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Cohousing

LegalToolkit2.0
ComplimentsofCohousingAttorneys:
JanelleOrsi(www.JanelleOrsi.com)and
CynthiaHawley(www.CynthiaHawley.com)

TABLEOFCONTENTS
ACK!SampleDocuments!.....................................................................................................................1
CoOwnershipQuestionnaire................................................................................................................2
20BasicQuestionstoDiscussWhenYouShare....................................................................................9
ArrangementsforHoldingTitletoLand..............................................................................................11
FormingandStructuringOrganizationsforCohousing.......................................................................13
SampleCoOwnershipAgreement......................................................................................................22
CommonIngredientsofCC&Rs............................................................................................................37
SampleBylawsForaCohousingOwnersAssociation..........................................................................38
SampleConsensusProcessPolicy........................................................................................................49
SampleLLCOperatingAgreementForCohousing...............................................................................54
GettingLoansorInvestmentsfromFriendsandFamily......................................................................69
ASampleFriendsandFamilyPromissoryNote...................................................................................70
TaxStuffandCohousing......................................................................................................................72
ZoningandCohousing..........................................................................................................................74
CommonInterestDevelopmentComparisonTable............................................................................76
LawsThatDictateCommunityAssociationGovernance.....................................................................78
TheDavisStirlingAct...........................................................................................................................79
GettingApprovaltoSellCohousingUnits............................................................................................81
Landlord/TenantLawsandSharedHousing........................................................................................82
BuildingandFireCodesandCohousing...............................................................................................84
FairHousingLawsandCohousing........................................................................................................85
SampleCarSharingAgreement...........................................................................................................86
TipsforEffectiveMeetings..................................................................................................................88
RestrictionsonRentalsofUnits...........................................................................................................89
ExpellingMembers..............................................................................................................................91
EnforcementofRulesinCohousingCommunities..............................................................................92
BlockingControlinaConsensusProcess.............................................................................................93
LandUse,Zoning,&EnvironmentalLaws............................................................................................94
ProtectingPlacewithConservationEasements..................................................................................96
AdditionalResourcesforSharingandCohousing................................................................................99
ListofResourcesforLessExpensiveHouses.....................................................................................100

ACK!SAMPLEDOCUMENTS!
Thesesampledocumentsandlegaltoolsare
foryoutoread,enjoy,study,share,andmaybeevenuse
.butonlyatyourownrisk!

WhyItsSafertoReadThisOntheBeach.andTalktoaLawyer
Wehaveincludedsomesampledocumentsinthistoolkitbecausewebelieveinsharing.We
believethateveryoneshouldsharedocumentsandinformationto
facilitatethegrowthofcohousingandintentionalcommunities.
Thesampledocumentsinthishandbookareeducational
toolstogiveyouanideaofwhatsuchdocumentslooklike.However,
usingthesesampledocumentscouldberiskyifyouassumetheywill
meetyourneeds.CoOwnershipAgreements,Bylaws,andLLC
OperatingAgreementsvaryinlengthfrom10to50pages,andmustbe
customizedtothefinancialarrangementanduniqueattributesofthe
community.Thatswhyitssafertoreadtheseresourcesforfunand
learning,ratherthanadopttheagreementsasyourown.
Plus,realestatelawiscomplicatedstuff.Cohousing
arrangementsbringupallkindsofotherlegalquestionsrelatedto:
Incometax
Fairhousinglaws
Propertytax
Staterealestateregulations
Zoninglaws
Rentcontrollaws
Liabilityandinsurance
Yourmortgageloan
Estateplanningquestions
Localhousingregulations
Andthelistevengoeson...
Homeownersassociationrules

Thatswhyyoushouldalwaysconsultwithalawyerifyouplantocoownproperty.Alawyerwillhelp
youunderstandyourrights,risks,andpitfallsinacohousingarrangement,andcanadviseyouonthe
otherlegalissuesthatarise.
Thatsaid,kickupyourfeetandenjoythesedocumentswithanicecoldglassoflemonade!

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COOWNERSHIPQUESTIONNAIRE

UseofthisQuestionnaire:ThisQuestionnaireisatooltohelpcoownerstalkthroughthedetailsof
theirsharedpropertyownership.Theanswerstothesequestionscouldhelplaythegroundworkfora
moredetailedTenancyinCommonorLLCOperatingAgreement.NotethatthisQuestionnaireassumes
thatthepropertyinquestioncontainsmultipleunits,butmanyofthequestionswouldalsopertainto
thecoownershipofasingleunitproperty.Pleasedonotrelyonthisasathoroughlistofquestionsyou
shouldaskinconnectionwithcoownership,sincetheremaybemanyotherdetailstoresolveorlegal
matterstosortthrough.Werecommendthatcoownersseektheadviceofanattorneyregardingthe
detailsoftheircoownershipagreement.

BuyingtheProperty
1. ContributiontoPurchasePriceandCosts:Willeachownerscontributiontothe
purchasepricebebasedonfinancialability,thevalueoftheshareofspacetheywill
receive,orsomebalancingofthetwoconsiderations?Aretheunitsand/orprivate
spacessubstantiallythesameordotheydifferinvalue?Iftheunitsandprivatespaces
differinvalue,howwillyoudeterminetheshareofthetotalcosttobepaidbythe
occupantsofeachunit?Forexample,woulditmakemoresensetoallocatethecostby
squarefootageortohaveeachunitanditsexclusiveusecommonareasappraised?If
theunitsaresubstantiallysimilar,willyoubeabletocometoanagreementaftertaking
intoconsiderationanyuniqueattributessuchasparking,decks,views,etc?
2. ContributionTowardDownPayment,MonthlyPayments,andOverallDebt:Whatwill
bethepercentoftotalpaidbyeachcoownerfor:
a. Downpayment
b. Monthlypayments
c. Overallshareofdebt
3. ContributionofLabororProperty:Willanyonebecontributinggoodsorservicesinlieu
ofmoneypaymentsforthepurchasepriceorothercosts?Ifso,whatwillthose
contributionsbeandhowwillyouvaluethem?Whatisthetimeframeforcompleting
thiswork?Howwillyoumanagetheincometaxconsequencesofsweatequity?
4. GroupOwnershipofUnits:Willmorethanonepersonsharethecostofoneunit;that
is,canagroupofpeoplebuyintothepropertycollectivelyasonecoownertoshareone
livingspaceorunit?

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WhoLivesattheProperty?
5. NumberofResidents:Doyouwanttolimitthenumberofpeoplewhomayliveineach
unitorlivingarea?
6. Housemates:Ifacoownerwantstohaveahousemateorroommates,shouldtheyget
approvalfromtheothercoowners?
7. RentingUnits:Ifacoownermovesoutandwantstorentouthisorherunitorliving
space,shouldtheyhavetogettheothercoownersapprovaloftheprospectivetenant?
Typically,itsreasonableforthecoowneroftheotherunittohavetherighttoreviewa
prospectiverentersfinancialstatusandreferencesandrejectarenteronreasonable
grounds.
8. RulesforTenants:Doyouwantpotentialtenantstosignawrittenagreementthat
includesalloftherulesanduserestrictionsinthecoownersagreement?
9. EvictionofTenants:Doyouwanttorestricthowacoownermayevictatenantinorder
toprotectothercoownersfromlegalretaliation?
10. Pets:DoyouwantapetpolicyinyourTICagreement?Youmightwanttoconsiderhow
manypetsperunitorlivingareamightbeallowed,whatkindsofpetsmightbeallowed
andspecificallyexcluded,wherepetsaretobekept,whatkindofpetbehavioris
unacceptable,andwhetheracoownerhastogetapprovalofothercoownerstohavea
newpet.

DesignationofUnits,ExclusiveAreas,andCommonAreas
11. AssignmentofUnitsandLivingAreas:Whichunitorlivingareawilleachcoownerget
tooccupy?
12. CommonAreas:Whatcommonareasofthepropertywillbesharedbyallowners?
13. ExclusiveUseCommonAreas:Whatcommonareasoftheproperty(outsideoftheunits
orlivingareas)willbereservedfortheexclusiveuseofeachowner,suchasparking
spaces,garages,yardandgardenspaces,storagespaces,decks?Theseareasareoften
referredtoasexclusiveusecommonareas.

WhatMayorMayNotBeDoneToorOntheProperty?
14. AlterationstoUnits:Whatkindsofalterationsmayacoownermaketoherorhisunit
orlivingareaandwhich,ifany,alterationswouldrequiretheothercoowners
approval?
15. HomeBusinessUse:Maythepropertybeusedforahomebusiness?Ifso,whatkindof
business?Youmaywanttodistinguishbetweenbusinessesthatinvolvevisitingclients
orcustomersversusahomeofficeorstudiowithnovisitors.
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16. UseofChemicals:Doyouwanttolimitthekindsofpaints,pesticides,herbicides,
cleaningchemicals,etc.thatmaybeusedontheproperty?
17. HazardousActivities:Doyouwanttolimitorprohibitanyhazardousactivities
particularlythingsthatcouldaffectyourabilitytogetproperinsurancefortheproperty.
18. RiskstoThirdParties:Doyouwanttolimitorprohibitanyactivitiesthatcreateariskto
thirdpartiesandsubjectcoownerstoliabilitysuchas,forexample,teachinggymnastics
onthepropertyorbuildingatreehouse,etc.
19. Storage:Doyouwanttolimitwhatmayormaynotbestoredonthepropertysuchas,
forexample,accumulatedtrashorclutter,discardedfurnitureorotherpersonalitems,
seldomusedorunusedvehicles,etc?Doyouwanttolimitstorageofanythingto
certainareasoftheproperty?

PropertyRelatedCostsandAccounting
20. Budgeting:Willyouholdanannualmeetingtoadoptanannualbudget?
21. BankAccount:Willyouopenajointbankaccounttomanagecollectionofmoneyand
paymentofbills?
22. Utilities:Areanyutilitiesseparatelymetered?Ifso,whichones?Howwillownersbe
reimbursedfortheuseoftheirseparateutilities,suchaswaterorlighting,incommon
areas.Ifanyutilityisnotseparatelymetered,onwhatbasiswillyousharethecost?An
equalshareperunitorlivingspace?Thenumberofpeoplelivingineachunitorliving
spaceasapercentageoftotalresidents?
23. OtherCosts:Whatotherregularcostsdoyouexpectandonwhatbasiswillyouallocate
eachcoownersshareofthem?
24. ProcessforCollectingandMakingPayments:Howwillyoucollectmoneytopayforall
sharedmonthlycosts?Willeachcoownerpayafixedmonthlyamountintoajointor
associationbankaccount?Inthiscase,anannualreckoningoftheaccountwould
reimburseorchargecoownersasneeded.Orwillyougettogethereverymonthto
divideupexpenses?
25. Bookkeeper/Treasurer:Willonepersonbeaskedtomanageaccounting?Ifso,how
longwillthatpersonbeexpectedtoprovidetheservice?Ifnot,willyouhirean
accountantorbookkeepertomanageaccounting?
26. LargeExpenses:Arethereforeseeablelargeexpensesinthenext510yearssuchas,for
example,roofreplacement,painting,plumbingorsewerrepairsorreplacements,
foundationwork,renovation,etc?

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27. ReserveAccount:Willyoubuildareserveaccountforforeseeablerepairsand
unanticipatedexpenses?Ifso,howmuch?Howwillyoubuildthefund?Willeach
ownercontributeasetmonthlyamounttotheaccountuntilthegoalisreached?
28. Repairs:Ifarepairisneeded,howmuchmayacoownerspendbeforetheyneedtoget
theothercoownersapproval?
29. Insurance:Whatminimumlevelofpropertyandliabilityinsurancewillyoumaintain?
30. Indemnification:Doyouwanttoagreetocompensateanddefendeachotherin
situationsinwhichonecoownermaycauseliabilitythatwouldextendtootherco
owners?
31. RecordKeeping:Whatrecordswillyoukeepaboutthepropertyandwherewilltheybe
kept?Whatmethodwillyouusetoaccountforcoownercontributions,expensesand
paymentsmade?

TakingCareofandDevelopingtheProperty
32. MaintenanceStandardsforStructures:Doyouwanttohavestandardsfortheupkeep
andmaintenanceofallstructuresontheproperty?Ifso,whatarethosestandards?
Thesestandardsareimportanttomakesurethepropertyissaleable,easiertoinsure,
andmorelikelytogetfavorablefinancing.
33. MaintenanceStandardsforYards:Doyouwanttohavestandardsfortheupkeepand
maintenanceoftheyardandothercommonareas?Ifso,whatarethosestandards?
34. ArchitecturalStyle:Arethereparticulardesignorarchitecturalfeaturesyouwouldlike
topreserve,stylesyouwanttofollow,ormaterialsyouwanttouseornotuseonthe
property?
35. MaintenanceResponsibilities:Whatpartsofthepropertywilleachownerbe
responsibleformaintaining?
36. SharedMaintenance:Forwhatareaswillyousharemaintenanceresponsibilities?
Typically,whereatenancyincommonisallinonebuilding,theownerswillbejointly
responsibleformaintainingtheentirestructureofthebuilding.Wheretheunitsarein
separatebuildings,eachownermaytakefullresponsibilityformaintenanceofhisorher
wholebuildingormayberesponsibleonlyfortheinteriorofthebuilding.Inthiscase
coownersshareresponsibilityformaintenanceoftheexteriorofbuildingsaspartof
thecommonarea.
37. Alterations:Shouldyouneedtogeteachothersconsenttoaltertheinteriorofunitsor
livingspacesifitdoesnotaffectthestructureofthebuilding?

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38. MaintenanceCosts:Doyouwanttohaveamonthlycontributionfromeachcoownerto
payforupkeepandmaintenanceofcommonareasthatwillbemaintainedbyall
owners?Ifso,howdoyouwanttoallocatethecosts?
39. PropertyTaxIncreases:Ifpropertytaxesareincreasedduetoimprovementsmadebya
coownertohisorherunitorlivingspace,willthatpersonberesponsibleforpayingthe
addedamount?
40. PartialDestruction:Ifthepropertyispartiallydestroyed,underwhatcircumstancesdo
youwanttorebuildisthereamaximumoutofpocketamountabovewhichyouwould
notrebuild?Ifyoutakeaninsurancepayout,howwillyoudividetheproceeds?
41. MaintenanceManager:Willonepersonberesponsibleformanagingthemaintenance
andrepairoftheproperty?Ifso,willtheybeaskedtoserveasmanagerforacertain
amountoftime?Ifnocoownerwillmanagethemaintenanceandrepair,willyouhire
someonetodothatjob?
42. Improvements:Ifacoownermakesasignificantimprovementonthepropertythat
raisesthevalueofthecommonarea(suchasinstallingahottub),howwillcoowners
compensatetheownerthatmadetheimprovement?Willtheimprovementbe
appraisedatthetimethepropertyissold?Willtheownerhavearightto
reimbursementfromthesaleproceeds?Howwilldepreciationbetakenintoaccount?

RefinancingtheProperty
43. Refinancing:Underwhatcircumstancesmaythecoownersrefinancetheproperty?
44. RefinanceCosts:Whowillpaytherefinancingcosts?
45. BorrowingAgainsttheProperty:Underwhatcircumstance,ifany,mayacoownertake
anequitylineofcreditorasecondmortgage?

IfOneCoOwnerhasFinancialTroubles
46. FinancialTroubles:Whatshouldhappenifonecoownerrunsintofinancialtroubles
andcannotmakerequiredpayments?
47. DefaultFund:Doyouwanttosetupadefaultfundtopaythecostsduebyacoowner
whorunsintofinancialtrouble?Thiswouldservetoprotecttheassets,equity,and
creditratingsoftheothercoowners.
48. AdvancingPayments:Inlieuofadefaultfund,doyouwanttoagreeaheadoftimeto
thetermsunderwhichcoownerswouldadvancepaymentonbehalfofanotherco
owner?

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49. RemediesforDefault:Howfarbehindonpaymentsmustacoownergetbeforethe
otherownercandemandthatthepropertybesold,ordemandtobuyoutorfindathird
partypurchaserforthedefaultingownersshare?

SellingtheWholePropertyAllAtOnce
50. TimelineforSellingtheProperty:Doyouwanttoagreenowtosetagoalofsellingthe
wholepropertyinthefuture?Ifso,doyouwanttotargetatimetosell?Willthe
decisiontosellbebasedon,forexample,anumberofyears,theoccurrenceofacertain
event,orconditionsofthehousingmarket?
51. DivisionofSaleProceeds:Howwillyoudividetheproceedsifallcoownersdecideto
sellatonce?Forexample:
a. Willyousplititonthebasisofhowmuchyoueachpaidtowardthepurchase
minuseachownersshareoftheoutstandingdebtonthepropertyandother
moneyowed?
b. Willyoubasethesplitontherelativevalueofeachownersinterestinthe
property?Todothis,youwouldappraiseeachownersinterest(meaningtheir
unitcombinedwiththeirexclusiveusecommonareas,theirshareofthe
commonareas,andotherrightswithregardtotheproperty),thenaddthe
appraisalsofallownersintereststogether,thendividesaleproceedsbasedon
eachownerspercentageofthetotal.Thismethodallowsacoownertobenefit
fromtheincreasedvalueofimprovementstohisorherunitandprovidesan
incentivetomakeimprovements.

SellingIndividualInterestsintheProperty
52. TermsforSaleofOneOwnersShare:Doyouwanttoprovidethetermsunderwhicha
coownermaysellhisorherinterestintheproperty?Forexample:
a. Doyouwanttomakeasaletoathirdparty(notacoowner)contingentupon
approvalofthesalebyyourexistingmortgagelender?Ifthesaleisnot
approvedbythelender,youmayruntheriskofthemortgagelenderdeclaring
theentireoutstandingbalanceoftheexistingmortgageimmediatelydueand
payablewithpotentiallyseriousconsequencestoothercoowners.
b. Doyouwanttoagreethateachcoownerwillnotifyotherownerswhenheor
sheintendstosellandthatotherownerswillhavethefirstoptionofbuyingthat
sellersinterest?
c. Doyouwanttoagreeaheadoftimehowyouwilldeterminethesellingpricefor
saleofasharetoothercoowners?

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d. Doyouwanttomakethesalecontingentontheprospectivebuyersigningyour
tenancyincommonagreementsotheagreementwillbindallfuturecoowners?
53. ApprovalofProspectiveBuyers:Shouldthenonsellingcoownersbeabletoapprove
orrejectaprospectivebuyer?Ifso,shouldtheapprovalorrejectionbeonthebasisof
thefinancialstatusoftheprospectivebuyer?Shouldapprovalorrejectionbeonthe
basisofpersonalreasons?Whileitisnotclearwhetherpersonalreasonscouldbea
legallyenforceablebasisonwhichtorejectaprospectivebuyer,itsagoodideatotalk
aboutandconsiderinadvanceonwhatbasisyoumightnotwanttoshareownership
andresidencyofahousewithsomeone.

MakingDecisionsAbouttheProperty
54. Meetings:Howoftenwillyouhaveregularmeetings?Whatproceduresdoyouwantto
adoptformeetingagendas,noticeandscheduling,etc?
55. DecisionMakingProcess:Willyouusemajorityvoting,supermajorityvoting,ora
consensusprocesstomakedecisionsabouttheproperty?Whatprocesswithyouuseto
consideranddecideonproposals?
56. ShareofVotes:Ifeachunitorlivingspacewillgetonevote,arethereanytopicson
whichonecoownerwillhaveagreaterdecisionmakingpowerorpowertoveto?
57. DelegatingDecisions:Whatkindsofdecisionsmaycoownersmakeontheirownand
whatkindsofdecisionsmustbemadebyallcoowners?
58. ConflictResolution:Willyourelyonmediationtosolvedisputesoranotherprocess?
Howwillyouchooseamediator?Whopays?Howmanymediationssessionsmustyou
attendbeforeyouturntoarbitrationorlitigation?

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20BASICQUESTIONSTODISCUSSWHENYOUSHARE
Adaptedfrom:
TheSharingSolution:HowtoSaveMoney,SimplifyYourLife&BuildCommunity,
byJanelleOrsiandEmilyDoskow(Nolo2009)

Whenyousitdowntodiscussthedetailsofyoursharingarrangement,heresachecklistto
guideyourconversation:

1.Whyarewesharing?
o Whatareourpersonal,practical,financial,orenvironmentalgoals?
o Whatdoweeachneedorwanttogetoutofthesharingarrangement?
2.Whatarewesharing?
o Andforthatmatter,whatarewenotsharing?
3.Whomarewesharingwith?
o Doourcosharersneedtomeetanyparticularqualifications?
4.Howmanypeoplearewesharingwith?

o Whataretheprosandconsofhavingalargeorsmallsharinggroup?
5.Howwillthetimingofourarrangementwork?
o Whenwillitstopandstart?
o Willithappeninphases?
6.Whoownstheshareditem(s)?
o Willonepersonownitandletothersuseit?
o Willweeachownspecificitemsorpartsoftheproperty?
o Willweeachownapercentageshareofthewholeproperty?Ifso,inwhatproportions?
7.Shouldweformaseparatelegalentity,suchasanonprofitorganization?
8.Shouldourgrouphaveaname,andwhatshouldwecallourselves?
9.Whatdowegettodo?
o Whatbenefitsorservicestowegetfromthissharingarrangement?
o Howmuchcanweusetheshareditem(s)orservices?
10.Howwillwemakedecisions?
o Willwealltakepartindecisionmakingordelegatedecisionstoasmallgroup?
o Doweallhaveequaldecisionmakingpower?
o Mustalldecisionsbeunanimousormadebymajorityvote?

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11.Whatresponsibilitieswilleachofushave?
o Willweassignrolesandtasks?
o Willwerotateresponsibilities?
o Willanyonereceiveextrabenefitsinreturnforextraresponsibilities?
12.Whataretherulesforusingoursharedpropertyormeetingoursharedresponsibilities?
13.Howwillwehandleadministrativematterslikescheduling,communication,andrecord
keeping?
14.Howwillwedivideexpenses?
o Willtherebeinitialbuyinorstartupcontributions?Willweneedanyloans?
o Howwillwedivideoverheadandvariablecosts?
o Howwillwecollectmoney?Throughregularduesorbyreckoningexpensesinsome
otherway?Willwestartabankaccount?
o Whatkindsofunexpectedcostscouldariseandhowwillweprepareforthem?
o Whowillkeeptrackofourmoney?
o Whathappensifamembercannotpay?
15.Howwillwemanageriskandliability?
o Whatrisksareinvolvedinoursharingarrangementandhowcanwereducethem?
o Howistheriskdistributed(i.e.,whocouldsufferlossorbeliablefordamages)?
o Dowewanttoredistributeriskbymakingagreementswitheachotherorpurchasing
insurance?
16.Aretherelegalrequirementsweneedtofollow?
o Arethereanyrequiredlicensesorpermits?
o Willthisbringupanytaxoremploymentlawquestions?
o Arethereanylegalroadblocksarisingfromzoninglawsorprivatelandcovenants?
o Whatstepsmustwetaketobecomealegalentity?
17.Howwillweresolveconflictsordisputes?
18.Howwillwebringnewpeopleintothegroup?
o Whatprocedureswillnewmembersfollow?
o Howwillnewmembersbeoriented?
o Whatisourpolicyonguests?
19.Howcanamemberleavethegroup?
o Whatstepsmustbetakenwhenamemberleavesvoluntarily?
o Underwhatcircumstancescanamemberbeaskedtoleavethegroup?
20.Howdoweendthesharingarrangement?

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ARRANGEMENTSFORHOLDINGTITLETOLAND
TenancyinCommon(TIC)
Whenyouownpropertyastenantsincommon(TIC),youeachownanundividedshare.Forexample,if
youownaduplexwithanotherpersonastenantsincommon,youeachownaportionofthewhole
building,eventhougheachofyoumayliveinandmaintainoneoftheunits.TICsarecustomarilyused
whentwoormoreunrelatedpeopleownahometogether,andarealsofrequentlyusedinmultiunit
residentialbuildings,suchasaduplex,triplex,orafourplex.Itislesscommonformorethanfour
ownersorhouseholdstoholdtitleasaTIC.
IfyoutaketitletopropertyasaTIC,youandyourcoowner(s)willwanttodraftawritten
agreementcoveringeachownersrightsandresponsibilities.Foramultiunitproperty,theTIC
agreementgiveseachownerrightstoandresponsibilityforoneunit,whichcreatesafeelingofseparate
ownership.OwnersofTICsusuallyfinancetheirpropertywithasinglemortgagesecuredbythewhole
property.Thisarrangementcreatessomehurdles,however:Allownersmustqualifytogetherforthe
loan,forexample,andallownersareatriskifonegetsbehindonthemortgage.Itisforthisreasonthat
TICagreementstypicallygointogreatdetailonhowcoownersdivvyupfinancialobligations.Although
thesinglemortgageapproachisstillusedforsharingasinglefamilyhome,afewlendersnowoffer
fractionalmortgagesforTICpropertiesthatareeasiertodivideintoseparateunits.Forafractional
mortgage,eachownersignsaseparatepromissorynoteanddeedoftrust.Eachmustqualifyforthe
loanseparatelyandcanselectdifferentloanterms.Eachfractionalmortgageissecuredonlybythat
ownersinterestintheproperty.

