Issue link: https://read.dmtmag.com/i/84809
DEVELOPMENT MARKETING Ask Eddie BY ED HICKS Howis it possible to sell and lease homesites at the same time inmy LLCommunity?Gary W., Pittsburgh, PA You may know the largest retirement com- munity in the US is The Villages just to the Northwest of Leesburg, FL. Youmay not know that it was originally a Manufactured Home Land Lease Community called Orange Blossom Gardens. Although it was a popular commu- nity as a LLCommunity, the developers found that most of the prospective residents objected to lack of ownership control of their homesites. Prospective buyer attitudes are the same today. One of themost frequent objections still encountered when selling m/h in a land lease community in spite of the very high quality fac- tory built homes (often better than site built) is this same issue: "I want to own/control the land beneath my home!" One practical solution to this issue is to mar- ket the community as a cooperative. A co-op is a very interesting alternative to residents con- sidering Manufactured Home land lease com- munity living. It still is, by the way, technically still a land lease community, with the exception that the residents own their homesites through ownership of the stock in the corporation which owns the land lease commu- nity. Manufactured Home Community coopera- tives own the land, utilities, and community facilities; their resident/homeowners own the individual "Manufactured Homes and the cor- poration uses legal documents including recorded covenants as the basis for maintaining the desired cooperative controls over function- ing of the community. A housing cooperative is usually formed when homeowners in a fully leased community join with each other on a democratic basis to OCTOBER 2012 18 THE JOURNAL own or control the housing and/or related com- munity facilities in which they live. In a few cases, developers form the cooper- ative initially, ahead of the sale of the homes and will offer the prospective resident the op- tion of purchasing a share, or not , and being just a resident paying monthly lease fees. The main distinction between a housing co- op and other forms of homeownership is that in a housing co-op, the resident/homeowner doesn't directly own real estate. But if they don't own real estate, what exactly are they buying? They are buying shares or a member- ship in a cooperative housing corporation.With each co-op the amounts of shares vary. The corporation owns the real estate. As part ofmembership (being a shareholder) in the cooperative is an exclusive right to live in a specific unit (this is established thorough an occupancy agreement or proprietary lease) for as long as wanted, as long as the rules or regulations of the cooperative are not broken. As part of membership, the resident/home- owner also has a vote in the affairs of the cor- poration, and therefore the community. A resident/homeowner is not necessarily required to also purchase a share in the cooperative. In a co-op, since the resident/homeowner is actually buying a share(s) in a corporation rather than real estate, if not paid for in cash at the time of the purchase of the home, they get a type of loan called a share loan from a lender. A share loan is like a mortgage. It provides the resident/homeowner with borrowed funds to buy the share(s) from the seller.Monthly pay- ments on the share loan to the lenders and monthly carrying charge (maintenance) pay- ments are made to the to the co-op acting as the communitymanager. The purchase price of the shares will vary depending on what kind of neighborhood it is in, whether the co-op limits resale prices, and whether the co-op has an un- derlying mortgage for the entire property. Share holders no longer pay larger monthly lease payments, but only pay a monthly main- tenance fee which in most cases is 1/3 or less than the monthly lease payments, which may include services like the trash bill and lawn mowing. The charges also cover a proportion- ate share of operating and maintaining the co- operative, which will include property taxes, management fees, maintenance costs, insur- ance premiums, and utilities of the Community itself, and contributions tomaintenance reserve funds. Because resident/homeowners may own a share, in most areas they will also now pay a property tax bill on the share, which is also sub- ject to homestead exemption in states, where and if they are qualified. Affordable: Possible lower down payment. Possible longer mortgage term than without a share, but will pay interest fees, that could oth- erwise be in savings earning interest. Living in a Co-op Stays Affordable: Mem- bers have no reason to substantially increase monthly charges unless taxes or operating costs go up, so monthly charges could remain rea- sonable, but in most cases this is the same in a leased land arrangement. Tax Deductions: For income tax purposes, the co-op member is usually considered a homeowner and, as such, can deduct his or her share of the real estate taxes and mortgage in- terest paid by the cooperative. Equity: Co-ops can provide for accumula- tion of individual member equity. For market- rate co-ops, the accumulation of equity and resale prices are based on the market just like the traditional site built home market. Limited Liability:Members have no personal liability on the co-op mortgage. The coopera-