Re: Pre-Sold Units as Condition of Membership
From: Stuart Joseph (stuartcaercoburn.org)
Date: Sat, 14 Jul 2007 12:14:33 -0700 (PDT)
Janet,

Janet H. Pelletier wrote:
        
Hi All,
I am working to re-write/clarify the Membership Agreement for Concord Village. We have 5 levels of membership, with varying levels of commitment and privilege within the group. At the higher levels, we are struggling with the idea of requiring that the member commit to purchase a housing unit.
We don't have housing units at Caer Coburn, since each person/member is responsible for building their own house within guidelines, it eliminates the need for a builder/developer.

The person selling us the land would be considered a developer since he has to put in a lot of improvements in order to sell us the property. You could say that we are "co-developers" because we are the applicants for the permits and we are putting up the money to make it happen, like paying for the engineering, surveying, etc, however, if something happens and the project doesn't fly, or a member has to leave for some reason, they get their money back.

We do have an option agreement that was approved by our attorney outlining all of the pertinent details: number of acres, what he would provide us, how and when money would be disbursed to him, what we would pay for, how he would pay us back, etc.

At this point, I think you need to consult a lawyer, especially if you are collecting, or are going to start collecting money, from members. it is important to either incorporate or become an LLC because you need the structure to receive and pay out money, and to protect the mebers from legal consequences. It will be money well spent.
We have been working under the assumption that a developer won't even talk to us unless a certain percentage of units are "Pre-Sold", but lately, one prospective member suggested that perhaps simply a larger non-refundable contribution from members would be sufficient to convince a developer that we are serious.
I don't know if a non-refundable" contribution is a way to go- it might scare off potential members, especially at the stage you are in, like not knowing where you will be getting the land, rural, suburban, or urban, how much the houses and land will cost.

We have set it up so that if someone wants to become a full member, they commit to doing so and eventually paying it for it. How and when the money is paid is outlined in the membership agreement.

I would also question as to whether a developer would want to talk to you without your group working out a lot of details first, like the location. Are you going to talk to a developer in PA or MD, or both?
We are still searching for land, generally in Chester County, PA, but haven't ruled out Cecil County MD, or New Castle County, DE. While some of us would like a more rural setting, others would be delighted with something more urban. Obviously, when land is selected, we will lose some members and gain others, simply because we are still considering so many options.
I think that one of the problems you are having is because you haven't decided what you are, rural or urban. You might want to consider making a choice and sticking to it. It will make getting members easier in some ways and more difficult in others.

It will be easier in the sense that you are appealing to a niche market: you will only attract the folks that want to be in that setting. It will lessen all of the hassles of folks joining and then having to leave if it turns out the group locates in a different spot. There is a lot of work involved in getting a group going and I would be mighty angry if I put in a lot of time, effort, and money, into something that turned out to be different than my picture at the outset and I had to leave. Not getting my money back would make me doubly angry, unless it wasn't much. our Associate mebers put in a non-refundable amount of $250.00 which is applied to their membership fee when they join.

It will be more difficult, because figuring out what to do if folks leave because they don't like the setting can be a big hassle. If you are asking for folks to commit to buying a house and putting in money they can't get back will also turn folks away.
Given the state of flux, there is hesitation among a group of 3 families (I'm one of them) to sign as Equity Members and commit to purchase a house when we don't know where the house will be, when it would be built or even if we can afford a house that would meet our families' needs. We also know that life throws curve balls, and you never know when there will be one of those life events that changes all the big decisions you thought you had the answers to.
I guess I should have read further before I made my previous comments. <grin>
So, how do we make sure that members are committed, yet not trapped into something financially ruinous?
Make sure that they can get their money back if the project fails or they change their minds.
What does "Pre-Sold" really mean in a case like this, where we don't have land, architectural plans, or one of those cute scale models with all the lots outlined in yellow?
We started off with really nothing, except that we did have access to the land. Our first members signed up with nothing being really settled and we have been going through the design and engineering process ourselves. I think most cohousing groups get their members together, decide on what they want to build, and then go out and find land to suit themselves.
Can a Membership Agreement have contingencies, like that the current primary residence is sold?
Yes.
Would non-refundable cash work as well to convince a developer that we are sincere?
I would not offer "non-refundable" cash to a developer under any circumstances. I might tell the developer how much we had in the bank, but I would think twice about that as well. I would most certainly have a contract for any work to be done.

Having a legal entity for the group like a corporation or an LLC will lend credibility to your group.

I would find myself a good lawyer and work with them.
Should agreements to purchase a home come later, once there is not so much flux? What have other groups done to balance these concerns?
All of our agreements, membership levels and rules, costs, etc. can be found on our website: http://www.caercoburn.org

Feel free to look it over, you might get some ideas.

My final thought is to take what we say with a grain of salt, and don't do anything without a lawyer to tell you what you can and can't do.
Thank you for your guidance.
--Janet Pelletier


--
Stuart Joseph, 802-463-1954
Project Director
Caer Coburn, a traditional village based upon cohousing  and intentional 
communities in
Rockingham, Vermont, USA
http://www.caercoburn.org
Mail to:
36 Front St.
Bellows Falls, VT 05101 USA


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