JointTenancy
Jointtenancyisaformofownershipthatincludesarightofsurvivorship.Whenoneownerdies,that
personsshareofthepropertypassesautomaticallytotheotherowner(s);incontrast,aTICsharegoes
totheownersheirsatdeath.Jointtenancyismostoftenusedbycouplesandfamilies,butitcouldalso
workwellforunrelatedownersinasmallsharedhousingarrangement,iftheownerswantthesecurity
ofknowingthattheirinterestsinthepropertywillbeprotectedifanotherownerdies.
Formingajointtenancyusuallyrequiresthatallownershaveequalinterestsintheproperty,
andthattheyacquiredtitleatthesametime,onthesametitledocument.Mostjointtenanciesare
financedwithasinglesharedmortgage.

Condominiums
Condominiumsarelegallydividedsothatportionsofthepropertycanbeseparatelyowned.
Condominiumownershiptypicallyinvolvesowningbothanindividualunitandashareofownershipin
commonareas,oftencalledcommonelements.Multiunitpropertiesthatwerenotbuiltas
condominiumscanoftenbeconvertedtocondos;thisusuallyrequirestheassistanceofanattorneyand
professionalsurveyor,andtheprocessdependsgreatlyonlocallawsandregulations.
Acondominiumformofownershipisoftenusedinhousingwhereresidentsownseparateunits.
Acondominiumcomplexcanbeassmallasaduplexoraslargeasamultistoryapartmentbuilding.
Cohousinggroupsfrequentlyusethecondominiumformbecauseitfacilitatesbothindividualautonomy
andsharing.Withcondominiums,eachunitcanbeseparatelyfinanced.
Condominiumownershiptypicallyrequiresmembershipinacommunityassociationthat
governsandmanagesthecommonelementsandenforcesrestrictionsontheuseofunits.These
associationscollectmonthlydues,oftencalledassessments,fromeachownertopayforthecostsof
upkeep,taxes,insurances,andotherexpenses.

Page11of101

OwnershipbyanEntity
Insomecohousingcommunities,residentsownsharesoramembershipinacorporationorLLC,which,
inturn,ownstheentireproperty,includingtheindividualunits.Undermanystateslegaldefinitions,
thisarrangementforholdingtitlemaybeconsideredahousingcooperativeorstockcooperative.
Typically,aresidentbuysintoa
communitybypurchasingsharesandsigninga
proprietaryleasethatentitlestheresidentto
occupyaparticularresidentialunit.Unliketypical
Anoteaboutthewordcooperative
leases,aproprietaryleasegenerallyhasnofixed
Theuseofthewordcooperativehere
term.Itlastsaslongastheresidentisanowner
doesnotnecessarilyimplyorrequirethat
intheentityanddoesntviolateimportantlease
acooperativecorporationbetheentityof
terms.Theentitytypicallyholdsasingleblanket
choice,northattheentityoperateona
mortgageontheproperty,andresident
cooperativebasisunderSubchapterTof
shareholderssometimestakeoutloansto
theInternalRevenueCode,northatthe
financetheirpurchaseofsharesintheentity.In
cooperativebemanageddemocratically,
addition,residentspayregularfeestocover
northatthecooperativefollowthe
propertytaxes,managementexpenses,
RochedalePrinciplesforcooperatives.
mortgagepaymentsonthebuilding,andsoon.
Themoraltothestoryis:theword
Eventhoughresidentsdontownthereal
cooperativehaswaytoomany
estatedirectly,theystillmightbeabletoenjoy
meanings,anditsnowonderthatits
someofthetaxbenefitsofhomeownership;that
hardtogetastraightansweraboutwhata
is,solongasthecooperativemeetstheIRS
cooperativeis.
definitionofacooperativehousingcorporation
(below).Forexample,althoughthecorporation
makesthemortgageandpropertytaxpayments,
residentsmaystilldeducttheirportionoftheseexpensesfromtheirincometaxes.Ifresidentstakeout
aloantopurchaseshares,however,theloanisusuallytreatedasapersonalloan,sotheinterestisnt
deductible.

DefinitionofCooperativeHousingCorporationforTaxPurposes
InternalRevenueCodeSection216(b)
Theterm''cooperativehousingcorporation''meansacorporation
(A)havingoneandonlyoneclassofstockoutstanding,
(B)eachofthestockholdersofwhichisentitled,solelybyreasonofhisownershipofstockinthe
corporation,tooccupyfordwellingpurposesahouse,oranapartmentinabuilding,ownedor
leasedbysuchcorporation,
(C)nostockholderofwhichisentitled(eitherconditionallyorunconditionally)toreceiveany
distributionnotoutofearningsandprofitsofthecorporationexceptonacompleteorpartial
liquidationofthecorporation,and
(D)meeting1ormoreofthefollowingrequirementsforthetaxableyearinwhichthetaxesand
interestdescribedinsubsection(a)arepaidorincurred:
(i)80percentormoreofthecorporation'sgrossincomeforsuchtaxableyearisderivedfrom
tenantstockholders.
(ii)Atalltimesduringsuchtaxableyear,80percentormoreofthetotalsquarefootageofthe
corporation'spropertyisusedoravailableforusebythetenantstockholdersforresidential
purposesorpurposesancillarytosuchresidentialuse.
(iii)90percentormoreoftheexpendituresofthecorporationpaidorincurredduringsuch
taxableyeararepaidorincurredfortheacquisition,construction,management,maintenance,
orcareofthecorporation'spropertyforthebenefitofthetenantstockholders.
Page12of101

FORMINGANDSTRUCTURINGORGANIZATIONSFOR
COHOUSING
Therearethreeprimarylayersofconsiderationsinthedesignoforganizationsfortheownershipand
managementofland:

Whatentitywechoose:Theentitywechooseandformatthestatelevelcomeswithasetof
builtinparametersforhowtheentitycanoperate,managefunds,makedecisions,andengage
inactivities.

Whattaxstatustheentitychooses:Thechoiceoftaxstatusaddsanotherlayerofparameters
thatguidehowanentitycanoperate,andalsoaffectsthefinancialstatusoftheentityand
individualsinvolved.

Howwestructuretheentity:Oncewehavechosenandformedanentity,thenext
considerationishowtostructureit,includinghowtomanagegovernance,capitalization,
allocationofprofits/losses,etc.Thisisdonethroughthechoiceswemakeindraftingbylaws,
operatingagreements,andpolicies.

Sometimesmultipleentitieswillbeinvolvedinthecreationofahousingarrangement.Forexample,
theremaybeonefortheownershipofland,oneforthemanagementofadevelopmentproject,and
oneformanagementofsharedactivities.Sometimes,holdingtitletolandunderaseparateentity
protectsitfromliabilityincurredbyanentitythatoperatesprogramsonanddevelopstheproperty.In
addition,eachentitymayhavedifferentpurposesoractivitiesthatmandatedifferentlegalstructures
andtaxexemptions.
Theformation,structure,andtaxationofentitiesisthefocusofChapter4ofthisbook,sothis
sectionfocusesprimarilyontheconsiderationsrelatedtotheformationofentitiestoholdandmanage
landandhousing.

1. ChoiceofEntity:

ConsiderationsinChoosinganEntity:
Thereareusuallymanyconsiderationstoweighinthechoiceofentity;thesearediscussedgenerallyin
transactionallawpracticeguides,andalsoinChapter4ofthisbook.Herearesomeconsiderations
relevanttotheownershipandmanagementofland:

a) Doesthechoiceofentitylimitliabilityofindividualmembers/shareholders?Ifmanaged
properly,limitedliabilitycompaniesandcorporationsofallkindsgenerallyshieldindividual
members/shareholdersfromliabilityfortheentitysdebts,acts,andomissions.Ifmultiple
peoplecometogethertopurchaseanddeveloplandtogether,particularlyiftheyplanto
takeoutlargeloans,aentitywithlimitedliabilitywilllikelybeoptimaltoensurethatnoone
individualisleftholdingthebagifthingsgowrong.Allentitieslistedabove,except
partnerships,offerlimitedliability.Inmanystates,theprimaryreasonthatsomegroups
maychoosetoformapartnershiptoownlandistosavemoneyonthecostsotherwise
requiredinformingandoperatingalimitedliabilityentity.InCalifornia,forexample,
partnershipsarenotrequiredtopaythe$800annualminimumfranchisetaxrequiredof
LLCsandcorporations.
Page13of101


b) Doesthechoiceofentitylimitindividualsabilitiestoderiveprofitfromtheentity?The
abilitytoprofitfromtheequityorincomeoflandoffersastrongincentiveforpeopletobuy
land,butthisincentivealsodrivespeopletoexploitlandandbuy/sell/owninwaysthat
driveuppricesforothers.Manygroupswillwanttolimitindividualsabilitytoprofitfrom
land,andwillthuschoosetoformanonprofitpublicbenefitcorporationoranonprofit
religiouscorporation.Whiletheexactnameofthecorporationtypeandthelegal
restrictionsvaryfromstatetostate,suchnonprofitsaregenerallyprohibitedfrom
distributingtheirprofitsandassetstoindividuals,andmayonlydistributeprofitsandassets
toothernonprofits.
Thereareatleasttwootherentitytypesthattendtoimposesomerestrictionson
thedistributionofprofitsandassets.Anonprofitmutualbenefitcorporation,undersome
statelaws,isprohibitedfromdistributingprofitstomembers,butmaypurchaseorredeem
membershipsfromthemembers.1Thus,ifamemberbuysamembershipinalandowning
nonprofitmutualbenefitcorporationfor$10,000,thecorporationcanpaythatamount
backtothememberwhenheorsheleaves.Mostlikely,however,nodividend,interest,or
appreciationcouldbepaidalongwiththeredemption.Althoughtheyareprohibitedfrom
distributingprofits,undersomestatelaws,mutualbenefitnonprofitsmay,upondissolution
only,distributeassetstomembersortoapersonorentityofitschoosing.2Thismeansthat
individualmembersmayhavesomeincentivetocashoutbysellingtheentirepropertyand
dissolvingtheentity.
Often,cooperativecorporationsarelimitedbystatelawsinthewaysthattheycan
distributeprofitstoindividuals.Forexample,inCalifornia,acooperativecannotdistribute
morethana15%returnperyearonindividualscapitalcontributions.3Cooperativesare
generallyrequiredtodistributeearningsonthebasisofpatronage,ratherthanonthebasis
ofcapitalcontributed.4Thismeansthatearningsaredistributedtoindividuals,butthatone
individualcannotmakealargeprofitonhis/hercapitalinvestment.

c) Doesthechoiceofentitymandatedemocraticoraccountablegovernance?Ifanentity
mandatesacertaintypeofgovernancestructure,thiscancontributetotheprotectionof
land,byhelpingtoensurethatprivateinterestscannotcontrolanentityfortheirpersonal
benefit.Cooperativecorporations,nonprofitmutualbenefitcorporations,andnonprofit
publicbenefitcorporationswithmembersaretypicallymandated,bylaw,tohaveelections
andmajordecisionsbemadeonaonemember/onevotebasis.Thishelpstoensurethat
anorganizationoperateswithitsmembersinterestsortheoriginalpurposeofthe
organizationinmind.Inaddition,evenwhentheydonotobtaintaxexemptionunder
501(c)(3),nonprofitpublicbenefitcorporationsareoftensubjecttocertainrulesthathelp
tomaintaintheintegrityoftheboard.Forexample,statestatutesmaylimitthenumberof
financiallyinteresteddirectorsthatmayserveonaboard,andrequirethatselfdealing
transactionsbeapprovedbyadisinterestedpanelofdirectorsorbyagovernmententity,
suchasthestateAttorneyGeneral.5

d) Doeschoiceofentitymandateacertaintaxtreatment?Asdescribedbelow,anentitycan
choosebetweentwoormoretaxstatusesorexemptions,buttheIRSwillalsoimpose

See,forexample,Cal.Corp.CodeSection7411.
See,forexample,Cal.Corp.CodeSection8717.
3
Cal.Corp.CodeSection12451
4
SeeCal.Corp.CodeSection12201,andChapter4ofthisbookforadescriptionofpatronageincooperatives.
5
See,forexample,Cal.Corp.CodeSection5233.
2

Page14of101

certainotherrulesonanentitydependingonwhetheritisacorporation,LLC,or
partnership.Taxlawisvast,anditsimpossibletosummarizeitallhere.However,Ill
describeonemajorconsiderationbriefly,whichisthatintherealestatecontext,mostof
thetimeitwillbeoptimaltoownlandasanLLC(orpartnership,ifpartnersarewillingto
assumepersonalliabilityfordebts).Mostcommonly,groupschoosetoformanLLCovera
corporation,becauseanLLCmembersadjustedbasisintheLLCisraisedbythemembers
allocableshareoftheentitysdebt.Becauseeachmembersadjustedbasisismuchhigher
thantheamountofcashthememberhasactuallycontributedtotheentity,eachmemberis
abletodeductgreaterlossesinanLLCthantheywouldthroughacorporation(wherethe
entitysdebtisnotincludedindeterminationofashareholdersbasis).Thelossdeducted
byanLLCmembermay,therefore,begreaterthantheamountofcashtheindividual
memberhasactuallycontributedtotheLLC.ManyLLCsformedforthepurposesofholding
realestatewillbeabletopasssignificantlossesthroughtoindividualmembers,asaresult
ofpaymentofmortgageinterest,propertytaxes,insuranceandotherexpenses,andby
allocatingashareofthepropertydepreciationtomembers.6Bypassingthroughdeductible
lossestomembersinthisway,LLCsareabletosimulatesomeofthetaxadvantagesof
individualhomeownership(suchastaxdeductionsformortgageinterestandpropertytax
payments).

CommonEntityTypes
Everystateoffersalargehandfulofentitytypestochoosefrom,andeachentitycomeswithasetof
legalrequirementsandconstraints.Therulesgoverningentitiesvaryfromstatetostate,soits
importanttoreadthestatutegoverningtheentitytypes.Themostcommonentitytypesavailableat
thestatelevelandusedfortheownershipoflandare:
Partnerships(GeneralandLimited)
LimitedLiabilityCompanies
LowProfitLimitedLiabilityCompanies7
GeneralStockCorporations,8whichincludenewcorporationtypes,suchasBenefitCorporations
andFlexiblePurposeCorporations9
CooperativeCorporations
NonprofitPublicBenefitCorporations
NonprofitMutualBenefitCorporations
NonprofitReligiousCorporations

Thefollowingarethethreemostcommonentitytypesusedinintentionalcommunities:

a) LimitedLiabilityCompanies(LLCs):
LimitedLiabilityCompanies(LLCs)areincreasinglypopularentitiesthroughwhichintentional
communitiesholdtitletoland.AnLLCisatypeofentitythatcanbeformedinanyU.S.state.LLCs
provideagreatdealofflexibilityinthewaysthatmemberscanstructuretheLLCsoperations,
governance,andfinancialprovisions.Forexample,LLCsdonotseemtobesubjecttotheDavis
StirlingAct,whichimposesmandatorygovernanceprovisionsoncooperativehousingcommunities
andcondocommunitiesinCalifornia.AmajorbenefitofanLLC,assuggestedbyitsname,isthatit

Formoreinformation,seeIRSPublications541and925.
Theseareonlyavailableinahandfulofstates.
8
Iusethephrasegeneralstockcorporationstorefertorunofthemillforprofitcorporations,todifferentiatebetweenthose
corporationsandcooperativesandnonprofits.
9
Theseareonlyavailableinasmallhandfulofstates.
7

Page15of101

providesliabilityprotectiontoitsindividualmembers,intheeventthatsomethinggoeswrongor
theLLCcannotmeetitsfinancialobligations.
HoldinglandasanLLCalsohascertaintaxadvantages(alsodescribedabove)overholding
landthroughanentitysuchasacorporation(unlessthecorporationmeetstheIRSdefinitionof
cooperativehousingcorporation,above),whichisthatcertaincosts,suchasdepreciationofthe
buildingandmortgageinterestcanbepassedthroughthemembersasabusinessexpenseandloss.
However,onetaxdisadvantageisthatLLCmembersthatselltheirsharecantclaimthe$250,000
capitalgainstaxexclusion,astheywouldwhensellinganormalresidence.
OneotherdisadvantageofpurchasingpropertyasanLLCisthatthefinancingavailableto
LLCsismoreakintocommercialloans,ratherthanpersonalhomemortgages.Assuchthedown
paymentrequiredoftheLLCisoftendoublewhatindividualswouldpayunderaregularhome
mortgage,andinterestratestendtobehigher.
ManycohousinggroupsalsousetheLLCformduringtheprocessofdevelopingaproperty
thatwillultimatelybeconvertedintocondominiums.ByforminganLLC,thegroupbecomesalegal
entityandcanenterintocontracts,whichallowsittopurchaselandandpartnerwithdevelopers
andcontractors.TheLLCformofownershipalsoprovidesliabilityprotectiontoindividualgroup
members,shouldanythinggowrongduringthedevelopmentprocess.

b) PublicBenefitNonprofits
Nonprofitpublicbenefitcorporationsaretheentitiesmostoftenusedtoholdresidentialproperties
whenthegoalistocreatesomeformofaffordablehousing,supportivehousing,religious
community,orhousingforagroupwithdistincthousingneeds,suchasstudents.Beinganonprofit
publicbenefitcorporationcomeswithakeyrestraint:theprofitsandtheassetsofthecorporation
cannotbedistributedtoprivateindividuals.Thisisacriticalcontrolthatremovesindividual
incentivestobuy,sell,develop,orextractresourcesfromthelandforprofitmakingpurposes.
Widespreadownershipoflandbypublicbenefitnonprofitcorporationscould,therefore,
significantlychangethedynamicsofthelandmarketandreduceincentivestoexploitorspeculate
onland.
Whenmostpeopleusethephraselandtrust,theyareusuallynotreferringtothetypeof
trustthathasatrusteeandbeneficiary;thephrasemostoftenreferstoanonprofitpublicbenefit
corporationthatownslandand/oreasements,usuallyforthepurposeofpreservingecosystems,
agriculturalland,oraffordablehousinginthelongterm.
Communitylandtruststypicallyoperateunderthismodel:Thenonprofittrustholdstitleto
apieceoflandandgrantstwothingstoeachresidenthousehold:1)averylongtermlease(known
asagroundlease)tooccupytheland,and2)ownershipofcertainimprovementsonthatland
(usuallyahousingunit).Thismodelgivesresidentsthefeelofownership,whilethelandtrusts
ownershipoftheunderlyinglandgivesthetrustthepowertosetlimitationsontheuseandtransfer
oftheproperty.Inparticular,thetermsofthegroundleasegenerallylimittheresidentsabilityto
selltheirunitatmarketrate,therebypreservingtheaffordabilityoftheunitandcreatingwhatis
usuallycalledlimitedequityhousing.Limitedequityhousingmodelsuseavarietyofformulasto
determinewhatkindofreturnaresidentmaygetwhenhe/shesellstheunit.Theformulais
typicallythepurchasepricemultipliedbythechangeintheconsumerpriceindexorthechangein
areamedianincome,plusthevalueofanyimprovementsaddedbytheresident.
Notallnonprofitsthatownlandnecessarilythinkoforrefertothemselvesastrusts.For
example,manyofthehousingcooperativesoccupiedbyUniversityofCalifornia,Berkeleystudents
areactuallyownedbytheumbrellanonprofit,theBerkeleyStudentCooperative.
c) MutualBenefitNonprofits
Page16of101

Forhousingthatdoesnotnecessarilyserveaspecialcharitableclassofindividualsorpurpose,a
mutualbenefitnonprofitformissometimesusedtoholdtitletoproperty.Mutualbenefit
nonprofitsprovideagood,service,orbenefittoagroupofmembers.Homeownersassociationsin
condominiumcohousingcommunitiesgenerallyformasmutualbenefitcorporations.The
ownershipoflandatEarthavenEcovillageinNorthCarolinaisbyamutualbenefittypeofnonprofit.
Mutualbenefitnonprofitcorporationsaresubjecttoanimportantconstraint,whichisthatthey
maynotdistributeprofitstoindividualsduringthelifeoftheorganization;thispreventsthe
corporationslandfrombeingdevelopedorminedtoserveprofitmakinggoalsofindividuals.At
thesametime,mutualbenefitcorporationsaregenerallyallowedtodistributeassetstoindividuals
upondissolution,whichmeansthatprofitmakinggoalsarenotcompletelypreventedfromdriving
thedecisionsofsuchanorganization.

2. ChoiceofTaxStatus:
Thequestionofanentitystaxstatusisansweredsomewhatseparatelyfromthechoiceofentity
formationatthestatelevel.Mostentities,onceformed,willthenbeabletochoosefromtwoormore
taxstatusesorexemptions.

a) EntityLevelTaxationversusPassThroughTaxation:Someentities(CCorporationsandLLCsthat
electtobetaxedlikeCCorporations)aresubjecttodoubletaxationtheentitypaystaxonitsnet
earnings,andindividualmembers/shareholderspaytaxonthoseearningswhentheyaredistributed
toindividuals.Bycontrast,passthroughentities(SCorporations,mostLLCs,andPartnerships)are
nottaxeduntilprofitsaredistributedorallocatedtomembersandshareholders.Passthrough
statusisespeciallyimportantinhousingownership,because,oftenmoreimportantly,lossescanbe
passedthroughtoindividualstooffsetothersourcesofindividualincome.

b) CooperativeTaxation:AsdescribedinChapter4,entitiesthatdistributeincometomembersona
cooperativebasis(onthebasisofhowmucheachpatronizedthecooperative)canbetaxedunder
SubchapterToftheInternalRevenueCode,whichprovidesforatypeofpassthroughtaxation.
UnderSubchapterT,cooperativeearningsthataredistributedaspatronagedividendsaretaxableto
individual,butnottotheentity.

c) FormsofTaxExemption:Mostnonprofitcorporationswillseeksomeformoftaxexemptionfrom
theIRS.ThesectionoftheInternalRevenueCodeunderwhichanentityobtainstaxexemptionmay
dictatemanythingsabouthowtheentityoperates,forwhatpurposes,howitisgoverned,what
sourcesofincomeitmayhave,andhowitmayspendordistributeitsfunds.Hereisabrief
summaryofthecategoriesoftaxexemptionlandowningorganizationsmaycontemplate:

i. 501(c)(2)TitleHoldingCorporations:Anentityorganizedfortheexclusivepurposeofholding
titletoproperty,collectingincometherefrom,andturningovertheentireamountthereof,less
expenses,to[anothertaxexemptnonprofit]mayobtainexemptionundersection501(c)(2)of
theInternalRevenueCode.10Thereareavarietyreasonsthatanonprofitmightwanttocreatea
separateentitytoholdtitletoandmanageincomeproducingproperties,someofwhichare
namedbytheIRSinonepublicationon501(c)(2):

Thesefactorswouldincludelimitationofliabilityfrompotentialdamagesuits;enhancementof
abilitytoborrow;limitationsimposedingiftsandbequeststoexemptorganizationsthat

10

See1986IRSEOCPEText,C.IRC501(c)(2)TitleHoldingCorporationsavailableathttp://www.irs.gov/pub/irs
tege/eotopicc86.pdf
Page17of101

effectivelyrequiresuchgiftstobekeptinseparateentities;clarityoftitle;accounting
simplification;andlimitationsimposedbyvariousstatelawsonorganizationsthatwouldbe
recognizedasexemptunderthefederalrevenuelaws.11

InadditiontothebenefitslistedbytheIRS,501(c)(2)titleholdingcorporationscreateanavenue
for501(c)(3)nonprofitstobenefitfromrentalincomefromproperties.Rentalincomeisnot
consideredtaxableunrelatedbusinessincometoa501(c)(2),butsuchincomemaybesubjectto
unrelatedbusinessincometaxundera501(c)(3).12Ifa501(c)(3)organizationplanstoholdtitle
tolandthatservesitstaxexemptpurposes,butwhichwillalsohaveagoodamountofrental
income,itmaybehelpfultoholdtitletothelandina501(c)(2)toavoidtaxontherental
income.

ii. 501(c)(3)Charitable,Religious,Educational,andScientificOrganizations:Unlessitisin
furtheranceofarecognizedcharitable,educational,religious,orscientificpurpose,developing
andprovidinghousing,alone,isgenerallynotconsideredapurposethatistaxexemptunder
501(c)(3).Providinghousingtopeoplethatarepoor,distressed,orunderprivilegedis
consideredacharitablepurpose.13Throughvariousrulingsandguidancedocuments,theIRS
hasprovidedguidanceonthecircumstancesunderwhichprovisionofhousingtolowincome
individuals,14peoplewithdisabilities,15andtheelderly16willbetaxexempt.Providinghousing
infurtheranceofanothertaxexemptpurposecanalso,itself,beataxexemptactivity.For
example,providinghousingtostudents(whetherornotstudentsarepartofanunderprivileged
group)maybetaxexempt,becauseprovisionofhousingadvancestheschoolseducational
purpose.Housingprovidedinconnectionwithareligiouscenterorothereducationalcenterwill
alsolikelybefoundtobeataxexemptpurpose,iftheprovisionofsuchhousingisnecessaryto
achievingthereligiousoreducationalpurposes.Organizationsformedtopreserveecologically
significantland17or,insomecases,historicallysignificantbuildings18mayalsoobtaintax
exemptionunder501(c)(3).
Manygroupsthataredevelopinghousingforthemselveswillbecuriousaboutthe
possibilityofobtaining501(c)(3)statusandusinggrantmoneyortaxdeductibledonationsin
thepurchaseordevelopmentoftheirhousing.Unfortunately,manyofthesegroupswouldfail
tomeettherequirementsnecessaryto501(c)(3)taxexemption,primarilybecausetheir
organizationisdesignedtomeetthehousingneedsofafixedanddefinedgroupofpeople,and
notnecessarilyformedforthepurposeofcreatingbroaderpublicbenefit.However,such
groupsmaybenefitfromcreatingaseparate501(c)(3)corporationfortheoperationofspecific
activitiesthataretaxexempt,suchaseducationalorcharitableprogramsprovidedonthe
property.Groupsmayalsosellorgivetitle,aconservationeasement,orotherrightstoa

