Cohousing-L Mailing List: CLT's, example cases

[Rob Sandelin (Exchange) (Robsan]

The Opal Land Trust on Orcas Island is an example of a 26 unit community
land trust.  They were funded by a grant to purchase the land and
because of the grant were severely restricted in the income range of
people who could buy in. This filtered out a whole bunch of people who
were originally interested in the "community" aspect of it, because they
either made too much money, or not enough.  They have a clause in their
lease agreement which allows the bank to sell at market rate on a
foreclosure, something the bank required in order to provide mortgages,
and something which impacts the notion of affordable housing forever,
although forclosure is not a real common occurance.  The CLT does have
right of first first refusal but thats kind of a joke, the folks who own
these units do not have the cash to buy out another unit - the whole
setup forbids that.

Both Coops and CLTs can be set up to manage resale price, either
allowing profit taking, limiting it, or not allowing it at all.  As you
can imagine, restrictions on resale make it harder to find lenders,
although, like Opal, a forclosure clause might satisfy the lenders
needs.  Resale restrictions also make it harder to sell, something
potential sellers and buyers will have to deal with. You are already
working in a very limited market, and so to limit it further means
taking even a huger risk of not getting your investment back.

As people have found out, selling a community unit, especially one with
a substantial price tag can be difficult depending on the community and
what the banks will accept. Remember, when you want to SELL your home,
even if you self finance, the buyers may not be able to, and so your
home will need to be financable or the owner is forced to carry the
contract, something many people do not want to do.

You need to plan for the transition of your community. If you adopt a
structure which makes it very difficult for other people to join, your
community may eventually dissolve. One of the things to watch for with
both coop and CLT group loans is that owners  have to pay their share of
group mortgage, taxes and insurance, and also carry 2,3,4 or more
unsold, unparticipating shares, your costs may very well exceed your
capacity and then you go under too.  Limits on individual share
liabilities protect you from that, but endanger the corporate structures
ability to get loans in the first place.

That is why many groups reject coop and CLT ownership forms.  The group
assumes total liability and this means you pay for your own loan share,
and a share of all unsold or bankrupt shares. Usually this scares people
away. In a condo or other personal ownership scenario, if some else goes
broke, the bank holds the risk, not the other owners, and so your
personal finances are not effected by the fortunes of your neighbors.

Rob Sandelin
Sharingwood