Cohousing-L Mailing List: Right of First Refusal

[Melanie Mindlin (sassetta]

Thanks to all of you for digging into this with me. It seems to me that the 
Right of First Refusal itself is useful because it requires the Seller to 
announce their intentions and let the community name the buyer before putting a 
unit on the open market. Our non-binding agreement to this effect has been 
incredibly helpful, and my complaint is that a couple of people who were not 
happy with the community refused to do it. 

However, I think what is more important is to requiring the buyers to go 
through an orientation process that includes meeting the community and signing 
off on the policies and agreements, many of which are not encoded in the CC&R’s 
or By-Laws. 

We were completely shocked to find out that the real estate agent in the sale 
mentioned in my previous letter simply ignored our numerous attempts to share 
our policies and ask the buyer to meet with us. He went through the entire 
buying process without ever hearing that we were attempting to connect with 
him, or seeing the materials we were providing. 

So I would love to hear what language folks have used to require people to do 
this kind of thing, and where you put it to make it binding.

Thanks,
Melanie
Ashland Cohousing


> 
> From: David Michael <david [at] ic.org>
> 
> We have a right of first refusal and a 28 day period for the HoA (Springhill 
> Cohousing Community Ltd) to nominate a buyer.
> However, we have a clause in our Lease (CC&R) that means a mortgage 
> company/Bank who  re-possesses (forecloses) on a house is exempt from many of 
> the conditions i.e. first refusal and having to pay 0.5% purchase price. We 
> had the Lease (CC&R and bylaws) checked by a number of banks before agreeing 
> it in 2001. The 0.5% payment has been a  really useful and painless  income 
> stream over the last 20 years.
> 
> From: Sharon Villines <sharon [at] sharonvillines.com>
> 
>> On Dec 13, 2023, at 6:48?AM, David Michael <david [at] ic.org> wrote:
>> 
>> However, we have a clause in our Lease (CC&R) that means a mortgage 
>> company/Bank who  re-possesses (forecloses) on a house is exempt from many 
>> of the conditions i.e. first refusal and having to pay 0.5% purchase price. 
>> We had the Lease (CC&R and bylaws) checked by a number of banks before 
>> agreeing it in 2001. The 0.5% payment has been a  really useful and painless 
>>  income stream over the last 20 years.
> 
> This is the heart of it:
> 
>> The primary purpose of the Right of First Refusal is to enable the 
>> Association to ensure that prospective buyers understand the nature of 
>> cohousing communities and the expectations of members of the Association. It 
>> is not to limit the rights of the mortgage holders.  
> 
> The phrase that has stayed in our current still-under-discussion draft is:
> 
>> The Association's Right of First Refusal is not designed to take priority 
>> over the rights of first mortgagees.
> 
> On whether the right of first refusal or the limitations on renting has cost 
> us any mortgages or buyers ? this would take a thorough investigation because 
> both mortgage brokers and buyers make statements that are not correct. Banks 
> won?t necessarily tell you. The whole thing seems to be blurry. Lots of 
> rumors.
> 
> Every time (maybe 5-10 times)  I have tried to track down a mortgage broker 
> to find out exactly what someone?s bank said, it has not produced definitive 
> information ? or even proof that this has ever happened when an owner or 
> purchaser told me it had.
> 
> The best I?ve been able to get from a mortgage broker is some banks don?t 
> like it, but there are so many others out there that if it is a good 
> application, I just go to someone else.
> 
> The only absolute "no" is VA loans. Active duty soldiers have to be able to 
> take deployments without restrictions. This means they need to be able to 
> rent or sell quickly with little notice. We have discussed adding a provision 
> to exempt people on active military duty from the rental limit of 3 years but 
> have decided to put that in a policy and not the bylaws because we may want 
> to specify other exemptions as well. 
> 
> The Right of First Refusal to purchase is considered an absolute requirement 
> by many if not all of our members. But as I have said, I question how much it 
> means since it is so hard to exercise. A community would have to have the 
> funds set aside in advance to use them fast enough to stop a sale. And it is 
> in all sellers' best interests not to delay sales.
> 
> Sharon
> ----
> Sharon Villines
> Takoma Village Cohousing, Washington DC
> http://www.takomavillage.org
>