11

Id.
SeeA.AllenButcher,LegalIncorporationforIntentionalCommunity,publishedbyFourthWorldServices,page9,available
athttp://www.culturemagic.org/PDF/c1Legal%20Inc.pdf.
13
SeeIRSPublication557(October2011),page30.
14
SeeIRSExemptOrganizationContinuingProfessionalEducationText,1992,LowIncomeHousingasaCharitableActivity,by
RobertLouthianandMarvinFriedlander,availableathttp://www.irs.gov/pub/irstege/eotopicd92.pdf.SeealsoRev.Rul.70
585,19702C.B.115,Rev.Rul.67138,19671C.B.129,IRSLowIncomeHousingGuidelinesRevenueProcedure,Rev.Proc.
9632,19961C.B.717,199620I.R.B.14,availableathttp://www.irs.gov/pub/irstege/rp_199632.pdf
15
SeeRev.Rul.7919,19791C.B.195.
16
IRSExemptOrganizationContinuingProfessionalEducationText,1979,RentalHousingfortheElderlyUnderIRC501(c)(3)
availableathttp://www.irs.gov/pub/irstege/eotopich79.pdf.SeealsoRev.Ruls.72124,19721C.B.145;7918,19791C.B.
194;and7918,19792C.B.194.
17
Rev.Rul.76204,19762C.B.15
18
SeethefollowingIRSRevenueRulings:Rev.Rul.75470,19752C.B.207,Rev.Rul.676,19671C.B.135,andRev.Rul.76
147,19761C.B.151
12

Page18of101

501(c)(3)organizationtoempowerthatorganizationtoenforcethepreservationofecosystems
onthelandortheaffordabilityofsomeofthehousingontheland.

iii. 501(c)(4)SocialWelfareOrganizations:501(c)(4)taxexemptionisgenerallyavailableto
organizationsengaginginactivitiesthatbenefitthepublicorabroadsectorofthecommunity.19
Manyactivitiescanfallunder501(c)(4)taxexemption,solongastheydontlookagooddeal
likecommercialactivitiesandsolongastheyarenotdesignedtobenefitonlyafixedgroupof
people.Agroupthatwantstodevelophousingforitselfwilllikelyfailtomeettherequirements
of501(c)(4)forsomeofthesamereasonsthatitmightfailunder501(c)(3),sincethegroups
effortsareoftenaimedprimarilytobenefitthegroup,asopposedtoabroadcommunity.Some
homeownersassociations,however,obtain501(c)(4)statusiftheyoperateprimarilytoprovide
facilitiestothepublic20oriftheyoperatetoprovidebenefittoalargecommunity(asopposed
toasmallgeographicarea).21Iftheorganizationworkstoimproveindividuallyowned
properties,itwilllikelyfailtoqualifyforexemptionunder501(c)(4).22Donationsto501(c)(4)s
arenottaxdeductibletodonorsandmostfoundationsdonotmakegrantsto501(c)(4)s;this
meansthat501(c)(4)statusgenerallydoesnothelpanorganizationtofundraise.

iv. 501(c)(7)SocialandRecreationalOrganizations:Incontrastto(c)(3)and(c)(4)organizations,
whicharerequiredtoprovidebenefitstothepublic,501(c)(7)taxexemptionisdesigned
specificallyforgroupsthatprovideaprivatebenefittothemselves.Inthatrespect,501(c)(7)s
maybefittingforgroupsseekingtoprovidecertainhousingamenitiestothemselves,likea
countryclub,swimmingpool,orpossiblyacohousingcommonhouse.501(c)(7)isacategoryof
exemptiondesignedforsocial,recreational,andothernonprofitablepurposes.23Aquestion
forfurtherinquiryis:whatkindsofactivitiescanbeincludedunder501(c)(7)sother
nonprofitablepurposescategory?Itisnotaperfectcatchall,becausetheIRShasalready
saidthatmaintainingroadsinaneighborhoodisnotaproperactivityfora501(c)(7)becauseis
notrelatedtosocialorpleasurablepurposes.24ApparentlytheIRShasappointeditselfthe
arbiterofpleasure,indecidingwhatdoesanddoesnotfurthersocialandpleasurable
purposes.Maintainingroads,totheIRS,mustsoundlikeallworkandnoplay.501(c)(7)maybe
afinetaxcategoryforagroupthatwantstoshareaprivatevacationhomeorcampground
(whichsoundslikefun),butitwillnotlikelyworkforagroupthatsimplywantstoprovideitself
withprimaryresidences(whichsoundstoonormalandboring).25
Notethat501(c)(7)smaynotreceivemorethan35%oftheirincomefromnonmember
sources,andnomorethan15%oftheincomemaycomefromtheuseoftheclubsfacilitiesby
thegeneralpublic.Thisrulerequiresthattheorganizationprovideonlyforalimitedgroupof
people.Theincomederivedfrommembersmustalsobeofasorttraditionallyassociated
withnormalandusualactivitiesofasocialclub(memberfees,entrancefees,andsoon).26
TheIRSseemstohavealsoappointeditselfarbiteroftradition,indecidingwhatgroupscan
provideforthemselvesandonwhatterms.Acohousingcommunitycouldlikelyownacommon

19

SeeExemptOrganizationsTechnicalInstructionProgramforFY2003,IRC501(c)(4)Organizations,byJohnFrancisReilly,
CarterC.Hull,andBarbaraA.BraigAllen,availableathttp://www.irs.gov/pub/irstege/eotopici03.pdf
20
SeeRev.Rul.8063,19801C.B.116.
21
SeeRev.Rul.7499,19741C.B.131.
22
SeeRev.Rul.7417,19741C.B.130.
23
SeeExemptOrganizationsTechnicalInstructionProgram1996,C.SOCIALCLUBSIRC501(c)(7),byJimLangleyandConrad
Rosenberg,availableathttp://www.irs.gov/pub/irstege/eotopicc96.pdf
24
SeeRev.Rul.75494,19752C.B.214.
25
Id.
26
SeeExemptOrganizationsTechnicalInstructionProgram1996,C.SOCIALCLUBSIRC501(c)(7),byJimLangleyandConrad
Rosenberg,availableathttp://www.irs.gov/pub/irstege/eotopicc96.pdf
Page19of101

houseasa501(c)(7)andcouldchargemembersduesandfeesforinvolvementincommunity
mealsandsocialactivities.Butcouldthatentityalsooperateagrocerybuyingclubforthe
members,anequipmentrentalservice,asharedinternetservice,aguesthouse,orother
amenitythatthemembersmustpayfor?Thisisanareaforfurtherinquiry,anditmayrequire
thatweseekguidancefromtheU.S.DepartmentofPleasureandTradition(theIRS).

v. 501(d)ApostolicAssociations:Agroupofpeoplethatwishestodevelopandownhousing
communallymaywanttoconsiderseekingtaxexemptionunder501(d)27ifthatgroupisbound
togetherbyasetofcommonbeliefsandvalues.Toobtainexemptionunderthissection,a
groupmustmeetrequirementsofthestatute,whicharesummarizedbythe9thCircuitas
follows:thattherebeacommontreasury,thatthemembersoftheorganizationincludepro
ratashareswhenreportingtaxableincome,andimplicitly,thattheorganizationhaveareligious
orapostoliccharacter.28Thephrasecommontreasurygenerallymeansthatmembersshare
incomeandproperty.
TwinOaksisanintentionalcommunityinVirginiathathastaxexemptionunder501(d).
TwinOakswasalsothesubjectofaTaxCourtdecisionthatheldthatmembersofa501(d)
communityneednotsurrendertheirpersonalpropertyandtakeavowofpovertyupon
joining.29Indeterminingwhatisaproperreligiousorapostoliccharacter,501(d)
organizationsappeartobesubjecttofarlessscrutinythanarechurchesthatseektaxexemption
under501(c)(3).501(d)organizationneednotholdreligiousservicesorengageinactivities
characteristicoftraditionalreligions,suchassongs,adoptionsymbols,orrituals.The
communitymaysimplycreateanenvironmentforthedailypracticeofitsbeliefs,astheTax
CourtobservedintheTwinOakscase.30

vi. Section528HomeownersAssociations:Ahomeownersassociation(HOA)maysoundlike
somethingyoudfindmanagingcommonareasandpropertyuseinarunofthemillsubdivision,
butthetaxcategorythattheIRShascreatedforHOAscouldalsobeusedtopurchase,develop,
andownentirepropertiesforthecreationofintentionalcommunities.EarthhavenEcovillagein
NorthCarolina,forexample,ownsa320acrepropertyasahomeownersassociationandfiles
taxesunderSection528.31Earthhavenleasesplotsoflandtomembers,whoconstruct
residencesonthoseplots.HomeownersassociationsaredefinedbytheIRStoinclude
condominiummanagementassociations,residentialrealestatemanagementassociations,and
timeshareassociations.32Suchorganizationsareusuallyformedunderstatelawasmutual
benefitnonprofits.ToqualifyfortaxstatusunderSection528,90%oftheentitysexpenditures
mustbemadetoacquire,construct,manage,andmaintainproperty.33Inaddition,60%ofthe
organizationsincomemustbederivedfrommemberfees,dues,andassessments.34Income
fromothersourcesisgenerallytaxable.Anorganizationneednotapplyfortaxexemption
under528,butneedonlymeettherequirementsofthestatuteandfileitstaxreturnusingform
1120or1120H.

27

SeeInternalRevenueManualSection4.76.29(June4,2010).
Kleinsasserv.UnitedStates,707F.2d1024(9thCir.1983).
29
TwinOaksCommunity,Inc.v.Commissioner,87T.C.1233(1986).
30
Id.
31
DianaLeafeChristian,CreatingaLifeTogether:PracticalToolstoGrowEcovillagesandIntentionalCommunities(NewSociety
2003),page179.
32
IRCSection528(c)(1).
33
IRCSection528(c)(1)(C).
34
IRCSection528(c)(1)(B).

28

Page20of101

3. ConsiderationsWhenStructuringtheEntity:
Choiceofentityandtaxstatusareimportantconsiderationsindesigninganorganizationtoownand
manageland;however,therealteethofanorganizationcansometimesbefoundinthechoicesthe
members/ownersmakeindesigningitsstructure,governance,andfinancialterms.Thesetermscan
greatlyinfluenceanorganizationsaccountabilitytoitsmembersandtothepurposesitwasdesignedto
serve.

Someentities,likeLLCs,affordavastamountofflexibilitytomemberstostructureandmanage
theentityhowevertheywish.Evenincorporations,which,bystatute,requirespecificstructuraland
proceduralformalities,thereisflexibilitytobuildinthestructuralteethtosustaintheorganizations
purposesandensureaccountability.Chapter4discussessomeofthesechoices,butherearesomeof
theimportantconsiderationstobemadeinstructuringanentitytoownland:

a) Compositionofmembership:Whomayjoinand/orbuyintotheentity?
b) Votingrights:Domembersreceiveonevoteeach,orarevotingrightsallocatedinproportiontoa
membersinvestment,shareoflandownership,oronsomeotherbasis?
c) Governingbody:Willtherebeagoverningboardofdirectorsorwillmembersmanagetheentity
directly?
d) Electionandappointmentprocedures:Iftheentityhasagoverningbody,howwillmembersofthe
governingbodybeelectedorappointed?Howwillofficersbeelectedorappointed?
e) Compositionofgoverningbody:Willthegoverningbodybecomprisedofpeoplethatliveonthe
property,peoplethatdonotlivethere,orsomebalance?(Forexample,manycommunityland
trustsrequirethat1/3oftheboardbecomprisedofresidentsofthetrustshousing,that1/3be
comprisedofexperts,professionals,andpublicofficialshelpfultothetrust,andthat1/3be
comprisedofconcernedandcommittedcommunitymembers.)
f) Spheresofdecisionmaking,management,andoperations:Whatdecisionsmustbeputtoall
membersoftheentityandwhataredecisionsthatwillbemadebygoverningbodies?Aresome
decisionsallocatedtocertaincommitteeswithintheorganization?Willcertainofficersofthe
organizationbeempoweredtomakesomedecisions?Howwilltheactivitiesoftheorganizationbe
managed?
g) Proceduresformeetingsanddecisionmaking:Whatprocedureswillbeusedtoholdmeetings?
Whatproceduresareusedtoconsideranddecideonproposals?
h) Financialprovisions:Howwillmembersbuyinandsellout?Howwillprofitsandlossesoftheentity
beallocatedanddistributedtomembers,ifapplicable?Whatfeesmaymembersberequiredtopay
regularly?
i) Conflictofinterestpolicies:Howwilltheorganizationpreservetheintegrityofitsgoverningbody
andensurethatitisnotsteeredtoservetheinterestofcertainindividualsorcertainprofit
interests?Underwhatcircumstancesmightamemberordirectorbedeemedfinanciallyinterested
inatransactionorissue,andhowwilltheorganizationhandlethis?
j) Proceduresforamendinggoverningdocuments:Ifgoverningdocumentscanbeamendedsimply
(suchasbyamajorityvoteoftheboard),thismeansthatmanyofthesafeguardsbuiltintolegal
structurecouldbeeasilyundermined.Manyorganizationsmaywanttobuildingreatersafeguards,
suchasbyrequiringapprovalbyasupermajorityoftheboardormembers,unanimousapproval,or
approvalbyathirdparty(suchasadesignatednonprofit)tochangecertainkeyprovisionsofthe
governingdocuments.
k) Dissolutionoftheentity:Underwhatcircumstancesmighttheentitydissolveandsellitsassets?
Howwilltheproceedsbedistributed?Toanonprofit,tocurrentmembers,ortobothcurrentand
pastmembers?

Page21of101

SAMPLECOOWNERSHIPAGREEMENT
AboutCoOwnershipAgreements:
ThefollowingisabasicTenancyInCommon(TIC)Agreementforcoownershipofatwounitproperty.
Thisisanexampleofanagreementthatcouldflowfromtheuseofthequestionnaireprovidedabove.
Coownershipagreementshaveaspectrumofdifferentpersonalities,dependingonthedegree
ofsharinginvolved.Somecoownershipagreementsseektosimulateseparateownership,bygiving
eachownerhis/herownexclusiveunitandindependentsetofresponsibilities,andbyrequiringthat
eachownerobtainseparatefinancing.35Forexample,onatwounitpropertywhereeachunitis
containedwithinitsownbuilding,suchasahousewithabackcottage,eachownerislikelysolely
responsibleformaintaininghis/herownbuilding;thisdivisionmaycreatearealfeelingofseparate
ownership.Incontrast,acoownershipagreementforasinglefamilyhome,forexample,likelyentails
shareduseofmostspaces,sharedfinancing,sharedresponsibilitiesformostmaintenancetasks,andso
on.
Thisagreementsitssomewhereinthemiddleofthespectrumofsharing.Theagreementisfor
coownershipofaduplexwheretheunitsarehousedunderthesameroof.Whentwounitssharea
singlestructure,coownersmustusuallybejointlyresponsibleformaintainingtheexterior,plumbing,
foundation,roof,andweightbearingwallsofthebuilding.Thisparticularagreementisalsowrittenfor
coownersthatshareasinglemortgage,asopposedtoeachobtainingseparatefractionalfinancing.At
thesametime,rightsandresponsibilitiesunderthisagreementaredividedtosimulateseparate
ownershipinotherrespects.Eachownerisallocatedasinglelivingunit,theinteriorofwhicheach
ownerisresponsibleformaintaining.Eachownermaysellhis/herunittothirdpartiesontheopen
market,thoughonlyafterprovidingtheotherownertheopportunitytobuytheunit.Iftheentire
propertyissold,theownersagreetodividetheproceedsbasedontheappraisedrelativevalueofeach
unit,ratherthanbasedonapredeterminedpercentage.Thismethodofdividingsaleproceedsallows
ownerstobenefitfinanciallyfromcarefulupkeepandanyimprovementstheymakeontheirownunit,
andit,thus,simulatesseparateownershipinthatrespect.
Notethat,althoughitislong,thisTICAgreement,inmanyways,issomewhatbarebones.A
significantamountofdetailcouldpotentiallybeaddedtonearlyeveryprovision,togivemorethorough
proceduresforhowtohandlevariousmatters.

CoOwnershipAgreement
for
[ADDRESS]

BackgroundofthisAgreement:PERSON1andPERSON2shareownershipofandresponsibilityforthe
duplexatADDRESS.PERSON1andPERSON2havedecidedtocoownthepropertybecausetheyenjoy
andrespecteachother,andtheytrustoneanothertobereliableandaccountable.PERSON1and
PERSON2valueclearandopencommunication,andexpecttonavigateanychangesorchallengeswitha
commitmenttorespectfulcommunication.Toensurethatexpectationsareclearlycommunicatedand
carriedout,PERSON1andPERSON2wanttoclarifytheirrightsandresponsibilitieswithregardtothe
sharedpropertyandtheirshareddebt,andalsowanttoensurethatanyfuturecoownersandtenants
adheretoanytermsandconditionsagreeduponnow.Therefore,PERSON1andPERSON2nowreduce
theiragreementtowriting,andagreeasfollows:

35

FractionalfinancingforTICs,however,canbesomewhatdifficulttocomeby,andthemajorityofTICownersmustshare
responsibilityforasinglehomeloan.
Page22of101

1. TenantsinCommonAgreementinRelationtotheProperty
ThisisaTenantsinCommon(TIC)Agreement(Agreement)anditgovernstherightsand
obligationsofanypersonorentitythathasanownershipinterest,underthetermsofthis
Agreement,intherealpropertylocatedatADDRESS(theProperty).ThePropertyconsistsofone
duplexbuildingcontainingtwolegalunits.ByowningthePropertyasTenantsinCommon,each
Owner(definedinParagraph2)ownsanundividedfractionalinterestintheentireProperty.This
meansthatnoneoftheOwnershasanindividuallydeededrighttoexclusiveoccupancyofany
portionoftheProperty.However,throughthisAgreement,Ownersintendtodividetheirrightsand
responsibilitieswithregardtotheProperty.TheOwnersdonotintendtocreateacommoninterest
development,partnership,orjointventure.

2. OwnersandPartiestothisAgreement
PERSON1andPERSON2areeachaPartytothisAgreementandanOwneroftheProperty;
collectivelytheywillbereferredtoasthePartiesand/orOwners.Anyonewholaterassumesthe
rightsandobligationsunderthisAgreementshallbecomeaParty.ByenteringintothisAgreement,
PERSON1assumesallrightsandobligationsofOwnerAandPERSON2assumesallrightsand
obligationsofOwnerB.AnOwnermayrefertoanindividual,anentity,oragroupofpeople,
dependingonwhoownstheProperty.Forexample,iftheCotenancyInterestofOwnerAislater
ownedbytwopeople,thosetwopeoplewillbereferredto,together,asOwnerA.

3. HowOwnersAllocateRightsandResponsibilities
AtthetimethisAgreementwasenteredinto,OwnerAandOwnerBhaveeachtakenresponsibility
fora50%shareoftheProperty.However,this50/50allocationdoesnotnecessarilygoverntheway
thatdecisionsaremade,thatthePropertyisused,howmucheachownershouldpaytowardthe
mortgage,orhowproceedswillbedividedonsale,partition,destruction,orcondemnation.The
allocationsofthoseandotherrightsandresponsibilitiesallocatedassetforthinthisAgreement.

4. CotenancyInterests
ThetotalofanOwnersownershipshareandrightsandresponsibilitieswithregardtotheProperty,
asdefinedbythisAgreement,isreferredtoasherCotenancyInterest.EachOwnersCotenancy
Interestincludes,butisnotlimitedto,herUnit,ExclusiveUseCommonAreas,andhershareofthe
CommonAreas.

5. Units,CommonAreas,andExclusiveUseCommonAreas

a. Units:

i. ThePropertyconsistsofaduplexwithtwoUnits.EachUnitconsistsoftheinteriorsurfaces
ofthejoists,studs,andbeamswithintheperimeterwalls,floors,ceilings,windows,window
frames,doors,doorframes,andtrimofsuchUnitandtheairspaceboundedbyand
containedwithinthoseinteriorsurfaces.EachUnitincludes,withoutlimitation,any
appliances,hotwaterheaters,spaceheaters,airconditioningunits,furnace,cabinetry,and
lightingfixturesinsideeachunit.AUnitdoesnotincludethoseareasandthosethingsthat
comprisetheCommonArea.

ii. OwnerAwillhavetherighttoexclusiveuseandpossessionoftheDownstairsUnit,totaling
720squarefeet,consistingofallroomsonthefirstfloor,including
________________________[moredetaileddescriptionofwhatroomsitincludes],not
includingthebasement.OwnerBwillhavetherighttoexclusiveuseandpossessionofthe
Page23of101

UpstairsUnit,totaling750squarefeet,consistingofallroomsonthetopfloor,including
__________________________[moredetaileddescriptionofwhatroomsitincludes].

b. CommonAreas:ThespacesofwhichbothOwnershavepossessionandusearereferredtoas
CommonAreas.OwnersshallbejointlyresponsibleformaintainingallCommonAreas.Each
OwnermayusetheseCommonAreasinaccordancewiththepurposesforwhichtheyare
intendedwithouthinderingtheexerciseoforencroachingupontherightsofanyotherOwners
tousethespacesforthosepurposes.CommonAreasincludeallyards,driveways,the
basement,decks,patios,walkways,roof,laundryroom,foundation,allotherexteriorportions
oftheProperty,andtheentirebuildingstructure,minustheUnits,describedabove.

c. ExclusiveUseCommonAreas:CertainportionsoftheCommonArea,referredtoasExclusive
UseCommonArea,aresetasideandallocatedfortheexclusiveuseoftheOwneroftheUnitto
whichtheyareeitherphysicallyattachedorassignedtoaUnit,asdescribedbelow.The
ExclusiveUseCommonAreaconsistsof:

i. Fixtures.Shutters,awnings,windowboxes,exteriorstairways,porches,landings,doorsteps,
exteriordoors,doorframesandhardwareincidentthereto,screensandwindows,skylights
andotherfixtures,allofwhicharedesignedtoserveasingleUnit,butlocatedoutsidethe
boundariesofsuchUnit.

ii. Pipesandwiring.Theplumbing,pipes,conduits,wires,cablesandallotherelectrical
equipmentorapparatusthataredesignedtoserveasingleUnitbutlocatedoutsidethe
boundariesofsuchUnit.

iii. Yards.Asownerofthedownstairsunit,OwnerAshallhaveexclusiveuseofthetwofoot
stripofgardenthatboardersthefrontoftheDownstairsUnitandrunsthelengthofUnitA.

iv. Decks.OwnerAshallhaveexclusiveuseofthedeckoffthebackdoorofUnitAandOwnerB
shallhaveexclusiveuseofthedeckoffthebackdoorofUnitB.

v. Parkingspaces.EachOwnershallhavetheexclusiverighttouseandenjoythatparking
spacedesignatedforthebenefitofherUnit,describedontheattachedmap.

6. UseofProperty

a. ResidentialuseofProperty:OwnersagreethattheprimaryuseofthePropertyshallbe
residential.Ownersmayoperateahomebusiness,solongasitcomplieswithzoningrules
pertainingtohomebusinesses,andsolongasitdoesnotcreateasoundnuisanceorclutterin
theCommonAreas.

b. Pets:UnlessOwnersagreeotherwise,eachOwnermaykeepnomorethantwodogsandtwo
catsontheProperty.Beforeadoptinganypets,anOwnershouldconsultwiththeotherOwner
toensurethattheotherOwnerdoesnothaveanyseriousconcerns.ThenonadoptingOwner
mayblocktheadoptingOwnerfromadoptingapetifthepethasatendencytobiteorattack,if
thepetisloudandcreatesasoundnuisance,orifitisillegaltokeepsuchananimal.AnOwner
withadogagreestocleanupafteranymessesleftbythedogintheCommonAreaandwillnot
leaveanydogsintheCommonAreaunattended,unlessallOwnersagreetoit.

Page24of101

c. Creatingacleanandreasonablyquietenvironment:OwnersagreetokeepallCommonAreas
cleanandclutterfree,andshallrespectoneanothersneedforquiet.

d. Prohibitedactivities:NopersonlivingonthePropertyshallusehazardouschemicalsincleaning
orcaringfortheCommonArea.

7. RentalandOccupancy

a. Housemates:AnOwnermayallowotherstolivewithheranddoesnotneedtoreceivethe
permissionoftheotherOwner,solongasthenumberofpeoplelivingineachunitdoesnot
exceedfour.Asacourtesy,anOwnerbringinginhousematesshallnotifytheotherOwner
beforetheproposedhousematesmovein.IftheotherOwnerfeelsresistanttoorhasworries
aboutaproposedhousemate,bothOwnersagreetositdownanddiscussanyworries,withthe
goalofmakingthearrangementworkableandcomfortableforeveryone.

b. LeasingtoThirdPartyTenants:EachOwnerisentitledtoleaseherUnittoaThirdPartyTenant,
andtoallincomederivedfromsuchalease,providedthatthefollowingrequirementsaremet:

i. ApprovalbynonleasingOwner:AnyprospectiveThirdPartyTenantissubjectto
approvalbythenonleasingOwner.ThenonleasingOwnermayreviewastandardform
rentalapplication,creditreport,andotherinformationasthenonleasingOwnermay
reasonablyrequestfromtheprospectiveTenantorleasingOwner.Thenonleasing
OwnershallquicklyrespondtorequestsforapprovalofaThirdPartyTenant,andshall
notunreasonablywithholdapprovalofaprospectivetenant.Afailurebythenonleasing
OwnertorespondwithinthreedaystoaleasingOwnersrequestforapprovalofaThird
PartyTenantshallbetreatedasapprovalbythenonleasingOwner.

ii. Leaseagreement:AnyleaseagreementwithaThirdPartyTenantshallbeinwriting,
shallincludethisagreementandanywrittenRulesasattachments,andmustincludean
agreementthattheThirdPartyTenantsshalladheretothetermsofthisTICAgreement
andtoanywrittenRulesregardingdaytodaymanagement,use,andcareofthe
Propertyasdescribedbelow.

iii. Agreementtoavoidevictingatenant:IfleasingaunittoaThirdPartyTenant,the
leasingOwneragreestonotattempttoaneviction,withoutfirstconsultingwiththe
otherOwnerandreceivingtheotherOwnerspermission.Thisisbecauseevictinga
tenantcouldnegativelyaffectthefutureapplicationsforcityapprovals,suchasfor
condoconversion.

