the legal protections that should owner of a condominium owns ty in which the member resides. thus flow to housing cooperative the actual condominium unit, This confluence creates the legal members. These various con- which means that person owns hybrid nature of housing coop- stituencies divide over whether real property. A member of a eratives: a member is, at once, housing cooperative members housing cooperative does not di- both a tenant of the cooperative are owners or renters. And, if rectly own his or her cooperative corporation and a co-owner in housing cooperative members unit, and, thus, does not directly the cooperative corporation. It is are owners, do they own real own real property. this dual nature that creates the property or personal property? Housing cooperatives are legal conflict in trying to define Some courts, such as Arizo- formed as a corporation pur- the legal structure of the housing na, designate housing coopera- suant to state statute, solely for cooperative. tives as ownership and specifi- the purpose of owning and op- Members of housing cooper- cally reject the idea of a housing erating real property for its res- atives who violate, or are found cooperative as rental property. idents. The housing cooperative in violation of, the housing co- Other courts, such as Illinois, corporation owns multi-family operative’s rules and regulations designate housing cooperatives property occupied by members are subject to eviction; a conse- as rental property and reject the of the housing cooperative. To quence some may consider very argument that a housing coop- become a member, a resident harsh given the violation. The erative is ownership. One juris- purchases shares in the coopera- 5 2015 Cooperative Housing Journal diction, Georgia, noted that a housing cooperative “owner,” a person who “holds under an occupancy could be designated homeownership or rental prop- agreement as stockholder of a nonprofit coopera- erty by the language of the cooperative’s corporate tive ownership housing corporation, which holds documents. Even the federal government added to property, either as owner or under a 99-year lease, the confusion. In an argument before the federal subject to a mortgage insured,by the Federal Hous- Tax Court, the IRS claimed that a housing cooper- ing Administration...” The legislation was intended ative was ownership property, not rental property. to make the state “homestead exemption applicable The Tax Court disagreed, holding that the residents to property held under an occupancy agreement by of the housing cooperative were leaseholders, not a stockholder of a non-profit cooperative owner- owners of the housing cooperative real property. ship housing corporation...” This section will review the conflict in case law When the Fulton County Board of Tax Asses- and statutes on this issue. sors denied the homestead exemption to residents of the Brandywine housing cooperative, the residents A. Judicial Findings of Landord- sued for relief under the homestead statute. Reject- Tenant Relationship ing the idea that housing cooperative residents are New York, Georgia, Illinois, California, and “owners,” the court reviewed the constitutionality Maryland courts found that a housing cooperative of the legislation and held that the Georgia legisla- is rental property. ture improperly granted homestead exemptions to residents who were not “owners.” The court looked 1. New York to the express terms of the Proprietary Lease In the 1988 case of Southridge v. Menendez which stated that “[t]he member expressly agrees (Southridge Coop. Section. No. 3 v. Menendez, 535 that there exists under this Occupancy Agree- N.Y.S.2d 299 (1988)), a housing cooperative sought ment a landlord-tenant relationship . .” While to use the state’s rental statutes to evict a housing the court recognized that “a member does possess cooperative member for violation