Re: Financial structure needed for forming group
From: David Heimann (heimannworld.std.com)
Date: Tue, 21 Nov 2006 19:57:00 -0800 (PST)

Hi Tom,

During our developing time (JP Cohousing) we had two types of membership. These were equity members, who had paid in a capital contribution of 5%-7% of their prospective unit costs, and associate members, who had paid a nominal ($115) fee. Both types of members could participate (and indeed were expected to participate) in general and committee household had a low income and so had trouble coming up with the capital contribution we had an arrangement by which they could pay it in installments.

There was no time limit to associate membership, so a household could participate indefinitely without needing to come up with significant money.

We did not have a cash-call system. If we were going to hit a period of exceptional expenses (much of which could be anticipated), we solicited voluntary member-household contributions, which (unlike the capital contributions) paid interest, and/or solicited outside lenders and investors (including some on this list -- Thanks again!!).

        Hope this helps.  All the best!

Regards,
David Heimann
Jamaica Plain Cohousing


Tom Hammer wrote:
Our forming cohousing group is looking for land,  and
we are in negotiation with a motivated seller.  We are
presently financially structured this way:

We have 8 "equity households."  Some of the households
are "full equity members" and pledge to meet future
calls for capital up to a limit of 10% of the
approximate cost of their future home.

The other households are less able or willing to take
the risk associated with the project and have stopped
meeting cash calls after committing $2000. Our present
agreement allows this and classifies this group as
equity members with full input on decisions but with
no ability to block consensus on "critical issues" as
defined by the full equity members.  Several of the
2nd group say they are fully committed to the project
but cannot take more risk at present, but members of
this group would like to have a full say in all
consensus decisions.  We all recognize a need for more
capital in the near future, and the limited equity
members recognize that their status puts more of a
financial burden on the full equity members.

Some folks reason that we will attract more equity
members if we maintain our different levels of
financial commitment to encourage more to join,
especially families with young children. Others say
that we would be better served if all equity
households made equal financial commitments and all
answered cash calls up to some pre-determined cap.

We have incentives in place for early full cash
commitments and site selection priority for full
equity households  as well as offers of high interest
on loans by early lenders.

We very much need advice from successful communities.
Did you allow large differences in financial
commitment such as we presently have, or did you have
a fairly large basic financial commitment that was
required of all to be a full decision maker?

Could you please inform us how you structure(d) your
membership and membership contribution? Please let us
know what worked and what you would have done
differently. Thank you.

Tom Hammer
for Concord Village
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