8. DecisionmakingandHouseRules

a. Meetings:Ownersagreetomeetatleastonceperyeartoagreeonanannualoperating
budget.Thereshallbenootherrequirementforregularandformalmeetings.However,a
meetingoftheOwnersmaybecalledbyanyOwnerprovidedshegivesnoticeandaproposed
agendatotheotherOwneratleastaweekinadvance.Ownersagreetokeepawrittenrecordof
issuesdiscussedanddecisionsmaderegardingtheProperty.

b. Voting:RegardlessofthesizeandvalueofanOwnersCotenancyInterest,andregardlessofthe
numberofpeoplelivingattheProperty,OwnerAandOwnerBeachhaveonevoteindecisions
Page25of101

abouttheProperty.Thus,exceptwherethisAgreementallowsanOwnertotakeunilateral
action,alldecisionsaboutthePropertymustbeunanimous.IntheeventthatOwnerscannot
agreeaboutaPropertyrelatedissue,Ownersshalldiscussandadapttheproposalinorderto
findasolutionthatisagreeabletobothOwners.Iftheissuecannotberesolvedthrough
discussion,Ownersagreetoattendmediation(describedingreaterdetailbelow).

c. AdoptingRules:TheOwnersmay,fromtimetotime,adoptandamendwrittenRules
regardingdaytodaymanagement,use,andcareoftheProperty.SuchRulesmayconcernany
subjectormatterandshallbebindingonallOwners,theirhouseholdmembers,guests,and
tenants.

9. FinancialArrangementforPurchase
PERSON1andPERSON2purchasedthePropertyinJanuaryof2013for$460,000,ofwhicheach
agreestopayhalf.Atthetimeofthepurchase,PERSON2paidanadditional$10,000towardthe
downpayment,andPERSON1andPERSON2intendtotreatthisasaloanfromPERSON2to
PERSON1.PERSON1agreestorepaythis$10,000toPERSON2withinoneyearoftheexecutionof
thisAgreement

10. ResponsibilityforDebtontheProperty
OwnersshareresponsibilityforthePropertyrelateddebtasfollows:

a. SharedMortgage:TheprimarymortgageonthepropertyistheLocalCreditUnionmortgage
(theSharedMortgage),intheamountof$400,000.OwnerAandOwnerBshallshare
responsibilityfortheSharedMortgageinthefollowingproportions:
i. OwnerA:50%
ii. OwnerB:50%
TheportionofSharedMortgageforwhicheachOwnerisresponsiblewillbereferredtointhis
AgreementasherShareoftheOutstandingDebt.AnOwnersShareoftheOutstandingDebt
maybeadjusted,asdescribedbelow.

b. MonthlypaymentsontheSharedMortgage:EachOwnershallmakeamonthlypayment
towardtheSharedMortgageonthebasisofherShareoftheOutstandingDebt.Atthetimethat
thisAgreementisenteredinto,thetotalrequiredmonthlypaymentontheSharedMortgageis
$2,300.InaccordancewitheachOwnersShareoftheOutstandingDebt,OwnerAandOwnerB
shallmakemonthlypaymentsasfollows:
i. OwnerA:$1150
ii. OwnerB:$1150

c. AdjustmentsDuetoPrepayment:AnOwnermayprepayalloraportionofherShareof
OutstandingDebt,solongasthelenderdoesnotpenalizeprepayment.ThatOwnermay
arrangeareamortization,providedshepaysthereamortizationfee,sothatthetotalmonthly
paymentisreducedtoreflecttheprepayment.Insuchevent,theOwnersshallrecalculatetheir
SharesofOutstandingDebtandtheOwnermakingtheprepaymentwillreceivethefullbenefit
ofthemonthlypaymentreduction.

Page26of101

11. SharingCosts

a. Costssharedonanequalbasis:ExceptasotherwiseprovidedinthisAgreement,regardlessof
thenumberofpeoplelivingattheProperty,OwnerAandOwnerBshalleachberesponsiblefor
onehalfofthefollowingcosts:
i. MaintenanceandrepairsofCommonAreas
ii. Insurance
iii. Propertytaxes
iv. Trash

b. CostssharedonthebasisofthenumberofpeoplelivinginaUnit:Becausegas,electric,and
watercostsarenotseparatelymetered,Ownerswilleachpay50%ofthecostssolongaseach
Unithasanequalnumberofoccupants.IfoneUnithasonemoreoccupantthantheotherUnit,
theOwneroftheUnitwiththelargernumberofoccupantsshallpayanadditional7%ofeach
bill,andtheUnitwithfeweroccupantswillpay7%less.Thus,iftheDownstairsUnithastwo
occupantsandtheUpstairsUnithasoneoccupant,OwnerAshallpay57%ofallutilitiesbillsand
OwnerBshallpay43%.Foreachadditionaloccupant,thebillsshallbeadjustedbyanadditional
7%.

12. Insurance

a. Insurancecoverage:TheOwnershaveagreedthattheywilljointlymaintainaninsurancepolicy
thatincludespublicliabilityandreplacementcoveragefordamagetotheProperty.IfanOwner
wishestodoso,shemayobtainaseparateinsurancepolicycoveringpersonalproperty.

b. Avoidingriskyactivities:Ownersagreenottoengageinactivitiesthatcouldcreateariskor
hazardtopropertyorpersonsorthatwouldmakethePropertydifficultorexpensivetoinsure.

13. CreationofaJointBankAccountandPaymentofExpenses

a. Ownersagreetoopenajointbankaccount,andeachOwneragreestomakeafixedmonthly
depositintotheaccount.Ownersshallmeetatleastonceayeartodetermineanoperating
budgetforPropertyrelatedcosts,takingintoaccountforeseeablemaintenancecosts.Owners
shallthendeterminehowmucheachOwnershoulddepositintothejointbankaccounteach
month.ExceptwhenOwnersfrontcosts,allbillsshallbepaidfromthisbankaccount.

14. CreationofaReserveFund

a. CreationandpurposeofaReserve:Ownersagreetokeepatleast$10,000inthejointbank
accounttoserveasaReservefund.ThepurposeofcreatingaReserveisprimarilytoprotectthe
creditandassetsofOwnersintheeventthatoneOwnercannotmakeanobligatorypayment
relatedtotheProperty.IntheeventthatoneOwnerdoesnotmakeanobligatorypayment,
eitherOwnermayusetheReservetomakenecessarymortgage,tax,orinsurancepayments.
TheReservemayalsobeusedtomakeunforeseenandnecessaryrepairs,solongasallOwners
agreetosuchrepairs.

b. ContributionstoandreimbursementoftheReserve:EachOwneragreestocontribute$250per
monthtotheReserveuntiltheReservehasreached$10,000.Ownerswillkeepanaccountingof
howmucheachOwnerhascontributedtoordrawnfromtheReserve.WhenanOwnerceases
Page27of101

toowntheProperty,sheshallbereimbursedanycontributionsshemadetotheReserve,minus
hershareofanypaymentsthatweremadefromtheReserve.Ownersshallattemptto
reimbursetheReservefundassoonaspossibleaftertheReserveisusedtopayforanexpense.
IftheReservefundisusedtopayforanexpensethatwouldbedividedonsomethingotherthan
anequalbasis,OwnersshallreimbursetheReservefundaccordingly.

15. KeepingAccountsandRecords

a. Maintaininganaccountingspreadsheet:Ownersagreetomaintainanaccountingspreadsheet
documentingthefollowing:

i. HowmucheachOwnerhascontributedtothejointbankaccount,

ii. AllcostspaidfordirectlybyanOwnerandwhetherthatOwnerwasreimbursedbythe
jointbankaccount,

iii. Allpaymentsmadefromthejointbankaccount,and

iv. HoweachpaymentshouldbeallocatedamongtheOwners(forexample,mostcosts
shallbeallocatedona50/50basis,butothersmaybeunequal).

b. Householdrecordfolder:EachOwneragreestodepositindependentevidenceofallher
expendituresfortheProperty,suchascanceledchecksorreceipts,inahouseholdrecordsfolder
tobejointlymaintainedbytheOwners.Totheextentpossible,allrecordsshallbekeptcurrent
onamonthlybasis.

c. Annualreckoningofaccounts:Withinonemonthoftheendofeachaccountingyear(ending
December31),OwnersshallreckontheaccountsbydeterminingeachOwnerstotal
contributionstoPropertyrelatedexpensesandthetotalamountofPropertyrelatedexpenses
thatshouldbeallocatedtoeachOwner.IfanOwnerstotalcontributionsarelessthanthat
Ownerstotalallocationofexpenses,thatOwnershallreimbursethebankaccountforthe
difference.IfanOwnerstotalcontributionsaremorethanthatOwnerstotalallocationof
expenses,thatOwnershallbereimbursedbythebankaccountorbytheotherOwner.

16. Maintenance,Repair,Alterations,andImprovements

a. Standardsformaintenance,repair,alterations,andimprovements:BecausetheOwnersdesire
tomaintainatidyandcomfortablehomeenvironment,Ownersagreethattheywillmaintain
thePropertyingoodconditionandwillnotallowanysignificantdefectstoremainunrepaired.

b. Maintenance,repair,andimprovementinUnits:EachOwnershallbesolelyresponsiblefor
maintainingandrepairingtheinteriorofherUnit,whichincludesensuringthatfloors,walls,
ceilings,lightfixtures,andsmokedetectorsarekeptingoodcondition.AnOwnermaymake
alterationstoherUnitwithouttheotherOwnersapproval;however,ifthealterationmight
affectthestructuraloracousticintegrityofthebuilding,theOwnermustseektheother
Ownerspermission.

c. Maintenance,repair,andimprovementstoExclusiveUseCommonAreas:EachOwnermust
maintainallpartsofherExclusiveUseCommonAreas,includingutilitylines,pipes,andconduits
Page28of101

thatserveherUnitexclusively.EachOwnermustobtainpermissionfromtheOwnerpriorto
makinganysubstantialchangesorimprovementstoherExclusiveUseCommonArea,primarily
toensurethatanychangesorimprovementsfitinharmonywiththedesignofthebuildingand
exterior.TheotherOwnershallnotunreasonablywithholdconsenttoanychangesor
improvementstoanExclusiveUseCommonArea.

d. MaintenanceandrepairofCommonAreas:Ownersarejointlyresponsibleformaintenanceand
repairofCommonAreasandagreetosharethecostsofsuchrepairsona50/50basis.Theonly
exceptiontothisisintheeventthatanegligentactoromissionbyoneOwnerorthatOwners
guestortenantcausesdamagetotheProperty,andthatdamageisnotcoveredbyinsurance,
thenthatOwnershallberesponsibleformakingorpayingfortherepairs.

e. PayingfornecessarymaintenanceandrepairstoCommonAreas:Unlessanemergencyrepair
isrequired,Ownersagreetoconsultwitheachotherpriortoauthorizinganyrepairstothe
CommonAreacostingmorethan$200.If,atanytime,theOwnersdeterminethatthereare
foreseeableandexpensiverepairsthatwillbecomenecessarywithinthreeyearsofsuch
determination(suchasrooforfoundationreplacement,exteriorpainting,orplumbingorwiring
replacement),Ownersagreetocomeupwithaplanforpayingforsuchrepairs,andwillbeginto
makelargermonthlypaymentsintothejointbankaccount,inorderplanforthatexpense.

f.

ImprovementstoandalterationsofCommonAreas:Owners,bymutualconsent,maymake
improvementsandalterationstotheCommonAreas.Priortomakinganimprovementor
alteration,Ownersshallcometoanagreementabouthowtosharethecostsandlabor.Inthe
eventthatoneOwnerwishestomakeanimprovement,andtheotherOwneragreestothat
improvementbutdoesnotwanttocontributetothecost,then,recognizingthattheother
Ownercouldbenefitfinanciallyfromtheimprovement,Ownerscouldagreeinwritingtohandle
thesituationinavarietyofways,including,butnotlimitedto:

i. TheOwnerrequestingtheimprovementcouldbereimbursedbytheotherOwnerin
monthlypaymentsovertime;
ii. TheOwnerrequestingtheimprovementcouldbereimbursedbytheotherOwneratthe
timethePropertyissold,oratthetimetheotherOwnersellsherCotenancyInterest;
iii. TheOwnerscouldagreethat,atthetimethePropertyissoldinitsentiretyoratthe
timethenonimprovingOwnersellsherCotenancyInterest,theimprovementsshallbe
appraisedtodeterminetheamountbywhichtheimprovementhasraisedthefair
marketvalueofthePropertyoroftheCotenancyInterest.TheOwnerthatpaidforthe
improvementshallthenbepaidthatamountfromthesaleproceeds.Ownersshall,at
thetimeofsale,chooseanappraisertogether.ShouldOwnersbeunabletojointly
agreetoanappraiser,theneachshallhireherownappraiserandthetwoappraisals
shallbeaveraged.Toassistinfutureappraisals,Ownersshouldcarefullydocumentthe
conditionofthePropertypriortotheimprovement.

IntheeventthattheOwnersdonotagree,inwriting,toanyoftheabovemethodsofhandling
animprovementtotheCommonArea,thenthedefaultrulewillbethattheOwnermaking
improvementwillbecompensatedaccordingtotheproceduredescribedinParagraphiii.

InasituationwhereoneOwnermakesanimprovementtoaCommonAreawithoutcontribution
bytheotherOwner,Ownersshouldalsodiscussandcometoanagreementaboutwhoshould
payanypropertytaxincreasesorinsurancepolicypremiumincreasesthatcouldresultfromthe
Page29of101

improvement.Inabsenceofanagreementotherwise,thedefaultruleshallbethattheOwner
makingtheimprovementshallberesponsibleforpayinganyincreasestopropertytaxesor
insurancepremiums.

g. EffectofUnitimprovementsonpropertytaxesandinsurance:AnyOwnerthataltersherUnit
agreestobesolelyresponsibleforthepaymentofallpropertytaxincreases,insurancepolicy
premiumincreases,andallothercostsforanyinsurancepolicyorpoliciesobtainedand
maintainedbytheOwnersarisingfromsuchalterationorimprovementoftheOwnersUnit.

h. ContributionsofLabor:TheOwnersintendthattherewillbenomonetaryoradditional
ownershipcompensationforlaborexpendedbyanOwnerforordinaryrepairandmaintenance
oftheProperty,unlessOwnersagreetoitinwriting.

17. FailuretoMakePayments

a. Takingstepstoavoidmissedpayments:Ownersrecognizethatthereissignificantriskinvolved
withsharingownershipofaproperty,particularlywhentherearedebtssecuredbytheentire
property,andwhenfailuretopaybillsandtaxescouldresultinliensagainsttheentireproperty.
Asaresult,inordertoavoiddefaultonanyloanssecuredbythePropertyandanyProperty
relatedbillsandtaxes,ifoneOwnerhasfinancialdifficultiesandbecomesawarethatshemay
notbeabletomakeafullandtimelypayment,sheshallnotifytheotherOwnerassoonasshe
becomesawareofherfinancialdifficulties.ThiswillallowtheotherOwnertoplanforthe
possibilityofmakingasubstitutedpayment.

b. FailureofanOwnertomakepayments:IfanOwnerisunabletomakeanynecessarypayments
becauseofillness,disability,prolongedunemployment,orotherhardship,andifthereareno
fundsintheReservetocoversuchpayments,theotherOwnermaymakethosepaymentsinthe
nonpayingOwnersplace,foraslongasnecessaryorpossible,oraslongasthepayingOwneris
willing.TheOwnersagreethattheOwnermakingthepaymentsmaychoosethemannerand
timeframeforreimbursementfromamongthefollowingoptions:

i. TreattheadditionalpaymentsasaloantothenonpayingOwner,bearinginterestata
rateofnomorethan10%,andtreatitasalieninfavorofthepayingOwneruponthe
CotenancyInterestofthenonpayingOwner.ThepayingOwnermaydecidethetime
frameforrepaymentofthisloan,andpartiesshallputthetermsoftheloanandlien
intowriting.

ii. TheOwnersSharesoftheOutstandingDebtmaybeadjustedbasedontheamountof
paymentsmadebythepayingOwner,therebyreducingthepayingOwnersshareof
subsequentmonthlymortgagepayments.

c. Forcingasaleorbuyoutasaremedyfornonpayment:IfapayingOwnerisunableorunwilling
tocoveranonpayingOwnersshareofnecessarypayments,andthenonpayingOwneris
unabletoresumeregularpaymentswithinthreemonthsoffirstmissingpayments,thepaying
OwnermaydemandtobuythenonpayingOwnersCotenancyInterestatapricedeterminedin
accordancewithParagraph20.b.iiofthisAgreement.Intheeventofthreemonthsofmissed
paymentsbytheotherOwner,thepayingOwnermayalsodemandthatthePropertybesoldin
itsentirety.

Page30of101

18. Encumbrances
Partiesagreenottoincuranyobligationsthatwouldplacealienoranykindofencumbranceonthe
Property,unlessallOwnersagreetotheencumbrance.Intheeventthatalienorencumbranceis
placedonthePropertyasaresultofonePartysobligations,thatPartyshallbearthecostof
removingtheencumbranceorshallcompensatetheotherOwnersfortheresultingdecreasein
propertyvalue.

19. TransferringanInterestinthePropertyandFirstRightofRefusal

a. OfferingtoSelltoAnotherOwner:AnOwnermay,atanytime,offertosellherCotenancy
InteresttotheotherOwner.

b. TransfertoaThirdParty:TheOwnershaveagreedtocoowntogetherbecauseoftheir
knowledgeofandconfidenceineachother.Thus,anOwnermaytransferherinterestinthe
PropertytoaThirdPartyonlyinaccordancewiththeguidelinesprovidedinthissection.

c. LenderApprovalRequirement:AllPartiesunderstandandacknowledgethatifaCotenancy
InterestinthePropertyistransferredtoanindividualwhoisnotasignatorytothemortgage,
andsuchtransferisnotapprovedbythemortgagelender,thelendercoulddeclaretheentire
outstandingbalanceofthemortgageimmediatelydueandpayable(an"acceleration")and,in
theeventofnonpayment,initiateforeclosureoftheProperty.Accordingly,notwithstanding
anythingtothecontraryinthisAgreement,noPartyshalltransferanyinterestinthePropertyto
anindividualwhoisnotalreadyasignatorytothemortgageunless(i)thelenderapprovesthe
transferinwriting,or(ii)allPartiesagree,inwriting,toallowthetransferwithoutlender
approvalandassumetheresultingriskofaccelerationandforeclosure.IntheeventallParties
donotagreetoallowthetransferwithoutlenderapproval,eachPartyshallcooperateingood
faithinsecuringsuchapproval.Suchcooperationshallinclude,butnotbelimitedto,submitting
alldocumentationrequiredbythemortgagelender.Allchargesimposedbythemortgage
lendershallbepaidbythetransferorand/ortransferee.

d. UnrestrictedtransfersofCotenancyInterests:Subjecttothelenderapprovalrequirement
notedabove,anOwnermaytransferaCotenancyInterestwithoutotherrestrictionifthe
transfereeis(i)apersonwhoisalreadyaPartyor(ii)arevocablelivingtrustofwhichaPartyisa
beneficiary.

e. RestrictedtransferofCotenancyInterests:Subjecttothelenderapprovalrequirementnoted
above,anOwnermaytransferaCotenancyInterestasprovidedinthisSection.

i. NoticeofIntendedSale.Ifasaleisintended,thetransferringOwnershallprovidetothe
otherOwnera"NoticeofIntendedPartialSale"stating(i)theexpectedsalesprice,
terms,andconditions(includingfinancing)and(ii)theamountofsalescommission,if
any,whichshallbepaidintheeventofsalebyarealestateagent.

ii. InitialRighttoPurchase.Ifasaleisintended,thenontransferringOwnershallhavethe
righttopurchasethetransferringOwner'sinterestonthetermsandconditionsstatedin
theNoticeofIntendedPartialSale,exceptthatthepriceandthecashdownpayment
requiredshallbereducedbytheamountoftheintendedsalescommission.Thenon
transferringOwnershallexercisethisright(i)within10calendardaysofreceivingthe
NoticeofIntendedPartialSale,byprovidingNoticetothetransferringOwnerofher
Page31of101

tentativeintenttopurchase(a"NoticeofTentativeIntent")and(ii)within30calendar
daysoftheEffectiveDateoftheNoticeofTentativeIntent,byprovidingasecondNotice
tothetransferringOwnerreaffirmingherintenttopurchase(a"NoticeofFinalIntent").
TheNoticeofFinalIntentshallbebinding.IfanontransferringOwnerfailstoprovide
eitherNotice,shewaivestheInitialRighttoPurchase.

iii. AdditionalRighttoPurchase.Beforeacceptinganypurchaseoffer,thetransferring
OwnershallprovideacopyoftheoffertotheotherOwner.Iftheofferistwopercent
(2%)ormorelowerthantheoriginalexpectedsalesprice,thenontransferringOwner
shallhavetherighttopurchasethetransferringOwner'sinterestonthetermsand
conditionsstatedinthepurchaseoffer(withoutdeductionoftheintendedsales
commission).AnontransferringOwnershallexercisethisrightbypromptlyproviding
NoticetothetransferringOwnerofherintenttopurchase.ThisNoticeshallbebinding.
IfanontransferringOwnerfailstoprovidetheNoticewithin48hoursofreceivinga
copyoftheoffer,shewaivestheAdditionalRighttoPurchasewithregardtothatoffer.
Nofurtherpurchaserightsshallbecreatedasaresultofagoodfaithrenegotiationof
salepriceortermsfollowinginspectionsorotherdisclosuresrelatedtothatparticular
offer.

iv. RighttoRejectTransferee.Beforecompletinganysale,gift,orothervoluntarytransfer,
thetransferringOwnershallprovidetotheotherOwnerastatementofthefinancial
qualificationsoftheprospectivetransfereeincludingaloanapplication,creditreport,
and,inthecaseofaselfemployedperson,thetwomostrecentyears'FederalTax
Returns.ThenontransferringOwnershallhavetencalendardaysfromdeliveryofthis
informationtoprovidewrittennoticeofdisapprovaltothetransferringOwner.During
thisperiod,eachPartyshallbeentitledtocontacttheprospectivetransfereetoarrange
apersonalortelephoneinterview.Tobeconsideredvalid,thewrittennoticeof
disapprovalmust(i)bedeliveredwithintherequiredtimeframe,and(ii)statea
reasonablebasisnotprohibitedbylawforthedisapproval.Atransfershallbedeemed
approvedunlessthetransferringOwnerreceivesavalidnoticeofdisapprovalstating
thebasisfordisapprovalfromthenontransferringOwner.

f. NontransferringOwnersRighttoDemandSaleoftheEntireProperty.Intheeventthatone
OwnerwouldliketosellortransferherCotenancyInterest,andthenontransferringOwner
wouldrathernotendupcoowningthepropertywithaThirdPartyTransferee,thenon
transferringOwnermaythendemandthattheentirePropertybesoldandtheproceedsdivided
inthemannerdescribedbelow.

g. Allocatingincreasedpropertytaxesafteratransfer.TheOwnersunderstandandacknowledge
thatatransferofanyinterestinthePropertymaytriggerareassessmentoftheProperty.The
Ownersagreethatthetransfereeshouldbesolelyliablefortheamountbywhichpropertytaxes
increaseasaresultofthetransfer.

20. OtherEventsConstitutingOfferstoSelltotheOtherOwner

a. Eventstriggeringoffertosell:Upontheoccurrenceofanyoftheeventslistedbelow,such
eventshallbedeemedtoconstituteanofferbytheaffectedOwner,orherexecutor,trustee,
personalrepresentative,orsuccessorininterest,asthecasemaybe,tosellherCotenancy
InteresttotheotherOwnerataspecifiedpurchaseprice,asdescribedbelow:
Page32of101


i. Death:ThedeathoftheOwner;

ii. Bankruptcy:Thevoluntaryorinvoluntaryfilingofapetitioninbankruptcyorforthe
protectionundersimilarinsolvencylawsoranygeneralassignmentofassetsforthe
benefitsofcreditors;or

iii. Courtorderedtransferasaresultofdivorce:Theentryofafinaldecreeofdivorceor
dissolutionofmarriagethattransfersanOwnersCotenancyInteresttoanypersonnot
apartytothisAgreement.

b. Noticeandappraisal

i. Givingnoticeofaneventtriggeringoffertosell:UponanOwnersdeath,herpersonal
representativeorsuccessorininterestor,intheeventofanOwnersbankruptcyor
proposedcourtorderedsaleofhisorherinterestpursuanttoafinaldecreeofmarital
dissolution,theOwnerhimselforherself,shallgivewrittennoticetotheremaining
OwnerofsuchOwnersdemise,bankruptcy,orforcedsalepursuanttoafinaldecreeof
maritaldissolution,asthecasemaybe,andtheremainingOwnershallhavetherightto
purchasetheCotenancyInterestataspecifiedpurchaseprice,asdefinedbelow,by
givingwrittennoticetothepersonalrepresentative,successorininterest,Owner,or
trusteeinbankruptcy,asthecasemaybe,within30daysaftertheirreceiptofthe
notice.

ii. Determiningpriceofsale:Thespecifiedpurchasepriceforoccurrencesinthissection
shallbethethencurrentfairmarketvalueoftheCotenancyInterest,lesstheamountof
theSellingOwnersordeceasedOwnersShareoftheOutstandingDebtandincreased
ordecreased,asrequired,bytheamountofanyadvances,credits,orexcess
contributionsmadeandnotyetreimbursed.Ifthepartiescannotagreeonthefair
marketvalue,thenpartiesshalleitherjointlyappointanappraiserforthepurposeof
determiningthefairmarketvalueor,failingajointaction,eachseparatelydesignatean
appraiser.Inthelattercase,theaverageofthetwoappraisalsshallserveasthe
specifiedpurchaseprice.

21. SharingoflossesrelatedtotheProperty:

a. TheOwnersunderstandandacknowledgethatasaresultoffluctuatingmarketcircumstances,it
ispossiblethatthetotalindebtednessforthePropertymayexceeditsmarketvalueatsome
pointintime.IntheeventthattheOwnersarepersonallyliableforanysuchobligationorif
thereisanylossincurredbytheOwnerswithregardtotheProperty,theOwnersagreethatthat
obligationshallbebornebyallOwnersonthebasisoftheOwnersthencurrentSharesofthe
OutstandingDebt,unlessotherwiseagreeduponinwriting.

22. RefinancingtheProperty

a. Agreementtorefinance:AllOwnersmustconsenttoanyrefinanceofadebtsecuredbyalien
againsttheentireProperty.FortheSharedMortgage,refinancingexpensesshallbeallocatedto
OwnersinproportiontotheirthenexistingSharesofOutstandingDebt.

Page33of101

b. Assumableloansandfractionalfinancing:Inconnectionwiththerefinancingofanyloan
securedbytheentireProperty,theOwnersagreetomakereasonableeffortstosecurealoan
thatallowsforsubstitutionandmaybeassumablebysubsequentpurchasersofthenexisting
OwnersCotenancyInterests.Iffractionalfinancing,intheformofTICloans,isavailable,
Ownersagreetoexploreandweightheprosandconsofobtainingsuchfinancing.Althoughitis
generallymoreexpensive,fractionalfinancingwillreduceriskexposureforeachOwner,andwill
makeitmoresimpleforeachOwnertosellherUnitseparately.

23. EventsTriggeringDistributions

a. Distributionofproceedsuponsale,partition,destruction,orcondemnation:Proceedsfrom
saleoftheentireProperty,condemnation,destruction,orpartitionwillbedistributedamong
theOwnersbasedupontheRelativeValuePercentageofeachCotenancyInterest(the
calculationprocessforwhichisdescribedbelow).EachOwner'sshareofthedistributionwillbe
reducedbytheamountofherShareofOutstandingDebt,andincreasedordecreased,as
required,bytheamountofanyadvances,credits,orexcesscontributionsmadeandnotyet
reimbursed.

i. SaleofentireProperty:SaleoftheentirePropertywouldrequiretheapprovalofall
Owners.OwnersshalldistributesaleproceedsinaccordancewithSubparagraph(a.)of
thisSection.

ii. Partition:AnOwnerwishingtopartitionthePropertyshallfirstoffertosellherinterest
inthePropertytotheotherOwner,accordingtotheprovisionsofthisAgreement,and
agreestoparticipateinthemediationandarbitrationproceduressetforthinthis
Agreement.OwnersshalldistributepartitionproceedsinaccordancewithSubparagraph
(a.)ofthisSection.

iii. CondemnationandEminentDomain:Theproceedsofanycondemnationoreminent
domainproceedingshallbedistributedinaccordancewithSubparagraph(a.)ofthis
Section.

iv. Destruction:IntheeventthatthehouseisdestroyedandOwnerschoosenottorebuild,
OwnersshallshareinsuranceproceedsinaccordancewithSubparagraph(a.)ofthis
Section.Generally,OwnersshallendeavortorepairanydamagetothePropertysolong
astherepairsdonotincuranymorethan$10,000inoutofpocketexpensestoanyone
Owner.

b. CalculatingtheRelativeValuePercentageofeachCotenancyInterest:Forthepurposeof
distributionslistedabove,PartiesagreetousetheRelativeValuePercentageofeachCotenancy
Interest;thisisbecausethemarketvalueofeachCotenancyInterestmayfluctuatebasedon
improvements,maintenance,andotherfactors.TheRelativeValuePercentageswillbe
determinedbyhavingeachCotenancyInterestappraisedseparately,thendividingeach
appraisalbytotalofthetwoappraisedvalues.Forexample,ifOwnerAsCotenancyInterestis
appraisedat$400,000andOwnerBsCotenancyInterestisappraisedat$350,000,thenthe
RelativeValuePercentageswillbe53.33%and46.66%,respectively.Toensureprecisioninthis
process,Ownersmay,attherequestofeitherOwner,jointlyhiretwoseparateappraisers,each
ofwhomwillmakeadeterminationoftheRelativeValuePercentages.Ownerswillthenaverage
thetwoappraisals.
Page34of101


24. ThisAgreementShallBindFutureOwners

a. UnlessthisAgreementisterminated,thetermsoftheAgreementshallbebindingoneachof
theOwnersandherheirs,assigns,transferees,andsuccessorsininterestandshallconstitutea
covenantand/orequitableservituderunningwiththeProperty.WhenaCotenancyInterestin
thePropertyistransferred,allrightsandobligationsunderthisAgreementmustbeacceptedby
thetransferees.AnytransferofaCotenancyInterestinthisPropertyshallbevoidifthe
transfereedoesnotacceptallrightsandobligationsassociatedwiththetransferredshareofthe
Property.TransfereesmustacceptthisAgreementbysigninganaddendumagreeingtobe
boundbythetermsofthisAgreement,orbyenteringintoanewagreementwiththenon
transferringOwner,subjecttoapprovalbythenontransferringOwner.

25. ResolutionofDisputes

a. Mediation:AnyunresolvabledisputesbetweentheOwnersregardingtheuse,management,
ownership,ordispositionofthePropertyshallbesubmittedtomediation.Amediatorshallbe
chosenbybothOwners,oriftheycannotsoagree,eachOwnershallselectonepersonandthe
twoselectedpeopleshall,together,selectathirdpersontoactasmediator.Thechosen
mediatorshallconductatleastonemediationsessionperweekforthreeweeks,withboth
Ownerspresent,unlessthedisputecanberesolvedsooner.Eachsessionmustlastuptotwo
hours,unlessthedisputeisresolvedsooner.EachOwneragreestoparticipateinthemediation
ingoodfaithandmakereasonableeffortstoresolvethedisputequickly.Ifnoagreementis
reachedafterthreemediationsessions,theOwnersagreetosubmitthedisputetoarbitration
assetforthinthisAgreement.

b. Arbitration:IftheOwnersareunabletoresolvetheirdisputesbymediation,theissuesin
controversyshallbesubmittedtoanarbitratorselectedbytheOwners.IfOwnercannotagree
onanarbitrator,theyshalleachselectoneperson,andthetwopeopletogethershallchoosean
arbitrator.Thearbitratorshallbecompetenttoconductarbitrationproceedingsinconformity
toapplicableprovisionsofCalifornialaw.NoOwnersshallbeawardedattorneys'feesincurred
duringarbitrationofanydispute.

26. Indemnity

a. IfaPartybecomessubjecttoanyclaim,liability,obligation,orlossarisingfromorrelatedtothe
willfulornegligentactoromissionofanotherParty,suchotherPartyshallfullyindemnifyand
defendtheliablePartyfromallassociatedcostsandexpensesincludingattorneysfees.

27. EffectiveDate,Term,andTermination:

a. ThisAgreementiseffectiveonthedateitissignedandshallcontinuefor90yearsfromthe
effectivedate,unlesspartiesterminatetheAgreementsoonerbymutualagreement,
consolidationofthepropertyundersoleownership,saleoftheentireproperty,conversionof
thepropertytoacondominium,orpartition.

Page35of101

28. MiscellaneousProvisions

a. HeadingsandsubheadingsinthisAgreement:ThisAgreementcontainsmanyheadingsand
subheadings(inbold),whicharetheretomaketheAgreementeasiertoreadandnavigate.The
headingsandsubheadingsarenotintendedtohaveanylegaleffectorlimitthescopeor
meaningoftheprovisionscontainedinthisAgreement.
b. Pronouns:ForthesakeofbrevityandflowinthisAgreement,thephraseheorshehasbeen
abbreviatedbythewordshe,andhisorherhasbeenabbreviatedbythewordher.
c. AgreementgovernedbythelawsofCalifornia:Thevalidityandinterpretationofthis
AgreementshallbegovernedbythelawsoftheStateofCalifornia.
d. Severability:ShouldanyprovisionofthisAgreementbedeterminedtobeinvalid,theremaining
provisionsshallremaininfullforceandeffect.
e. Consultationwithattorneys:ThisAgreementhasbeendraftedwiththeassistanceofattorney
______________,whoisrepresentingPERSON1.EachOwnerhasbeengiventheopportunityto
consultwithherownseparateattorney,beforeexecutingthisAgreement.
f.

AmendingthisAgreement:ThisAgreementmaybealteredoramendedonlybywritten
agreementsignedbyallOwners.

g. MultipleoriginalsofthisAgreement:ThisAgreementmaybeexecutedinmultipleoriginals,
eachofwhichshallbeconsideredanoriginal.
Inwitnesshereof,theOwnershavesignedthisAgreementonthedateandyearsetforthnexttoeach
signature.

Dated:____________________
_______________________________
PERSON1

Dated:____________________
_______________________________

PERSON2

Attachments:

ExhibitA:AttachedasExhibitAisadrawingofthepropertywithbuildingsandfeaturesasdescribed.

Page36of101

COMMONINGREDIENTSOFCC&RS
Conditions,Covenants,andRestrictions(CC&Rs)isthenameofadetaileddocumentthatistypically
recordedinthecountypropertyrecords,andwhichdescribesacondominiumcommunitysplansforthe
managementofpropertyrightsandresponsibilities.Cohousingcommunitiesthatarestructuredas
condominiumsareusuallysubjecttoasetofrecordedCC&Rs.CC&Rsareusuallyrecordedalongwitha
CondominiumPlanthatclearmapsouttheboundariesofunitsandcommonareas.

WehavenotincludedasamplesetofCC&Rsinthishandbook,primarilybecausetheCC&Rsof
cohousingcommunitiesarenotespeciallyuniqueincomparisontotheCC&Rsoftypicalcondominium
communities.

CC&Rstypicallycoverthefollowingmatters:

1. DescriptionofProperty:Locationanddescriptionofproperty;boundariesoflandandlocation
ofbuildings.
2. Units:Descriptionoftheunitsandtheirboundaries.
3. CommonAreas:Descriptionofcommonlyownedportionsoftheproperty(CommonAreas).
4. ExclusiveUseAreas:Adescriptionoftheareasthatareownedbythegroup,butreservedfor
theuseofindividualunitowners(ExclusiveUseAreas).
5. OwnersAssociation:ProvisionsmandatingthecreationofaCondoOwnersAssociation(COA).
6. MandatoryMembership:RequirementthatunitownersbemembersintheAssociation.
7. VotingRights:Allocationofvotingrightsofunitowners.
8. AllocationofExpenses:Generaldescriptionofthehowtheassociationwillhandlefinancesand
allocateexpensesbetweenunitowners.
9. AssessmentsandEnforcement:Descriptionofhowassociationwillenforcerulesandpayments,
suchastherighttoplacealienonunitsofownerswhofailtopay.
10. Insurance:Generaldescriptionofplansforinsurance.
11. Architecture:Aframeworkforregulatinguseandarchitectureoftheproperty.
12. Maintenance:Designationofresponsibilityformaintenanceofcommonareasversusunits.
13. UseRestrictions:Restrictionsonhowthepropertymaybeused.
14. DamageandDestruction:Provisionsrelatedtothedestructionoftheproperty.
15. RightsofFirstRefusal:Rightsoffirstrefusal,tobeexercisedintheeventthananownerwants
tosellaunit.
16. Expansion:Provisionsrelatedtothepotentialtoexpandthecommunity.
17. DisputeResolution:Provisionsrequiringmediationand/orarbitrationintheresolutionof
disputes.

Page37of101

SAMPLEBYLAWSFORACOHOUSINGOWNERS
ASSOCIATION

ABOUTTHESESAMPLEBYLAWS
ThesesampleBylawsareforacondominiumassociationwhereunitsareownedbythemembersand
theland(evenunderthecondounits)andallcommonfacilitiesareownedormanagedbythe
CohousingOwnersAssociationwhichisanonprofitmutualbenefitcorporation.Theprocessfor
decisionmakingintheseBylawsisconsensus.Themanagementistobedividedintoteamsresponsible
forspecificspheresofmanagementandauthorizedtomakespecifictypesofdecisions.TheBylaws
provideforthefacilitateddevelopmentoftheAssociationsconsensusprocessandthedevelopmentof
themanagementteams.Thistoolkitincludesasampleconsensuspolicy.

Inaddition,thesebylawsarepreliminary;thatis,theyaredraftedtoaddresstheneedsofan
organizationinthefirststageofoperation.NotethatthesebylawscallforthedevelopmentofTeams,
PoliciesandProceduresthatmust,byCalifornialaw,bedevelopedandincludedinthebylaws.Itis
recommendedthatanorganizationworkwithanattorneytodevelopthesePoliciesandProceduresto
makesurethattheycomplywithlegalrequirements.Onceadopted,bylawsmustbeamendedto
includethePoliciesandProcedures.

TheseBylawsandtheconsensuspolicyaresamplesbasedonspecificcircumstancesandareforyouruse
onlyasexamples.Yourownbylaws,decisionmakingprocess,andsystemofmanagementmayturnout
tobeverydifferentfromthesesamples,basedonyourownspecificvaluesandgoals.Weemphasize
thatyourorganizationwillhaveamuchbetterchanceoflongtermsuccessifyoubeginbyestablishing
clearvalues,policiesandgoalsthatwilldeterminechoicesoforganizationalstructure,ownership,
financing,andmanagement.

BYLAWSOFTHEMOUNTAINTOPCOHOUSINGOWNERSASSOCIATION
ACaliforniaNonprofitMutualBenefitCorporation

1.
NameandLocation

ThenameofthecorporationistheMountainTopCohousingOwnersAssociation,referredtointhese
BylawsasAssociation.TheAssociationisincorporatedundertheCaliforniaNonprofitMutualBenefit
Corporationlaw.TheprincipalofficeoftheAssociationis,andshallbelocatedinSanLuisObispo
County,StateofCalifornia.

2.
PurposeoftheBylaws

ThepurposeoftheseBylawsistoprovidefortheoperationandmanagementofMountainTop
Cohousing,acondominiumdevelopmentmadeupofninememberownedresidentialunitsand
Associationownedcommonfacilities,createdundertheDavisStirlingCommonInterestDevelopment
Act,CivilCodesections13501378,anddescribedwithintheseBylaws,theMountainTopCohousing
Covenants,Conditions&Restrictions(Declaration),policies,rules,agreementsandprocedureswhich
areincorporatedintheseBylawsintheirentiretybyreferenceastheyareadoptedandamendedfrom
Page38of101

timetotime.TheBylaws,Declaration,policies,rules,agreements,andproceduresadoptedby
MountainTopCohousingshallbecollectivelyreferredtoasitsGoverningDocuments.

3.
MembershipandVotingRights

Everyownerofaunitshall,byvirtueofownership,beaMemberoftheAssociation.Forpurposesof
theseBylawsandallotherGoverningDocuments,thetermMemberappliesonlytoapersonwhoowns
orsharesownershipofaunitorunitsinMountainTopCohousing.Forpurposesofconsensus,where
thereismorethanonerecordownerofaunit,eachownerisentitledtoparticipateintheconsensus
decisionmakingprocessesasdescribedintheseBylawsandotherGoverningDocuments.Ifvotingis
usedinadecisionmakingprocessatfullMembershipmeetings,eachunitisentitledtoonevote.

4.
ThePurposeandValuesofMountainTopCohousing

ItisthepurposeofMountainTopCohousingtocreateasupportive,peaceful,healthy,sustainable,
affordable,andfriendlycommunityamongitsmembers.TheAssociationshalldeveloppolicies,rules,
agreements,andproceduresasappropriatetocarryoutthepurposesandgoalsofMountainTop
CohousingandshallmanageandoperateMountainTopCohousingaccordingtoitspurposesandgoals.
Morespecifically,thegoalsofMountainTopCohousingareto:

a. createaninterconnectedcommunitythatenrichesthedailylivesofitsMembersandthe
surroundingcommunity;
b. togovernthecommunitybasedonaprocessthatbuildscommunityandresultsindecisions
thatcanbeeffectivelyimplemented;
c. createacommunitycultureandgoverningprocessesthatincludeopportunitiesforpositive
growthandchangeforMembersandthecommunity;
d. createacultureofsharingandtosharetheCommonHouse,theCommonHousefacilities,
commonareas,andcommonlyownedpossessionsaccordingtotheagreementsandrules
fortheiruse;
e. supportandrespecttheneedsanddesiresforprivacyofMembers;
f. provideasecureandsafeenvironmentforresidentsandespeciallyforchildren;
g. createandmaintainenvironmentalandeconomicsustainabilitytotheextentpossible;
h. provideandmaintainaffordablehousingformembers;
i. supportnonviolenceandengageinnonviolentcommunication;
j. supportandencourageactivitiesthatcreatehealthandhappiness;
k. encouragepositiveinvolvementinthesurroundingcommunity;and
l. includeopenspacesandfacilitiesdedicatedtogardening,gathering,personalandcultural
enrichment,play,andrecreation.

5.
ApplicationoftheBylaws

TheseBylawsandthedocumentsincorporatedintothembyreference,includingtheMountainTop
CohousingDeclarationandgoverningpolicies,rules,agreements,andproceduresastheyeachare
adoptedandmaybeamendedfromtimetotimetocarryoutthepoliciesandgoalsoftheAssociation,
applytotheentirecondominiumdevelopmentasdescribedintheDeclarationincludingallseparately
ownedunitsandcommonlyownedland,structures,andfacilities.TheseBylawsandotherincorporated
GoverningDocumentsapplytoallpresentandfutureownersofeachunit,mortgageesandother
encumbrances,lessees,tenants,licensees,andalloccupantsofunitsforanylengthoftimeandtheir
Page39of101

guestsandemployees,andanyotherpersonwhomaybepresentonthepremisesorusetheMountain
TopCohousingfacilities.

6.
AssociationDutiesandResponsibilities

TheAssociationshall:

a. maintainallcommonareasandfacilitiesingoodorder;
b. maintaininsuranceasrequiredbytheDeclaration;
c. fix,levy,collectandenforceassessmentsassetforthintheDeclarationandasneededto
payforallbudgetedexpenses;
d. enforcetheseBylaws,theDeclarationandallotherGoverningDocumentsincluding
governingpolicies,rules,agreements,andprocedures;
e. keepadequateandcorrectbooksandrecordsofaccount,minutesofMembersMeetings
andteamMeetings,andacurrentlistofallnamesandcontactinformationofallMembers;
f. keepthecompleterecordofalltheAssociationsactionsandaffairs;
g. contractforgoodsandservicesasprovidedintheDeclaration;and
h. defendtheAssociationasneededincourt.

7.
OrganizationalStructureofOperationsandManagement

TheoperationsandmanagementofMountainTopCohousingwillbeconductedbasedondecision
makingspheresasdescribedbythepracticeofsociocracyand/orbytheOccidentalArtsandEcology
Center/SowingCircleCommunityModel,asapplicable.TheAssociationwillhire,andMemberswill
workwith,aconsultanttodevelopandmanageappropriatedecisionmakingspheres,TeamProcedures,
andaclearDecisionMakingChart.Decisionmakingsphereswilloperateasteamstooverseespecific
areasofoperationandmanagementandwillbemadeupofMembersresponsibleforcarryingoutthe
daytodaydecisionstheymakeandproposingimportantdecisionstobemadebyallMembers,as
describedintheTeamProceduresandDecisionMakingChart.TheDecisionMakingChartandTeam
ProceduresastheymayfromtimetotimebeamendedbytheMembershipareincorporatedinthese
Bylawsbyreference.

8.
Governance

8.1 ConsensusDecisionMakingProcess.Tocarryoutthegoalofgovernancestatedabovein
section4.(b),itistheintentoftheAssociationMemberstogoverntheAssociationbased
onaconsensusdecisionmakingprocesswhichshallbedevelopedandadoptedbythe
Membershipandwhichmaybeamendedfromtimetotimetofurtherthevaluesand
goalsofMountainTopCohousingandtheAssociation.Theconsensusprocessthatis
adoptedshallincludeaneffectivemethodofgoverningtheuseofblockstodecisions
andthismethodshallprovide,amongotherthings,anexplanationofwhatconstitutes
inappropriateblocksandthemethodthatwillbeusedtodeterand/orprevent
inappropriateblocks.

8.2 CommunicationsandConsensusTraining.ImmediatelyafterestablishingtheAssociation
andnolaterthantwomonthsafterestablishingtheAssociation,allMembersshall
participateintrainingincommunicationsandtheconsensusprocessprovidedbya
professionalconsultanttobehiredbytheAssociation.

Page40of101

8.3

8.4

9.

DevelopmentandAdoptionofConsensusProcess.Thetrainingincommunicationsand
consensusprocessdescribedaboveshallincludeconsultantfacilitationofdevelopmentof
theMountainTopConsensusPoliciesandProcedurestobeusedbytheAssociationand
shallculminateintheadoptionoftheConsensusPoliciesandProcedureswhichare
incorporated,asamendedfromtimetotime,intheseBylawsbyreference.
Developmentandadoptionofcommunicationspolicy.Thetrainingincommunications
andconsensusprocessdescribedaboveshallincludeconsultantfacilitationof
developmentoftheMountainTopCommunicationsPoliciesandProcedurestobeusedby
theMembersinrelationtoAssociationmattersandshallculminateintheadoptionofthe
CommunicationsPoliciesandProcedureswhichareincorporatedasamendedfromtime
totimeintheseBylawsbyreference.

BoardofDirectors

9.1 MembersoftheBoardofDirectors.AllMembersoftheMountainTopCohousing
AssociationshallbeontheAssociationBoardofDirectors.ThenumberofDirectorswill
bedeterminedbythenumberofMembersintheAssociation.

9.2 DirectorsReferredtoasMembers.SinceallMembersoftheAssociationareDirectorson
theAssociationBoardofDirectors,MembersandDirectorsareoneandthesameandwill
bereferredtointheseBylawsasMembersandtheBoardofDirectorsshallbereferredto
asMembership.

9.3 MeetingsoftheBoardofDirectors.SinceallMembersoftheAssociationareDirectorsof
theAssociationBoardofDirectors,allmeetingsoftheBoardwillbemeetingsofthe
MembershipandarereferredtointheseBylawsasMembershipMeetings.

9.4 ResponsibilityoftheMembership.TheactivitiesandaffairsofMountainTopCohousing
andtheAssociationshallbeconductedandallcorporatepowersshallbeexercisedbythe
Membership.TheMembershiphastheultimateresponsibilityfordirectingtheaffairsof
theAssociationandofMountainTopCohousing.

9.5 PowersandDuties.TheMembershiphastheauthorityanddutytoadoptgoverning
policies,rules,agreements,andprocedures;overseeandreviewtheadministrationofthe
Associationsaffairs;enforcetheseBylaws,theDeclarationandalladoptedgoverning
policies,rules,agreements,andprocedures;levyandcollectassessments;andimpose
fines.

9.6 DelegationofAuthorityandDuty.TheMembershipwilldelegatetheresponsibilityfor
specificelementsofMountainTopCohousingandtheAssociationtoMemberteams
whichwillhavespecificallydefineddutiesandspheresofdecisionmakingauthorityas
limitedbyCorporationsCodesection7212andasdescribedintheTeamProceduresand
DecisionMakingChart,includedintheseBylawsbyreferenceastheymaybeamended
fromtimetotime.

9.7 BudgetTeam.TheMembershipshallappointaninitialBudgetTeamwhichshalldevelop
theBudgetProceduresandpresenttheBudgetProcedurestotheMembershipforreview,
potentialamendment,andadoption.Onceadopted,theBudgetProceduresasamended
Page41of101

fromtimetotimeshallbeincludedintheseBylawsbyreference.Atthebeginningofeach
fiscalyearataMembershipMeetingtheMembersshallappointabudgetteamwhich
shalldevelopabudgetforfollowingfiscalyearinaccordancewiththeBudgetProcedures.
TheproposedbudgetwillbedistributedtoallMembersandpresentedataMembership
meetingatleast60daysbeforethebeginningofthenextfiscalyear.

10.

Chairperson,Secretary,andTreasurer

10.1 Officers.ThepositionsofSecretary,Treasurer,andChairpersonshallbefilledby
consensusoftheMembershipandshallbeheldforoneyear.

10.2 Chairperson.TheChairpersonshallberesponsibleformanagingarotationsystemfor
meetingfacilitators.TheChairpersonshallalsoberesponsibleforsigningcertain
documentsandchecksfortheAssociation,asprovidedinParagraph20.Anyother
responsibilitiesoftheChairpersonshallbedeterminedbytheMembershipbyconsensus.

10.3 DutiesofSecretary.TheSecretaryshall,amongotherthings,keeptheminutesof
MembershipmeetingsincludingarecordofdecisionsmadeatMembersmeetings,shall
servenoticesofSpecialMembermeetings,shallpostnoticesofmeetingsontheCommon
Housebulletinboard,andshallkeeppastandcurrentrecords,includingbutnotlimitedto
alistofcurrentMembersbasedonrecordedownershipofunitsandtheircontact
information.TheSecretaryshallalsoberesponsibleforsigningcertaindocumentsand
checksfortheAssociation,asprovidedinParagraph20.

10.4 DutiesofTreasurer.TheTreasurershallreceiveanddepositinappropriatebankaccounts
allmoniesoftheAssociationanddisbursefundsasdirectedbytheMembers,shallcosign
allchecksandpromissorynotesoftheAssociation,shallkeepproperbooksofaccountor
causethemtobekept,andshallassistinorcausethepreparationanddistributionofthe
financialstatementsoftheAssociation.TheTreasurershallalsoberesponsibleforsigning
certaindocumentsandchecksfortheAssociation,asprovidedinParagraph20.

10.5 ResignationandRemoval.TheChairperson,Secretary,andTreasurermayresignatany
timebywrittennoticeandmayberemovedatanytimewithorwithoutcausebythe
Membershipbywrittennotice.

11.
MembershipMeetings

11.1 RegularMembershipMeetings.TheMemberswillhaveregularMembershipmeetings
onceamonthonthethirdWednesdayofeverymonth.

11.2 NoticeandPlaceofRegularMembershipMeetings.Noticeofthedayofthemonthon
whichregularmonthlyMembershipmeetingswillbeheldwillbegivenatthebeginningof
eachfiscalyear.Noticeoftheday,time,andlocationofeachmonthsRegular
MembershipMeetingwillbepostedatalltimesontheCommonHousebulletinboard.

11.3 SpecialMembershipMeetings.TheSecretaryshallcallaspecialmeetingofthe
Membershipifdirectedtodosobyapetitionstatingthepurposeofthemeetingand
signedbynotlessthanthirtypercent(30%)oftheMembers.Thenoticeofanyspecial
meetingshallstatethepurpose,date,time,andplaceofthemeeting.Nobusinessshallbe
Page42of101

transactedandnodecisionsshallbemadeataspecialmeetingexceptasstatedinthe
notice.

11.4 NoticeofSpecialMembershipMeetings.Noticeofthepurpose,date,time,andplaceof
aspecialmeetingshallbedeliveredbytheSecretaryandshallbedeliveredatleastten
daysbeforethespecialmeetingtoeachresidencebymailorbyphone,emailorother
methodthatisagreedtoinwritingbytheMembership.Ifnoticeisbymail,deliveryis
whenthenoticeismailed.NoticeofanyspecialMembershipMeetingshallbe
immediatelypostedontheCommonHousebulletinboardandmaintainedthereuntilthe
meetingisover.NoticeofaspecialMembershipMeetingmaybewaivedinwritingbefore
orafterthemeeting,byconsenttoholdingthemeeting,orbyapprovalofthemeeting
minutesandisdeemedtobewaivedbyattendanceatthemeeting.

11.5 EmergencyMembershipMeetings.AnemergencyMembershipMeetingmaybecalledby
anyMemberwheretherearecircumstancesthatrequireimmediateattentionand/or
actiontoprotectthewelfareofaMember,Members,MountainTopCohousing,orthe
Association,andwhichofnecessitymakeitunreasonableorimpossibletotakethetime
toprovidethenoticesrequiredforspecialMembershipMeetings.

11.6 Quorum.Aquorumis50%oftheMembership.IfanyMembershipMeetingdoesnot
haveaquorumpresentoriftheMemberspresentagreethatadditionalMembersshould
bepresentforthemeeting,theMemberswhoarepresentmayadjournthemeetingtoa
timenotlessthanfortyeighthoursfromthetimetheoriginalmeetingwascalled.
ImmediatenotificationshallbegiventoallMembers.

12.

FinancialandReportingRequirements

TheAssociationshallcarryoutthefinancialandreportingrequirementsinaccordancewith
CivilCode1365through1365.6.

13.
Assessments

13.1 AnnualMembershipBudgetMeeting.Memberswillattendandparticipateinanannual
Membershipbudgetmeetingwhichwillbeheldatleast60daysbeforethebeginningof
thenextfiscalyear,atwhichthebudgetforthenextfiscalyearasproposedbythebudget
teamwillbediscussed,andatwhichabudgetwillbeapproved.ThisMembershipbudget
meetingmaybecontinuedasneeded.

13.2 BasisforRegularAssessment.Regularannualassessmentswillbebasedonthebudget
approvedbytheMembershipforthatyearandshallbebilledtotheownerorownersof
eachunitforthenextfiscalyear.

13.3 NoticeofAssessmentandTimeforPayment.Atthebeginningofeachfiscalyear,the
TreasurershallnotifyeachMemberoftheamountoftheregularmonthlyassessmentdue
forthatyear.EachMemberisresponsibleforpaymentofhis/her/theirassessmentonthe
firstofeverymonthwithoutadditionalnotice.AMembermaypayextrapaymentsorthe
fullremainingamountdueoftheannualassessmentatanytime.

Page43of101

13.4 SpecialAssessments.IftheMembersdecideataMembershipMeetingthattheamount
tobecollectedfromregularassessmentswillnotbeadequatetopaytheexpensesfor
thatfiscalyearduetounanticipatedcostsorforanyotherreason,theMembersmay,ata
noticedMembershipMeeting,setanamountconsistentwiththeneededamountfor
specialassessment.Thespecialassessmentshallbepaideithermonthlyorinalumpsum,
thesameastheregularassessment,unlesstheMembershipdecidesthatitisnecessaryto
payinalumpsumorinanyotherway.

13.5 InterestonUnpaidAssessments.Interestof10%maybepayableonanyportionofan
assessmentifunpaidwithin30daysoftheassessmentduedate.

13.6 EnforcementofAssessmentDue.Enforcementofanassessmentduemaybebycivilsuit
toobtainapersonaljudgmentand/orbylienonthedebtorsunit.

14.
ConflictResolution

TheMembershipshallappointmembersofaConflictResolutionTeam.TheMembersofthisteammay
changefromtimetotimeasneeded.ThisTeamshallprovideconflictresolutionamongMembersand
betweenMembersandtheAssociationand/orMembership,andshallprovideInitialConflictResolution
MeetingswithMembersrelatedtoenforcementofBylaws,theDeclarationandotherpolicies,rules,
agreements,andproceduresasdiscussedbelow.AconsultantshallbehiredbytheAssociationas
neededtotraintheConflictResolutionTeamMembersinconflictresolution.

15.
EnforcementofGoverningDocuments

15.1 EnforcementofGoverningDocuments.TheAssociation,throughitsMembership,shall
enforcetheseBylawsanditsDeclaration,policies,rules,agreements,andprocedures.Itis
understoodthattheAssociationhasthedutytoenforceitsGoverningDocumentsand,if
theAssociationfailstoenforce,aMembermaytakejudicialactiontocompelthe
AssociationtoenforcetheGoverningDocuments.

15.2 Remedies.EnforcementofGoverningDocumentsshallincludealawsuitforinjunction,
fines,andsuspensionofprivilegesincludingsuspensionfromparticipationinteams,
suspensionfromparticipationinanydecisionmakingprocess,andsuspensionfromthe
useofcommonareasandfacilitiesasallowedbylaw.Enforcementmaynotinclude
suspensionfromattendanceofmeetingsorsuspensionfromfreeaccesstoanduseofa
Membersunitand/orparcelconsistentwithlawandallGoverningDocuments.

15.3 EnforcementTeam.TheMembershipshallappointanEnforcementTeamnolaterthan
twomonthsafterincorporationoftheAssociation.TheEnforcementTeamshalldevelop
EnforcementPoliciesandProcedures.ThePoliciesandProceduresshallincludeliens,
suspensionofprivileges,fines,moneyjudgments,injunctions,impositionoflatecharges
fordelinquentassessmentsandfines,paymentplansfordelinquentassessmentsand
fines,andnoticeofanownersrighttodisputeadelinquency,tointernaldispute
resolutionandtoalternativedisputeresolution.TheEnforcementTeamshalldevelopa
specificFinePolicyandFineScheduleasdescribedbelow.AfteradoptionofthePolicyand
Schedule,theFinePolicyTeamshallberesponsibleformonitoringtheeffectivenessofthe
adoptedFinePolicyandFineScheduleandshallassesstheneedforandpropose
appropriateamendmentsasneeded.
Page44of101


16.

ConflictResolutionProcess

16.1 NoticeofIntenttoEnforceandofInitialConflictResolutionMeeting.Unlessotherwise
providedinParagraph18orunlesstheviolatingmemberrefusestoparticipateinthe
conflictresolutionprocess,priortoinitiatingtheuseofanyremediesdescribedin
Paragraph15.2,includingimpositionoffines,theAssociationmustusetheConflict
ResolutionProcessdescribedintheseBylaws.Immediatelyafteraviolationoccursoris
knowntotheMembership,theSecretaryshallprovidea)noticetotheMember,Members
and,whereapplicable,rentersoftheAssociationsintenttoenforcenotsoonerthan30
daysofthenotice,andb)noticeofanInitialConflictResolutionMeetingoftheConflict
ResolutionTeamasdescribedbelow.

16.2 InitialConflictResolutionMeetingwithConflictResolutionTeam.AnInitialConflict
ResolutionMeetingofaMemberandtheConflictResolutionTeammayberequestedby
theMemberornoticedbytheAssociationSecretary.Themeetingmustberequestedin
writing.Oncerequested,theAssociationmustimmediatelyschedulethemeeting,which
mustoccuratleastwithin20daysoftherequestandmorepromptlyifthecircumstances
showanurgentneedforfasterresolution.

16.3 PurposeoftheInitialConflictResolutionMeeting.ThepurposesoftheInitialConflict
ResolutionMeetingshallbetounderstandandclarifythecircumstancesandthepositions
oftheMemberandtheAssociation,resolveanyconflictifpossible,andattempttocorrect
aviolation,ifpossible,orstopitfromcontinuing.Thismeetingmustbenoticedas
describedbelow.Theteammustreporttheresultsofthismeetingtothefull
Membership.

16.4 RequiredParticipation.IftheInitialConflictResolutionMeetingisrequestedbya
Member,theConflictResolutionTeamisrequiredtoparticipate.IftheInitialConflict
ResolutionMeetingisrequestedbytheAssociation,theMemberisnotrequiredto
participate.

16.5 NoFeeforInitialConflictResolutionMeeting.AMemberoftheAssociationshallnotbe
chargedafeetoparticipateinthisprocess.

16.6 NoticeofInitialConflictResolutionMeeting.Nomatterwhocallsthemeeting,any
meetingoftheConflictResolutionTeamorthefullMembershiptodiscussenforcementor
disciplineofanyMembershallbenoticed.TheSecretarymustgivetheMembernotice10
daysbeforethemeetinginwritingandmusteitherdeliverthenoticepersonallyorbyU.S.
mailorbyothermethodestablishedbytheMembershipinwriting.Thenoticemust
includethedate,time,andplaceofthemeeting,mustexplaintheviolationthatis
claimed,andmustlettheMemberknowthatheorshehastherighttoattendthe
meetingandtotalkwiththeMembershipabouttheallegation.

16.7 AdditionalConflictResolutionMeetings.IftheMemberparticipatesinanInitialConflict
ResolutionMeetingandthedisputeisnotresolvedbyagreementofboththeMember
andtheConflictResolutionTeam,then,ifappropriateinrelationtotheurgencyfor
resolution,theConflictResolutionTeamandtheMembermaymeetuptotwomoretimes
within30daysoftheNoticeofInitialConflictResolutionMeeting.
Page45of101


16.8 UnresolvedConflict.Ifthisprocessdoesnotresultinendingtheviolationand/orprovide
aremedyforharmsdonewithinthe30dayperioddescribedinParagraph16.1,orifthe
MemberdoesnotparticipateintheConflictResolutionProcess,thentheAssociationmust
usetheremediesdescribedinParagraph15.2toenforcethetermsoftheseBylawsandits
Declaration,policies,rules,agreements,andprocedures.Atameetingnoticedas
describedinParagraph16.8,theMembershipshalldecidetheremedytobeimposed.The
Membershallnotparticipateinanydecisionmakingprocessesrelatedtoenforcement.

16.9 ResolvedConflict.IftheMemberparticipatesinthisprocessandaresolutionisreached
thatisnotinconflictwiththelawortheAssociationsGoverningDocuments,the
resolutionshallbeputintowritingandsignedbytheparties,andshallbindtheparties
andbeenforceableincourt.

17.

Waivers.

WaiverofenforcementoftermsoftheGoverningDocumentsmaybegrantedbytheMembership
withoutbiasandwhereitisdeterminedthatawaiverisinthebestinterestofMountainTopCohousing
and/ortheAssociation.TheMembershipunderstandsthatfailuretoenforceatermofitsGoverning
DocumentsortheimpropergrantingofwaiverscouldresultintheAssociationslossofitsrightto
enforcethatterm.

18.
ImmediateEnforcementofGoverningDocuments

Enforcement,asallowedbylawandtheseBylawsandotherGoverningDocuments,includingimposition
offines,suitforinjunctionand/orsuspensionsasdescribedintheseBylaws,shallbeimmediatewhere
anyviolationhascaused,iscausing,orcouldcauseseriousharmorinjurytopeople,property,orthe
environment,asdeterminedbytheConflictResolutionTeam.Insuchacase,itshallnotbea
requirementtousetheConflictResolutionsProcesspriortoinitiatingenforcement.

19.
EnforcementofGoverningDocuments:Fines

19.1 FinePolicyTeam.TheMembershipshallappointaFinePolicyTeamwhichwillbe
responsiblefordeveloping,andamendingasneeded,aproposedFinePolicyanda
proposedFineSchedule.AfteradoptionofthePolicyandSchedule,theFinePolicyTeam
shallberesponsibleformonitoringtheeffectivenessoftheadoptedFinePolicyandFine
Scheduleandshallassesstheneedforandproposeappropriateamendmentsasneeded.

19.2 FinePolicy.ThefinesintheFinePolicyshallbereasonableandtheamountoffinesshall
besettodeterviolationofMountainTopCohousingsGoverningDocuments.

19.3 ReviewandAdoptionofFinePolicyandFineSchedule.BeforetheFinePolicyandFine
Scheduleareadopted,theAssociationmustsendadraftoftheproposedPolicyand
ScheduletotheMembershipfor30daysofreview,afterwhichaMembershipMeeting
willbeheldtodiscuss,amendasnecessary,andadoptaFinePolicyandFineSchedule.

19.4 NoticeofFinePolicy,FineScheduleandFine.TheFinePolicyandFineScheduleshallbe
providedtoallMembersatthebeginningofeachyearandshallbepostedatalltimeson
theCommonHousebulletinboard.Beforefining,theSecretaryshallprovidenoticeof
Page46of101

intenttoenforceandnoticeofinitialconflictresolutionmeeting,asdescribedinSection
16.

20.

FiscalYear

ThefiscalyearfortheMountainTopCohousingAssociationshallbethecalendaryear,beginningon
January1andendingonDecember31.

21.
AvailabilityofDocuments

AllAssociationandMountainTopCohousingdocumentsshall,asstatedabove,bekeptbythe
AssociationSecretarywhoshallmakealldocumentsavailableforreviewbyallMembersbyappointment.

22.
ExecutionofDocuments.

Allagreements,contracts,deeds,leases,checks,andotherinstrumentstobeexecutedonbehalfofthe
Associationshallbesignedbytwoofthefollowingofficers:theChairperson,Secretary,and/or
Treasurer.Innoeventshallanysuchdocumentbesignedbyonlyonepersonunlessadecisionhasbeen
adoptedbytheMembershiptoallowthesigningofcertaindocumentsorofchecksunderacertain
amount.

23.
GoodFaithActions

WhenmakingdecisionsandactingfortheAssociation,Membersunderstandthatitistheir
dutytoactingoodfaithinthebestinterestofMountainTopCohousingandtheAssociation.

24.
ContributionsofTime,Labor,andServices

24.1 ServicestotheAssociationonVolunteerBasis.Allserviceonteams,service
asChairperson,Secretary,andTreasurer,andserviceasfacilitatorofany
processormeeting,andanyotherservicetoMountainTopCohousingshallbe
onavolunteerbasiswithoutpay,unlessotherwisedecidedbythe
Membership.

24.2 ContributionsofTime,Labor,andServices.TheMembersoftheAssociation
agreetocontributetheirtime,labor,andservicestothebenefitofMountain
TopCohousingasdescribedintheMountainTopCohousingCommunity
ServicePolicyandRuleswhichisincludedintheseBylawsasamendedfrom
timetotime.

24.3 CommunityServiceandMaintenanceTeam.TheMembershipshallappointa
CommunityServiceandMaintenanceTeamwhichwilldeveloptheMountain
TopCohousingCommunityServicePolicyandRulesforreview,amendment,
andadoptionbytheMembership.

25.
Pets

25.1 PetPolicy.PetsmaybekeptinaccordancewiththeMountainTopCohousing
PetPolicywhich,whenadopted,willbeincludedbyreferenceintheseBylaws
Page47of101

asamendedfromtimetotime.Thepetpolicyshallincludelimitsonthetype,
size,andnumberofpetsallowedatMountainTopCohousing,andshallset
rulesabouttheenclosureandbehaviorofanimals.

25.2 PetPolicyTeam.TheMembershipshallappointaPetPolicyTeamwhichwill
developtheMountainTopCohousingPetPolicyandRulesforreview,
amendment,andadoptionbytheMembership.ThePetPolicyTeamshallbe
responsibleformonitoringtheeffectivenessofthePetPolicy,developing
appropriateamendmentsforreviewbytheMembership,andformonitoring
complianceandtheneedforenforcementofthePetPolicyandRules.
ViolationsofthePetPolicyandRulesmaybereportedtotheMembershipby
anyMember.

26.

Amendments.

TheseBylawsmaybeamendedataproperlynoticedMembershipmeetingbyaconsensusofthe
membershipasdescribedintheAssociationsConsensusPolicy.

27.
Indemnification

TheMountainTopCohousingAssociationshallindemnifyallMembersintheirstatusofdirectorsand/or
officersandanypersonwhoisorwasanemployeeoragentofMountainTopCohousingAssociation
(CorporationsCodesection7237)tothefullestextentpermittedandsubjecttoanylimitationsimposed
bytheCaliforniaCorporationsCodesection7237.Inaddition,theMembersoftheAssociationareand
shallbeentitledtothebenefitsdescribedintheMountainTopCohousingDeclarationofCovenants,
Conditions&Restrictionsandsection1365.7oftheCaliforniaCivilCodebothofwhichlimittheliability
ofdirectorsandofficers.

Page48of101

SAMPLECONSENSUSPROCESSPOLICY
byTreeBressen
(ReprintedfromPracticingLawintheSharingEconomy,byJanelleOrsi,ABABooks2012).

TreeBressenservesawidevarietyofgroupsonagifteconomybasis,offeringskilledfacilitation,
dynamicworkshops,andelegantprocessdesign.www.treegroup.info

Thefollowingisasamplepolicyoutliningaconsensusdecisionmakingprocessthatmaybeusefulto
drawon.Thislevelofdetailwouldtypicallyappearinapolicydocumentratherthanbylaws,sothatit
canbemoreeasilymodifiedasagroupevolves.Often,anorganizationsbylawswillmakereferencetoa
separateconsensuspolicy,andrequirethatdecisionsbemadeinaccordancewiththepolicy.An
electroniccopyofthispolicyandanaccompanyingarticlebyTreeBressenisavailableat:
http://treegroup.info/topics/consensusinsharinglaw.pdf

Introduction
Consensusisacooperativeprocessinwhichgroupmembersdevelopandagreetosupportadecisionin
thebestinterestofthewhole.Itembracesindividualperspectives,honoringeachpersonspieceofthe
truth,whileemphasizingthesenseofthemeetingthroughacreativesearchforunity.Bychoosingto
useconsensusasourprimarydecisionmakingmethod,werecognizethatwearepledgingtodothe
hard,patientworkofbringingourbestselvesforwardandlisteningfromtheheart.Weencourage
participantstoshareideas,feelings,needs,andconcerns,inaspiritofhonesty,kindness,andmutual
respect,givingallviewpointsafairhearing.Werecognizewearesometimescalledtoacceptwithgood
graceadecisionofthemeetingwithwhichwearenotentirelyinagreement.Weaffirmourwillingness
tolistenwithanopenmindtothetruthsofothers,andtoworkingoodfaithtowarddecisionsthat
reflectthewholegroupintentionandserveitsgreatestgood.

AgendaPlanning
Itemstobeconsideredforthemonthlymeetingagendaareexpectedtobereceivedbytheagenda
planner(s)nolaterthan10daysbeforethemeeting,includinganyassociateddocumentation.Agenda
plannersaimtopublishtheproposedagenda57daysbeforethemeeting,alongwiththebackground
materials(reports,research,surveyresults,proposals,etc.).Membersareaskedtopleasereadthisand
comepreparedtodiscusstheissues.
Thereareoftenmorepotentialitemsfortheagendathantimeinthemeeting.Wesupportour
agendaplannersinprioritizing,recognizingthatthegroupusuallyfindsitmoresatisfyingtodoa
thoroughjobonafewitemsthantotakeaquickpassatmany.Agendaplannersmayalsoassist
membersinfindingalternatewaystoaddressissueswithouttakingfullgrouptime.Theplannermakes
suretherearefacilitatorsandminutetakerssignedupforeachmeeting,aswellasthenextagenda
planner.
Everyplenaryagendaincludestimeatthebeginningforshortpersonalcheckinsandgroup
confirmationandapprovaloftheagenda;atleastonebreak;andtimeattheendforevaluationsand
appreciations.Eachitemontheagendaisassignedatimeallocationandlabeledwithacleargoal,such
as:Information,Discussion,orDecision.
Weusethefollowingmatrixindeterminingwhetheranitemcomesfirstasanissuediscussion
oranofficialproposal:

Page49of101

Is the issue . . .

SIMPLE

COMPLEX

Proposal may pass with


relative ease.

Likely send to committee for


main work.

Might be ok to start with


proposal, and might take a
few more meetings, possibly
with committee work in
between.

Start with issue discussion


not proposal, and expect it to
take a series of meetings,
almost always with
committee or individual work
in between.

SMALL

LARGE

FacilitatorRoles

Weaskeveryonepresenttoshareresponsibilityforcreatingaconstructiveconversation.Our
facilitatorstakespecialresponsibilitytosupportusbymanagingourmeetingprocesssotherestofus
canfocusonthecontent.Thefacilitatoractsasaservantofthegroup.Inordertodothis,facilitators
needtoremainasneutralaspossibleinword,deed,andappearanceandavoidstatingorimplying
youropinionontheagendaitemsinthemeeting.Thisincludesnotbeingtheofficialpresenterofany
itemsatthemeetingyouarefacilitating,andfindingareplacementfacilitatorifsomethinggetsputonto
theagendathatyouhaveespeciallystrongfeelingsabout.Ifatanytimeyourneutralitybecomesan
issue(foryoupersonallyorinsomeoneelsesperception),yourcofacilitatorandtherestoftheteam
cansupportyoubysteppinginandgivingyouabreak.
Thefacilitatorjobincludesworkingwiththeagendaplanner(s)beforehand.Eachmeetinghasa
leadfacilitatorandanassistantfacilitator,whosignupaheadoftimeandtogetherdecidehowto
handlethejob.Theymayrecruitadditionalassistanceifneededtocoverallthework,whichincludes:

Contactingpresenterstodiscussformatandhowtheitemmayunfoldatthemeeting
Gettingtheroomready,includingsettingupchairs,flipchart,markers,andtape
Postingagendaclearlysoeveryonecanreadit
Welcomingthegroupandopeningthemeeting
Makingitclearwhichstepoftheprocessweareonwhen
Keepingstackanddecidingwhospeaksinwhatorder,includingensuringthatquietervoices
areheard
Doingreflectivelisteningtoindividualparticipants,especiallythoseholdingconcerns
Weavingandsummarizinginputtothemeeting
Scribingcommentsandlistsontotheflipchart
Suggestingformats,light&livelyexercises,orbreakstohelpimprovetheenergy
Takingtemperaturechecksifneededtogetfeedbackfromthegroup
Vibeswatching,thatis,keepinganeyeoutforemotionaldynamicsandresponding
appropriately
Runningthecallforconsensusoneachitemthatreachesthedecisionpoint
Ensuringthatextraneousissueswhicharisemidmeetingandgetputontothebikerackmake
itontotheagendalistafterwardtogetconsideredforfuturemeetings
Timekeeping

Page50of101

Wetrytohaveatleastsixfacilitatorsontheteamatanygiventime,servingstaggeredterms,andto
pairupmoreandlessexperiencedfacilitatorssothatnewcomersgetsupporttostepup.

StepsoftheConsensusProcess
Eachitemrequiringadecisiongoesthroughthefollowingsteps.Someitemsmaynotneedadecision,
inwhichcasetheymightnotgothroughthefullsequence.Weexpectsubstantiveitemstotake
multiplemeetings,inwhichcasewestarteachtimewithstep#1,andthenpickupwhereitmakessense
basedonwhathappenedlasttime.Becauseweprefertogivepowertopeoplewhoarepresentina
meetingmorethanthosewhoareabsent,proposalscanbemodifiedonthefloorandadopted;indeed,
changingaproposalinresponsetonewwisdomemergingisattheheartoftheconsensusprocess.

1.Introduction
Typicallytakeslessthan5minutes,andcoversthefollowing:
Whyarewetalkingaboutthis,whydoesitmatter?
Historyoftheissue(includingresultsofanypreviousmeetingsonit).
Goalforthisitematthisparticularmeeting(report,decision,committeegatherinput,etc.).
Attheendoftheinitialpresentation,otherswhohavefactualknowledgeoftheissuearesometimes
invitedtoaddinfurtherbitsaboutthehistoryandsoon,aslongasitdoesntgoonattoomuchlength.

2.ClarifyingQuestions
Thesearesimplequestionsjusttomakesureeveryoneintheroomfullyunderstandswhathasbeen
presentedorproposed.

3.Discussion
Thisistheexploratoryphase,wherepeopleareinvitedtoaskfurtherquestions,showthefulldiversity
ofperspectives,raisechallengesandconcerns,andsoon.Agreementsanddisagreementsongeneral
directionarenoticed,andthereasonsforthemexaminednotjustwhatthepositionsare,butwhy,
andanyunderlyingvaluesconflictsbroughtout.

4.EstablishBasicDirection
Whatisthesenseofthemeeting,intermsofbasicdirectiononthisissue?Hereweseekgeneralor
philosophicalagreement,anagreementinprinciple.

5.SynthesizeorModifyProposal(asneeded)
Integratewhatsbeensharedsofarandmakeitasspecificasneeded,recognizingthatsomedetailswill
alwaysbelefttoimplementationandreallifeexperimentation.Again,wenoticeagreementsand
disagreements(thistimeonthespecificsoftheproposal),andworkwiththeunderlyingreasons,then
generateideasforaddressingandresolvingconcerns,emergingwithaproposalthathassubstantial
groupsupport.Periodicallythefacilitatormayask,Arethereanyremainingunresolvedconcerns?

6.CallforConsensus
Thefacilitatorclearlyrestatestheproposalandthenaskspeopletoindicatewheretheyare,usingthe
optionslistedbelow.Rememberourbylawsrequire70%quorumforofficialdecisions.Notethat
newcomersarerequiredtoattendanorientationfromthefacilitationteambeforetheycanbevested
asfullyempowereddecisionmakingmembers.

7.Record
Thenotetakerreadsbackthedecisiontothegroup.Inaddition,theyrecordanyimplementation
informationneeded(tasks,whosresponsible,timelines,etc.).
Page51of101


8.RevisitingtheDecisions
Onceadecisionhasbeenreached,itmayberevisitedifanyofthefollowingconditionsapply:
(a)Somethingrelevantandsignificanthaschangedsincethedecisionwasreached;
(b)Morethantwoyearshavepassed;
(c)Fiveormoremembersrequestarevisit.

DecisionPointOptions
Atthepointthatthefacilitatorcallsforconsensus(step#6above),participantshavethefollowing
options:

1.Agreement:Isupportthisproposal,andamwillingtoabidebyandimplementit.

2.ConsentwithReservations:Isupportthebasicthrustofthisproposal,andhaveoneormore
minorunresolvedconcerns.

3.StandAside:Ihavemajorconcernswiththeproposal,andagreetostandasideandletthe
groupproceedwithit.Thechoicetostandasidemaybebasedon(butisnotlimitedto)anyof
thefollowing:
Disagreementwiththeproposal,ortheprocessusedtoreachthedecision;
Personalvaluesorprinciples;
Personalimpactorneed,e.g.IcantaffordthisorIdhavetoleavethegroup.
Ifsomeonestandsaside,theirnameandreasonisrecordedintheminutes.Thatpersonis
relievedofanyleadimplementationresponsibilities,yetisstillboundtofollowthedecision.

4.Blocking:Ibelievethisproposalwouldbemajorlydetrimentaltoourgroup,becauseeitherit
goesagainstourfundamentalprinciplesoritwouldleadtoadisastrousoutcome.Notethat
noneofthefollowingareappropriatereasonstoblock:
Togetyourwayorbecauseyoupreferadifferentproposal,ornoproposal;
Tofulfillyourpersonalmoralvaluesorhowyouwanttolive;
Tradition:becausethingshavealwaysbeendonethisway;
Becausetheproposedactiondoesntfityourpersonalneeds(orfinances);
Becauseyoudhavetoleavethegroupiftheproposalpassed.
Inordertoprotectagainstinappropriateuseofblocking,thegrouphastheoptiontoevaluate
blocks:If90%ofthegrouppresentbelievesthatablockisbeingappliedinappropriately,then
theblockisinvalidated.Thispowermustbeusedcarefullyinordertoavoidsimplyoverruling
thosewedisagreewith.

5.Abstain:Ichoosenottoparticipateinthemakingofthisdecision.Typicallyusedbecausea
participantfeelsuninformedornotreadytoparticipate.

Ifwevedoneagoodjobduringthediscussionperiod,thereshouldnotbeanysurprisesatthecallfor
consensus.Ifanyonehasreservations,standsaside,orblocks,thegroupwillpausetoensurethatthe
reasonsareclearlyknown,andconsiderwhethertheproposalmightbemodifiedtoaddressthe
concerns.Ifmorethanthreepeoplehaveminorreservations,ormorethanonepersonstandsaside,we
willaskwhetherornotthedecisionathandrequireshighersupportinordertofulfillthegoalsofour
consensusprocess(highqualitydecisions,effectiveimplementation,andconnectionamongthegroup),
Page52of101

inwhichcasewemayholdthedecisionovertoafuturemeeting.Mostdecisionsdontneedtobemade
inarush;atthesametime,werecognizethatthereisacosttoinaction,soweseektomovethings
alonginordertorespectpeoplestime,energy,andmorale.
Ifadecisionistimesensitiveduetoexternalfactorsandconsensusisnotreached,thegroup
mayelecttoinvokeavotingfallback.Inorderforthattohappen,95%ofthosepresentmustagreeitis
calledfor.Ifavotetakesplace,decisionsmaypassby90%ofthosevoting.Optionsatthatdecision
pointare:Yes,No,Abstain.(Abstentionsdontcounttowardthetotal.)

***

AdditionalConsensusResources
TreeBressenswebsite,filledwithfreearticles,handouts,andpointerstoyetmoreresources.
www.treegroup.info

GroupWorksdeck,publishedbytheGroupPatternLanguageProject.Distillsthecorewisdomofgood
meetingsintoanexcellenthandsontool.www.groupworksdeck.org

SeedsforChange(UK)hasawonderfulwebsiteonconsensusdecisionmaking:theirwritingis
straightforward,thorough,valuesbased,andincludesahistoricalandmulticulturalperspective.
www.seedsforchange.org.uk/free/res#grp

Starhawks'sFiveFoldPathofProductiveMeetings,afreebonuschapterfromherbookThe
EmpowermentManual:AGuideforCollaborativeGroups.
www.starhawk.org/Empowerment_FiveFoldPath.pdf

TrainingforChangehasagreatcollectionoftoolsandexercisesontopicssuchasdiversity,strategy,
andteambuilding.www.trainingforchange.org

VernalProject.RandySchutt,longtimeactivist,hasadozenshortpapersoncooperativedecision
making.See,forexample,GettingUnstuck:CommonProblemsinMeetingsandSomeSolutions.
www.vernalproject.org/papers/Process.html

Page53of101

SAMPLELLCOPERATINGAGREEMENTFORCOHOUSING

NoteaboutthisLLCOperatingAgreement:OperatingAgreementsforcohousingcommunitiesvary
widely,basedontheneedsofthecommunity.Notethatthisparticularagreementenvisionsa
communitythatwillpurchaseanexistingbuildingorbuildings,andwhichwillhavenonresident
investors.Inthiscase,thememberresidentsenvisionthemselvesastenantsinalandlordtenant
relationshipwiththeLLC.Noteverymember/owneroftheLLChasarighttoliveattheproperty;thisis
inpartduetothefactthattherearenonresidentinvestorsthatownashareoftheLLC.Thisgrouphas
alsostructureditselfinthiswayinordertoclarifythatitisnotacommoninterestdevelopmentsubject
tomanyburdensomelegalrequirementsunderCaliforniastatelawandlocalcitylaws.
KeepinmindthatthisOperatingAgreementmaynotmakeagoodtemplateforyourcommunity,since
thecircumstances,financialconsiderations,andplansforyourcommunitymaybequitedifferent.

OperatingAgreementfor[Imaginary]CambriaCohousing,LLC

TheMembersofCambriaCohousing,LLC(theCompany)enterintothisOperatingAgreementtoform
andprovideforthegovernanceoftheCompanyandtheconductofitsbusiness,andtospecifytheir
relativerightsandobligations.TheMembersagreeasfollows:

Section1PurposeofCambriaCohousing
TheprimarypurposeoftheCompanyistopurchase,develop,own,andmaintainarentalproperty(the
Property)forthepurposeofcreatingacohousingcommunity.TheCompanyshallberesponsiblefor
enteringintoleaseswithandcollectingrentfromeveryonelivingattheProperty(theTenants)and
managingcommunityactivities.TheCompanymay,inaddition,engageinanyandalllawfulbusiness
activities.

Section2MembershipandcapitalContributions
2.1

ClassesofMembership:ThereshallbetwoclassesofMembershipintheCompany:
a. RESIDENTMEMBERS:ResidentMembersarethoseMembersthatintendtoliveatthe
Property.ResidentMembersareentitledtoMemberDistributionsand,undersome
circumstances,SpecialDistributions,asdescribedinSection6.Aperson,group,orentity
wishingtobecomeaResidentMembermustbeapprovedby2/3ofcurrentResident
Members,mustsignthisAgreement,andmakethefollowingcapitalcontributionsand
agreements:
i.

DuringthePlanningPhase:AnyResidentMemberjoiningtheCompanybeforethe
CompanyhasenteredintoapurchaseandsaleagreementforthePropertyshall
makea$15,000InitialCapitalContributiontotheCompany.Membersmayagreeto
raisethisrequiredInitialCapitalContributioninordertomeetanynecessarycosts
oftheCompany.

Page54of101

ii. AftertheCompanyisUnderContracttoPurchaseaProperty:AftertheCompany
hasenteredintoapurchaseandsaleagreementfortheProperty,eachResident
MembershallmakeanAdditionalCapitalContributionsoastobringthatMembers
TotalCapitalContributiontobetween$20,000and$100,000,asdeterminedbythe
Managersatthetimeofpurchase,dependingonthecostofthePropertybeing
purchased,andtheUnittobeoccupiedbythatMember.AResidentMembermay
makeanadditionalCapitalContributionifthatMemberdesires,solongasa
majorityofResidentMembersapprove.AResidentMemberthatmakesan
additionalCapitalContributionshallbeentitledtoaSpecialDistribution,as
describedinSection6.IfaResidentMemberdoesnotmakehisorherTotalCapital
ContributionwithinoneweekoftheCompanyssigningofapurchaseandsale
agreement,thatMembersmembershipshallconverttoaNonResident
Membership.AllResidentMembersjoiningtheCompanyafterthepurchaseofthe
PropertyshallalsoberequiredtomakeaTotalCapitalContributionasappropriate.
iii. EnteringIntoanOptiontoLease:AftertheCompanyhasenteredintoapurchase
andsaleagreementfortheProperty,eachResidentMembershallenterintoan
OptiontoLeasewiththeCompany,asdescribedinSection5ofthisAgreement.A
SampleOptiontoLeaseisattachedtothisAgreementasExhibitB.
b. NONRESIDENTMEMBERS:NonResidentMembersarethoseMembersthatmakean
investmentintheCompanywithouttheintenttoliveinthecohousing.NonResident
MembersareentitledtoMemberDistributionsandSpecialPayments,describedinSection
6.NonResidentMembersmayconverttoResidentMembersbygoingthroughthe
membershipprocessdescribedinsection2.1(a),whichincludesacceptancebytheMembers
andenteringintoaLeaseorOptiontoLease.Aperson,group,orentitywishingtobecome
aNonResidentMembermustbeapprovedbythemajorityofallMembers,signthis
Agreement,andmakethefollowingcapitalcontributions:
i.
WhentheCompanyisUnderContracttoPurchaseaProperty:Whenthe
CompanyhasenteredintoapurchaseandsaleagreementfortheProperty,theNon
ResidentMembersshallmaketheirCapitalContributionsasapprovedbyamajorityof
ResidentMembers.TheminimumCapitalContributionforNonResidentMembersshall
bedeterminedbytheResidentMembersbasedonthecostofthePropertybeing
purchased.
2.2

Members'PercentageInterests:AMember'sPercentageInterestinthisLLCshallbecomputedas
afraction,thenumeratorofwhichisthetotalofamember'scapitalaccountandthedenominator
ofwhichisthetotalofallcapitalaccountsofallmembers.Thisfractionshallbeexpressedinthis
agreementasapercentage,whichshallbecalledeachmember's"PercentageInterest"inthis
Company.EachMembersPercentageInterestshallbelistedinExhibitA.Membersunderstand
thattheadditionofnewMemberstotheCompanywilldilutepreexistingmembershipinterests,
aswellthecontributionofadditionalcapitalbyanypreviouslyadmittedMembers.The
PercentageInterestofeachnewMembershalldilutethePercentageInterestsofthepreviously
admittedMembersinproportiontotheirrespectivePercentageInterestsasineffectimmediately
priortosuchdilution.AtnopointmayaResidentMembersPercentageInterestfallbelowa
certainfraction,thenumeratorofwhichis1andthedenominatorofwhichisthetotalnumberof
UnitsattheProperty.

Page55of101

2.3

ChangingtheRequiredCapitalContributions:Membersmay,bymajorityvote,raiseorlowerthe
requiredTotalCapitalContributionsofallcurrentandnewMembers.

2.4

MemberList:TheMembersnames,contactinformation,classesofmembership,TotalCapital
Contribution,andPercentageInterestintheCompanyareassetforthinExhibitA.ExhibitAshall
beupdatedaseachnewMemberjoinstheCompanyandshallimmediatelybecomeapartofthis
OperatingAgreement.AllMembersagreetopromptlynotifytheCompanyofchangestotheir
addressandcontactinformation.

2.5

MembershipsHeldbyCouples,Households,orGroups:AsingleMembershipmaybeheldbyan
individualoragroupofindividuals.IntheeventthataMemberconsistsofmorethanoneperson,
thatMembermustdesignateoneperson(theContact)toserveasthecontactpersonand
decisionmakerforthatMember.ThisContactpersonshallbelistedonExhibitA.

Section3ManagementandDecisionMaking
3.1

SpheresofDecisionMaking:TheCompanyshallhavethreeprimaryspheresofdecisionmaking:
a. MEMBERDECISIONS:Exceptasotherwiseprovided,anydecisiondesignatedinthis
AgreementtobemadebytheMembersshallbemadebyanaffirmativevoteofthe
MemberswhosecombinedInterestsintheCompanyconstitutethemajorityofthetotal
InterestsintheCompany.HoweverMajorDecisionspertainingtotheCompanyshallbe
madebyanaffirmativevoteoftheMemberswhosecombinedInterestsintheCompany
constitute2/3ormoreofthetotalInterestsintheCompany.MajorDecisionsaredefinedas
follows:
i.

AmendmentofanyOperatingAgreementprovisionthatwouldmateriallyaffect
thefinancialinterestsordecisionmakingpowerofaNonResidentMember;

ii.

ThedecisiontoexpelaMemberfromtheCompany,unlesstheexpulsionisofa
NonResidentMembermorethan10yearsfromtheeffectivedateofthis
Agreement;

iii.

ThedecisiontoraiseorlowertherequiredCapitalContributionsofMembers;

iv.

Thedissolution,merger,orsaleoftheCompany;

v.

ThesaleofanyrealpropertyownedbytheCompany;

vi.

ThedispositionofallorasubstantialpartoftheCompanysassetsnotinthe
ordinarycourseofbusiness;

vii.

TheincurringofanydebtsecuredbytheProperty;

viii.

Anyactthatwouldmakeitimpossibletocarryontheordinarybusinessofthe
Company;

ix.

AnyconfessionofajudgmentagainsttheCompany;

x.

Thefilingofapetitioninbankruptcyortheenteringintoofanarrangement
amongcreditors;and
Page56of101

xi.

Theenteringinto,onbehalfoftheCompany,ofanytransactionconstitutinga
reorganizationwithinthemeaningoftheBeverlyKilleaLimitedLiability
CompanyAct.

b. MANAGEMENTDECISIONS:ThebusinessoftheCompanyshallbemanagedbythe
Managers,consistingofallResidentMembers.DecisionstobemadebyManagersshallbe
calledManagementDecisions,andincludealldecisionsthatdonotconstituteMajor
Decisions,whicharenototherwisedesignatedtobemadebytheMembers,andwhichdo
notfallwithinthepurviewoftheCommunityProgram.InanyManagementDecisionin
whichaMemberisentitledtovote,theMembershallhaveonevote,regardlessofthesize
ofthatMembersPercentageInterestintheCompanyandregardlessofthenumberof
peoplecomprisingthatMemberorlivinginthatMembershousehold.
c. COMMUNITYDECISIONS:DecisionsfallingunderthepurviewoftheCommunityProgram
shallmadebytheCommunityCommittee.ThescopeandmanagementoftheCommunity
ProgramisfurtherdescribedinSection4ofthisAgreement.
3.2

ManagementDecisionMakingProcess:
a. MANAGEMENTDECISIONMAKINGPROCESS:AsprovidedinthisAgreement,anydecision
tobemadebyManagers,unlessotherwiseprovidedordelegated,shallbemadeduring
ManagementMeetings,inthefollowingmanner:AllManagementDecisionsshallbemade
byanaffirmativevoteofamajorityoftheResidentMembers,meaningavoteofResident
Memberswhosecombinedvotesequalmorethan50%ofthevotesofallResidentMembers
inthisCompany.PriortovotingonanyproposalconstitutingaManagementDecision,
ResidentMembersshallfirstmakeagoodfaithefforttoobtainconsensusofthegroupby
submittingtheproposalfordiscussionandmodifyingtheproposalbasedonMembers
reasonableconcerns.PriortopurchasingtheProperty,Managersshalladoptamore
detailedpolicydescribingthisconsensusprocedure,andattachthatpolicytothis
AgreementasExhibitH.

3.3

Meetings:
a. TYPESOFMEETINGS
i.

AnnualMemberMeeting:TheCompanyshallholdanAnnualMemberMeetingfor
thetransactionofanybusinessrequiringthevoteofbothResidentMembersand
NonResidentMembers.TheAnnualMemberMeetingshallbeheldinOctober.The
SecretaryshallprovideallMemberswithonemonthNoticeofthetime,date,and
placeofthismeeting.

ii. SpecialMemberMeetings:AnytwoMembersmaycallaSpecialMemberMeeting
bygivingNoticetoallMembersofthetimeandplaceoftheMeetingatleastone
weekpriortothetimeoftheholdingoftheMeeting.TheNoticemustspecifythe
purposeoftheMeeting.
iii. ManagementMeetings:MeetingsofManagersforthepurposeManagement
Decisionsshallbeheldasneededwithnolessthan48hoursNotice.

Page57of101

b. PARTICIPATIONINMEETINGS:Membersmayparticipateinmeetingsthroughtheuseofa
conferencetelephoneorsimilarcommunicationsequipment,providedthatallMembers
participatingintheMeetingcanhearoneanother.
c. ACTIONWITHOUTMEETING:Anyactionrequiredorpermittedtobetakenbythe
MembersoranygroupofMembersunderthisAgreementmaybetakenwithoutaMeeting
solongasallMembersentitledtovoteonthatdecisionreceiveNoticeoftheproposalanda
reasonableopportunityobjectorcommunicateconcernstotheMembership,andsolongas
therequisitenumberofMembersconsentsinwritingtosuchaction.Furthermore,the
transactionsoftheMembersatanyMeeting,howevercalledornoticed,orwhereverheld,
shallbeasvalidasthoughtransactedataMeetingdulyheldaftercallandNoticeif,either
beforeoraftertheMeeting,eachMembernotpresentsignsawrittenwaiverofNotice,a
consenttotheholdingoftheMeeting,oranapprovaloftheminutesoftheMeetingor
provideswrittenconsentbyelectronicmail.
3.4

Records:TheMembersshallkeepthefollowingrecordsattheprincipalbusinessaddressofthe
CompanyorinelectronicfilesaccessibletoallMembers:
a. MINUTES,NOTICES,ANDCONSENTS:FullandaccurateminutesofallMeetings,Notices,
andwaiversofNoticesofMeetings,andallwrittenconsentsinlieuofMeetings.
b. BOOKS:BooksofaccountoftheCompanysfinancialtransactions.
c. ORGANIZINGDOCUMENTSANDMEMBERLIST:CopiesoftheLLC'sArticlesof
OrganizationandasignedcopyofthisAgreement,includingExhibitAwithupdateMember
namesandcontactinformation.
d. TAXRETURNS:TheCompany'staxreturnsfortheprecedingthreetaxyears.

3.5

Officers:TheManagersshallberesponsibleforelectingthefollowingOfficersfromamongits
ResidentMembers.OfficersshallbeelectedbyavoteofManagersattheAnnualMember
Meetingandshallserveatermofoneyear.Intheeventoftheincapacity,resignation,orrecallof
oneoftheseOfficers,theManagersshallelectanewpersontofilltheposition.Officersmay
receivereasonablecompensationfortheirworkasOfficers,andanycompensationmustbe
approvedbytheManagers.TheOfficersandtheirdutiesareasfollows:
a. CHAIR:ThedutiesandauthoritiesoftheChairareasfollows:
i.

TheChairwillhavenoindependentdecisionmakingauthority.

ii. TheChairshallsettheagendaforManagementMeetingsandMemberMeetings
withinputfromotherMembers.
iii. TheChairshallserveasfacilitatoratmeetingsordesignateanotherpersontoserve
asfacilitator.
iv. TheChairwill,alongwiththeTreasurer,signallchecksfortheCompany.
TheManagerscanopttoelectafacilitationteamtoassumeresponsibilitiesforitemsii&iii.
b. TREASURER:ThedutiesandauthoritiesoftheTreasurerareasfollows:
i.

TheTreasurershallprovidetheCompanywithregularwrittenfinancialreports.
Page58of101

ii. TheTreasurershallcoordinatewiththeCompanysaccountantandensurethatthe
Companyfilesallrequiredtaxreturns.
iii. TheTreasurershallcollectanddepositrentpayments.
iv. TheTreasurershall,alongwiththeChair,signallchecksfortheCompany.
c. SECRETARY:ThedutiesandauthoritiesoftheSecretaryareasfollows:
i.

TheSecretaryshallprovideNoticetoMemberswhenNoticeisrequiredfora
meeting.

ii. TheSecretaryshallmaintaincontactinformationupdatestoExhibitAofthis
Agreement.
iii. TheSecretaryshalltakewrittenminutesordesignatesomeoneelsetotakeminutes
ofManagementMeetingsandsendminutesbyemailtoallResidentMembers
within7daysofthemeeting.
iv. TheSecretaryshalltakewrittenminutesordesignatesomeoneelsetotakeminutes
ofMemberMeetingsandsendminutesbyemailtoallMemberswithin7daysofthe
meeting.

Section4TheCommunity

4.1 TheCommunityProgram.InadditiontomanagingthePropertyandleasingtheresidentialunits,
theCompanyshalloperateaspecialprogramcalledtheCommunityProgram(theCommunity).
TheCommunityshallberesponsiblefororganizingcommunityeventsandmeals,owningand
maintainingshareditems(suchasrecreationalequipmentandtools),adoptingrulespertainingto
daytodaylifeinthecohousing,andmanagingcertaincommonareasontheProperty.The
Managersshalldeterminethetermsonwhichcommonareamanagementanduseisdelegatedto
theCommunityProgram(suchaswhetherrentwillbepaidandsoon).TheCommunityshallbe
subjecttotheprovisionsinthisSection4.

4.2 CommunityParticipants: TobeeligibletoregularlytakepartinCommunityactivities,apersonor


householdmustbecomeaCommunityParticipant,bysigningaCommunityParticipantAgreement,
attachedtothisAgreementasExhibitE.Alladults(age18andover)livinginUnitsownedby
ResidentMembersshallbecomeCommunityParticipants.TheCommunitymayadmitanyother
personasaCommunityParticipant,withapprovaloftheCommunityCommittee.AllCommunity
Participantsmustpayregularduesandtakepartincertainactivitiesandchoressetbythe
CommunityCommittee.

4.3 CommunityCommittee:DecisionsregardingtheCommunityanditsactivitiesshallbemadebythe
CommunityCommittee,whichshallbeelectedbytheCommunityParticipants.Theinitialmembers
oftheCommunityCommitteeshallbetheResidentMembersoftheCompanyatthetimethatthis
Agreementisfirstexecuted.TheCommunityCommitteeshalladoptseparatepoliciesfordecision
making,meetings,andfutureCommitteeelections.TheCommunityCommitteemayappointother
committeesforthedelegationofcertaindutiesandactivities.

Page59of101

4.4 AdoptingPoliciesandRules:TheCommunityCommitteemayadoptpoliciesandrulesrelevantto
Communityactivities,chores,anddaytodaylifeattheProperty.

4.5 CollectingCommunityDues:TheCommunityshallsetandcollectduesfromallCommunity
Participants.TheCommunitymaysetarangeofdueslevels,basedonvariousfactors,including
whethertheCommunityParticipantlivesatthePropertyandhowmanypeopleliveinthe
CommunityParticipantsUnit.

4.6 CommunityAccount:TheCommunityshallmaintainaspecialaccountwhereCommunityDuesshall
bedepositedandfromwhichCommunityexpensesshallbepaid.

4.7 FailuretoPayDues:ThisAgreementprovidesandtheCommunityParticipantAgreementshall
providethatifaResidentMemberfailstopayduestotheCommunity,theCompanymaytreatthe
unpaidduesasalienagaintheMembersMembershipInterestintheCompanyintheamountofall
unpaidduesplusaninterestrateof3%.TheCommunityCommitteemaysetseparatepoliciesfor
howtorespondwhenanyotherCommunityParticipantsfailtopaydues.

4.8 LegalStructureoftheCommunity:TheCommunityProgramshallinitiallybeaprogramoperated
undertheumbrellaoftheCompany.TheCompanymay,fortax,liability,orgovernancereasons,
wishtolaterhavetheCommunityoperateunderanotherentity,suchasanonprofitmutualbenefit
corporationtaxexemptunderInternalRevenueCodeSection528(whichiswhathomeowners
associationsgenerallyuse)or501(c)(7)(whichiswhatcountryclubsandsocialclubsuse).The
CommunityProgrammaybeterminatedandreorganizedbyanaffirmativevoteofamajorityof
ResidentMembers.

Section5LeasingPolicies
5.1

NoResidencyRights:MembersshallnothavetherighttoresideatthePropertysolelybecauseof
ownershipofanInterestintheCompany.

5.2

ProspectiveTenants:ProspectiveTenantsreferstoallpeoplethatarelistedintheOccupancy
PriorityList,andwithwhomtheCompanyhasenteredintoanOptiontoLeaseagreement.

5.3

MemberTenants:MemberTenantsreferstoResidentMembersoftheCompanythathave
enteredintoacurrentLeasetoliveattheProperty.

5.4

PreexistingTenants:PreexistingTenantsreferstoallpeoplelivinginatthePropertyatthe
timethattheCompanytakestitletotheProperty.AsPreexistingTenantsmoveoutofthe
Property,theUnitstheyvacatewillbemadeavailabletoProspectiveTenantsintheOccupancy
PriorityList,orshallbeconvertedtoacommonarea.

5.5

TheOccupancyPriorityList:TheOccupancyPriorityListreferstoalistthattheCompanyshall
keep,indicatingtheorderofpriorityinwhichProspectiveTenantswillbeofferedaLeasefora
Unit.OnlyResidentMembersmaybeplacedintheOccupancyPriorityList.

5.6

OptiontoLease:TheCompanyshallenterintoOptiontoLeaseagreementswithResident
Members,whichsecuresthoseProspectiveTenantsplaceintheOccupancyPriorityList.The
followingprovisionsshallbeincludedintheOptiontoLease:

a. PLACEINTHEOCCUPANCYPRIORITYLIST:TheOptionshalloffertheProspectiveTenant
anopportunitytoleaseaUnitwhenonebecomesavailable,inorderofthatProspective
Page60of101

b.

c.

d.

e.

5.7

TenantspriorityintheOccupancyPriorityList.AcopyoftheOccupancyPriorityListshall
beattachedtotheOptiontoLeaseandanupdatedOccupancyPriorityListshallbeattached
tothisAgreement.

ACCEPTINGALEASE:IfaProspectiveTenantdoesnotenterintoaLeasewiththe
CompanywithintwoweeksofaUnitbeingofferedtothatProspectiveTenant,thatUnit
shallbeofferedtothenextpersonintheOccupancyPriorityList.TheCompanyshallmake
reasonableeffortstoensurethatNoticeofsuchofferisreceivedbyaProspectiveTenant
whenaUnithasbecomeavailableforthatProspectiveTenant.IfaProspectiveTenantis
nextintheOccupancyPriorityListandistravelingoroutofreach,heorsheshallgivethe
Companyinformationnecessarytoreachinghimorher,orshalldesignatearepresentative
toaccepttheLeaseontheProspectiveTenantsbehalf.

FEEFOROPTION:ToensurethecontractualenforceabilityoftheOptiontoLease,the
Companyshallchargeafee(evenifnominal)toProspectiveTenantswhenenteringintothe
OptiontoLease.ThefeeshallberefundableonlyintheeventthattheCompanydoesnot
succeedintakingtitletothePropertywithinfiveyearsoftheeffectivedateofthis
Agreement.

COPYOFTHELEASE:AcopyoftheLeasethatwillbeofferedtotheProspectiveTenant
shallbeattachedtotheOptiontoLease.ByattachingacopyoftheLease,theProspective
TenantisabletosecurethetermsonwhichtheywillbeofferedaLease.

MONTHLYRENT:TheOptiontoLeaseshallstatetheamountofinitialrenttheProspective
TenantshallpayuponbecomingaMemberTenant;however,therentmaybecontingenton
thesizeanddesirabilityoftheUnitthatbecomesavailabletothatMember.TheOptionshall
statethecriteriafordeterminingtherentamount.ThebaserentforeveryUnitshallbeset
atthetimethatthePropertyispurchased,andascheduleoftherentsforeachUnitshallbe
attachedtothisAgreementasExhibitF.BeforeaResidentMembermovesintoaUnit,the
Unitshallbebroughtuptoacommonstandardofrepair,attheexpenseoftheCompany.A
descriptionofthisstandardofrepairisattachedtothisAgreementasExhibitG.

LeaseProvisions:TheCompanyshallincludethefollowingprovisionsintheLeaseofferedto
ProspectiveTenants:
a. COMMUNITY:TheLeaseshallrequirethataMemberTenantbecomeandremaina
CommunityParticipantingoodstandingandpayCommunityDues.
b. REMEDYFORNONPAYMENTOFRENT:IfMemberTenantdoesntpaythefullrent
amount,theCompany,inadditiontoanyotherlegalremediesavailable,shallhavealienon
theMembersInterestintheCompany,intheamountoftheunpaidrent,plus7%interest
accruingannually.AMemberTenantthathasfallenmorethanonemonthbehindonrent
paymentsmay,attheoptionoftheManagers,havetheirCompanymembershipconverted
toaNonResidentMembership,andwillthereforebyineligibletotakepartinManagement
Decisions.TheLeaseshallalsorequirethatMemberTenantspayafeeforlatepaymentof
rent.Inaccordancewithstateandlocallawsgoverningevictions,theCompanymayevict
anyTenantinviolationofthetermsoftheLease.
c. BUYINGOUTTHELEASE:TheLeaseshallprovideawayfortheCompanytobuyouta
MemberTenantsLease,intheeventthattheMemberTenantleavesvoluntarilyorthe
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CompanywishesfortheMemberTenanttoleave.TheBuyOutprovisionshallspecifyhow
theCompanyshallcompensateaMemberTenantfortheterminationorforfeitureoftheir
Lease,takingintoaccountrentalpricesintheareaandimprovementsthattheTenanthas
madetotheUnit.Furthermore,theCompanyshalloffertoPurchase(onthetermssetforth
inSection7)theMembershipInterestofanyMemberTenantthathasbeenevictedorhad
theirLeaseinvoluntarilyterminated.TheCompanyhastheoption,butnoobligation,tobuy
outtheLeaseofaMemberTenantthatmovesoutvoluntarily.Unlessthedeparting
MembersMembershipisterminatedbytheMembers,thedepartingMemberTenanthas
theoptiontomaintainhisorherMembership,howeveritwillconverttoaNonResident
MembershipwhentheMemberTenantvacatestheProperty.
d. ASSIGNINGALEASETOSOMEONEELSE:AMemberTenantmaynotassignhisorher
LeasetoathirdpartywithoutfirstofferingtheCompanyanopportunitytoBuyOutthe
Lease.WhenthereareMemberswaitingintheOccupancyPriorityList,theCompanyshall
BuyOuttheLeaseunlessdoingsowouldmaketheCompanyunabletomeetotherfinancial
obligations.IfaMemberTenantassignshisorherLeasewithouttransferringhisorher
MembershipInterestinconjunction,thatMembersmembershipshallbecomeaNon
ResidentMembership.AMemberTenantmaynotassignhis/herLeasetoathirdparty
unlessthethirdpartyisapprovedby2/3oftheResidentMembers.AResidentMemberthat
disapprovesaproposedthirdpartyassigneemuststatereasonablegroundsforthat
disapproval.
e. SUBLEASING:IntheeventthataMemberTenantwishestomoveoutandsublethisorher
Unittoathirdpartysubtenant,anaffirmativevoteof2/3ofResidentMembersisrequired
toapprovethesubtenant.AResidentMemberthatdisapprovesaproposedsubtenant
muststatereasonablegroundsforthatdisapproval.IfaMemberissubleasingandhasnot
livedatthePropertyformorethantwoyears,thatMembersMembershipshallconverttoa
NonResidentMembership,unlessdeterminedotherwisebytheManagers.
5.8

Rents:AllTenantsshallpaymonthlyrenttotheCompany,asprovidedbythatTenantsLease.The
rentforeachunitshallbesetbytheCompanybasedonthesquarefootageoftheunitandother
reasonablefactorsrelatedtotheunitsdesirability,etc.TherentsforeachUnitshallbe
determinedinadvanceandattachedtothisAgreementasExhibitF.TheCompanymayraiseor
lowerrentasitchoosesandasallowablebylaw,howeverallMemberTenantsrentsshallbe
raisedorloweredsimultaneouslyandinthesameproportions.

Section6AccountsandDistributions
6.1

6.2

CapitalAccountforEachMemberandAllocationofProfitsandLosses:Acapitalaccountshallbe
setupandmaintainedonthebooksoftheCompanyforeachMember.Itshallreflecteach
Member'sTotalCapitalContributiontotheCompany,increasedbyeachmember'sshareofprofits
intheCompany,decreasedbyeachmember'sshareoflossesandexpensesoftheCompany,and
adjustedasrequiredinaccordancewithapplicableprovisionsoftheInternalRevenueCodeand
correspondingincometaxregulations.AllprofitsandlossesoftheCompanyshallbeallocated
amongtheMembersCapitalAccountsonthebasisoftheirPercentageInterestintheCompany.

OperatingBudget:TheManagerswillmeetatleastonceperyeartodetermineanoperating
budgetfortheCompany,takingintoaccountbothregularexpensesandforeseeableimprovement
andmaintenancecostsoftheProperty

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6.3

6.4

6.5

6.6

6.7

6.8

MaintenanceofReserves:TheCompanyshallmaintainaReserveaccountandshallplantobuilda
MinimumReserveof$300,000withinthreeyearsofpurchasingtheProperty.TheReserveshall
servetopayforunforeseenexpensesoftheCompanyandinstanceswhentheCompanydesiresto
BuyOuttheLeaseofaMemberTenant.TheCompanyshallbudgetappropriatelyinorderto
contributetoandbuildtheReservetotheminimumlevel.

SpecialPaymentstoNonResidentMembers.Beforetheendofsecondfiscalyearafterthe
CompanyhastakentitletotheProperty,andbeforetheendofeveryfiscalyearthereafter,the
CompanyshallmakeaSpecialPaymenttoeachNonResidentMember.TheamountofeachNon
ResidentMembersSpecialPaymentshallbetheequivalentof3%oftheamountoftheMembers
TotalCapitalContribution.TheSpecialPaymentshallnotchangetheNonResidentMembers
proportionateshareoftheallocatedprofitsandlossesoftheCompany.SpecialPaymentsmay,at
theelectionoftheManagers,bereduced,delayed,orcancelledintheeventthatthe
ManagementTeambelievestheCompanywillnothavesufficientfundstomeetitsOperating
BudgetandtobuildandmaintainitsMinimumReserve.

SpecialPaymentstoResidentMembers.SpecialPaymentstoResidentMembersshallbemadein
ordertoprovideanincentivetoResidentMemberstocontributemorethantheirrequiredshare
ofcapital.BeforetheendofsecondfiscalyearaftertheCompanyhastakentitletotheProperty,
andbeforetheendofeveryfiscalyearthereafter,theCompanyshallmakeaSpecialPaymentto
eachResidentMemberthathascontributedmorethanthatMembersrequiredCapital
Contribution.TheamountofeachResidentMembersSpecialPaymentshallbetheequivalentof
3%oftheamountbywhichtheMembersTotalCapitalContributionexceedsthatMembers
requiredCapitalContribution.TheSpecialPaymentshallnotchangetheResidentMembers
proportionateshareoftheallocatedprofitsandlossesoftheCompany.SpecialPaymentsmay,at
theelectionoftheManagers,bereduced,delayed,orcancelledintheeventthatthe
ManagementTeambelievestheCompanywillnothavesufficientfundstomeetitsOperating
BudgetandtobuildandmaintainitsMinimumReserve.

MemberDistributions.Fromtimetotime,whentheManagershavedeterminedthatthe
CompanyhassufficientfundstomeetitsOperatingBudgetandtomaintainaMinimumReserve,
theCompanymaymakedecideonanamountofDistributableCash,whichshallbedividedupand
paidtoMembersoftheCompanyinproportiontoeachMembersPercentageInterestinthe
Company.

ConsenttoCapitalContributionWithdrawalsandDistributions:Exceptasprovidedelsewherein
thisAgreementandexceptfortheMemberDistributionsandSpecialPaymentsdescribedabove,
Membersshallnotbeallowedtowithdrawanypartoftheircapitalcontributionsortoreceive
distributions,whetherinpropertyorcash,unlesssuchdistributionsareapprovedbythe
Managers.

TaxandAccountingMatters:
a. TAXCLASSIFICATION:TheMembersofthisCompanyintendthatthisLLCbeinitially
classifiedasapartnershipforfederalandstateincometaxpurposes.

b. FISCALYEAR:ThetaxyearofthisCompanyshallbeJanuary1toDecember31.

Page63of101

c. ACCOUNTINGMETHOD:TheCompanyshallusethecashmethodofaccounting.

d. ANNUALINCOMETAXRETURNSANDREPORTS.Within60daysaftertheendofeach
taxableyearoftheCompany,theCompanyshallsendtoeachoftheMembersall
informationnecessaryfortheMemberstocompletetheirfederalandstateincometaxor
informationreturnsandacopyoftheCompany'sfederal,state,andlocalincometaxor
informationreturnsforsuchyear.

e. WITHHOLDINGTAXES.TheCompanymaywithholdfromdistributionsallamountsrequired
underapplicablelaworregulation.AmountsrequiredtobewithheldpursuanttoCode
Section1446oranyotherprovisionoffederal,state,orlocaltaxlawshallbetreatedas
amountsactuallydistributedtotheaffectedMembersforallpurposesunderthis
Agreement.

Section7TransfersofInterests
7.1

VoluntaryTransferofaMembershipInterest:Duringhis/herlifetimeaMembermaynotsell,
assign,transfer,pledge,gift,subjecttoavotingtrust,orotherwisedisposeofanInterestorany
incidentorprivilegeofMembership(referredtoasa"Transfer"),unlesshe/sheobtainstheprior
writtenconsentof2/3ofResidentMembers,orintheabsenceofsuchconsenthascompliedwith
thefollowing:
a. RIGHTOFFIRSTREFUSAL.TheMemberwantingtoTransferanInterest(referredtoasthe
"OfferingMember")shallfirstoffertheInteresttotheCompany,whichshallhavethe
option(butnottheobligation)topurchasetheOfferingMember'sInterestforaperiodof
fifty(50)daysafterthedateofsuchoffer.AnyportionoftheInterestnotpurchasedduring
thisperiodmaythenbepurchasedbytheotherMembers.TheMembersshallhavethe
option(butnottheobligation)topurchasetheOfferingMember'sInterestproratabased
ontherelativepercentages(byratio)oftheirrespectiveInterests,foraperiodofforty(40)
additionaldaysafterthedateofsuchoffer.AnyportionoftheInterestnotpurchasedduring
thisperiodmaythenbepurchasedbytheMembersexercisingthepurchaseoption,who
shallhaveaperiodofthirty(30)additionaldaysinwhichtoproportionatelyincreasetheir
respectivepurchaseoftheOfferingMember'sInterest.ThenoticebytheotherMembersof
acceptanceoftheaforesaidoffersshallsetaclosingdateforsuchpurchasebetweenten
(10)andthirty(30)daysafterthedateofsuchnotice.
b. PERMITTEDTRANSFER.TheInterestoftheOfferingMemberwithrespecttowhichthe
CompanyandotherMembersfailtoexercisepurchaseoptions,maythenbesoldbythe
OfferingMembertoathirdparty.However,aResidentMemberthatcontinuestoliveat
thePropertymaynotoffertosellhisorherMembershipInteresttoathirdpartyunlessthe
thirdpartywillbeassignedtheMembersLease.
i.

ConditionsofTransfer.NotwithstandinganyprovisionofthisSection8tothe
contrary,allTransfersshallbesubjecttothefollowing:(i)thetransfereemustagree
inwritingtobeboundbytheprovisionsofthisAgreementandanyother
agreementsandpoliciesincorporatedintothisAgreementbyreference,aswellas
anyamendmentsthereto;(ii)noTransfershallbemadeif,intheopinionofcounsel
totheCompany,theCompanywouldloseitscharacterization,orbedeemed
Page64of101

terminated,asapartnershipfortaxpurposes;(iii)everyTransferincontraventionof
anyprovisionhereofshallbevoidandineffectual,andshallnotbindorbe
recognizedbytheCompanyortheMembers;and(iv)allpartiesshalltakesuch
actionsasarenecessary,includingexecutionofamendmentstothisAgreementor
theArticles,tocarryouttheintentofthissection.
c. PURCHASEPRICE.NotwithstandingtheofferreceivedbytheOfferingMember,orany
otherprovisionhereoftothecontrary,thepurchasepriceforanyMemberInteresttobe
paidbytheCompanyoranyotherMemberunderthisAgreementshallbeanamountequal
totheamountoftheMembersCapitalContributionadjustedinaccordancewithany
changeinthefairmarketvalueoftheProperty,whichshallbedeterminedandadjustedas
follows:
i.

AdjustmentforFairMarketValue:TheCompanyshallrecordthefairmarketvalue
ofthePropertyatthetimethateachMembereitherjoinedtheCompanyoratthe
timetheCompanypurchasedtheProperty,whichevercomessecond.A
determinationoffairmarketvalueshallbemadeagainforthetimeatwhichthe
MembergivesnoticeofintenttoTransfer.TheamountpayabletotheMember
shallthenbeadjustedbasedonthechangeinfairmarketvalue.Forexample,ifthe
valueofthePropertyhasrisenby10%,theMembershallreceiveanadditional10%
premiumontheamountoftheMembersCapitalContribution.Ifthevalueofthe
Propertyhasdeclinedby10%,theMemberspaymentshallbetheamountofthe
CapitalContributionminus10%.

ii. DeterminingFairMarketValueoftheProperty:Therecordedfairmarketvalue
shallbedeterminedbyanagreementbetweentheCompanyandtheMemberin
question.IftheMemberdoesnotagreewiththeCompanysassessmentoffair
marketvalue,theMembermayhavethePropertyappraisedtodeterminethefair
marketvalue.IftheCompanydoesnotagreewiththeMembersappraisal,the
Companymayobtainanindependentappraisalandthetwoappraisalsshallbe
averaged.
d. PAYMENTTERMS:IftheMembershipInterestispurchasedbytheCompanyorother
Members,thePurchasePriceshallbepaidinfullwithinsixmonthsoftheCompanysor
MembersexerciseoftheoptiontopurchasethedepartingMembersInterest.
7.2

InvoluntaryTransferofaMembershipInterest:
a. WITHDRAWAL.ForpurposesofthisAgreement,anInvoluntaryWithdrawalofaMember
(theWithdrawingMember)shallbedeemedtooccuriftheMember(i)filesfor
bankruptcyprotection,isadjudgedinsolventorotherwisebecomessubjecttobankruptcyor
insolvencyproceedingsthatarenotdismissedwithinthirty(30)days,(ii)dies,or(iii)has
actedoromittedtoactinamannerinconsistentwiththepurposeoftheCompanyorwhose
holdinganInterestisotherwisedetrimentaltotheCompanyortheMembers,as
determinedby2/3oftheMembersingoodfaith.SincethegoaloftheCompanyisto
achieve100%residentownership,anInvoluntaryWithdrawalofaNonResidentMember
mayalsobebroughtaboutbyadecisionoftheManagers10yearsormoreafterthe

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purchaseoftheProperty.IntheeventofanyInvoluntaryWithdrawal,theMembersshare
shallbepurchasedasprovidedinParagraphbofthisSection.
b. PURCHASEOFWITHDRAWINGMEMBERSINTEREST:IntheeventofanInvoluntary
Withdrawal,theCompanyshallpurchasetheWithdrawingMembersInterestattheprice
andonthetermssetforthinParagraph7.1.cand7.1.d.However,iftheWithdrawing
Memberhasdied,theWithdrawingMembersheirsorbeneficiariesmayrequesttokeep
theMembershipInterest.IntheeventthatadeceasedWithdrawingMembersheirsor
beneficiariesrequesttokeeptheMembershipInterest,sucharequestshallthenbe
consideredbyManagersandmayonlybedisapprovedifamajorityofManagersrejectthe
request.

Section8DissolutiontheofCompany
8.1
8.2

8.3

DurationoftheCompany:ThedurationofthisCompanyshallbeindefinite.

EventsThatTriggerDissolutionoftheCompany:Thefollowingeventsshalltriggeradissolutionof
theLLC,exceptasprovided:

a. Thewrittenagreementof2/3oftheMemberstodissolvetheCompany;
b. EntryofadecreeofdissolutionoftheCompanyunderstatelaw.

DistributionofAssetsUponDissolution:UpondissolutionoftheCompany,allassetsremaining
afterpaymentofdebtsshallbedistributedtothethencurrentMembersoftheCompanyonthe
basisoftheirPercentageInterestsintheCompany.

Section9ConflictResolution
9.1

9.2

MediationastheFirstRecourse:InanydisputeovertheprovisionsofthisAgreementandin
otherdisputesamongtheMembers,iftheMemberscannotresolvethedisputetotheirmutual
satisfaction,themattershallbesubmittedtomediation.Thetermsandprocedureformediation
shallbearrangedbythepartiestothedispute.Thechosenmediatorshallconductatleastone
mediationsessionperweekforfourweeks,withallpartiestothedisputepresent,unlessthe
disputecanberesolvedsoonerthanfourweeks.Ifnoagreementisreachedafterfourmediation
sessions,thepartiesshallsubmitthedisputetoarbitrationassetforthinthefollowingparagraph.

ArbitrationastheSecondRecourse:

a. ARBITRATION:Ifgoodfaithmediationofadisputeprovesimpossibleorifanagreedupon
mediationoutcomecannotbeobtainedbytheMemberswhoarepartiestothedispute,the
disputemaybesubmittedtoarbitrationinaccordancewiththerulesoftheAmerican
ArbitrationAssociation.

b. REQUESTINGARBITRATION:Anypartymaycommencearbitrationofthedisputeby
sendingawrittenrequestforarbitrationtoallotherpartiestothedispute.Therequestshall
statethenatureofthedisputetoberesolvedbyarbitration.Arbitrationshallbe
commencedassoonaspracticalaftersuchpartiesreceiveacopyofthewrittenrequest.

Page66of101

c. PAYINGFORARBITRATION:Allpartiesshallinitiallysharethecostofarbitration,butthe
prevailingpartyorpartiesmaybeawardedattorneyfees,costsandotherexpensesof
arbitration.

d. ARBITRATIONSHALLBEBINDING:Allarbitrationdecisionsshallbefinal,bindingand
conclusiveonallthepartiestoarbitration,andlegaljudgmentmaybeenteredbasedupon
suchdecisioninaccordancewithapplicablelawinanycourthavingjurisdictiontodoso.

Section10GeneralProvisions

10.1 ReplacingPriorAgreements:ThisAgreementamendsandreplacesallpriorOperating
AgreementsofCambriaCohousing,LLC,formerlyknownasCambriaCohousing,LLC.

10.2 ModificationofthisAgreement:ThisAgreementrepresentstheentireagreementamongthe
MembersofthisCompany,anditshallnotbeamended,modifiedorreplacedexceptbyawritten
instrumentexecutedbyanaffirmativevoteof2/3ofResidentMembers,exceptwhenapprovalof
NonResidentMembersisalsorequired,asprovideinSection3.

10.3 Notice:AnytimeNoticeisrequiredtobegivenunderthisAgreement,unlessotherwiseprovided,
NoticeshallbedeemedtohavebeendeliveredtoaMemberonthedaythatanemailissentto
theemailaddressprovidedbytheMembertotheCompanyandlistedonExhibitAofthis
Agreement.IfaMemberwishestoreceiveNoticebymail,thatMembermustrequestthisin
writingdeliveredtotheSecretaryoftheCompany.

10.4 RecordDate:ThedateonwhichNoticeofameetingofMembersisdeliveredorthedateon
whichadistributionismade,asthecasemaybe,shallbetherecorddateforthedeterminationof
theMembersentitledtonoticeofortovoteatsuchmeeting,includinganyadjournmentthereof,
ortheMembersentitledtoreceivesuchdistribution.

10.5 NonliabilityofMembers:NomemberofthisCompanyshallbepersonallyliablefortheexpenses,
debts,obligationsorliabilitiesoftheCompany,orforclaimsmadeagainstit,exceptasotherwise
providedbylaw.

10.6 HeadingsandSubheadingsinthisAgreement:ThisAgreementcontainsmanyheadingsand
subheadings(inboldoritalics),whicharetheretomaketheAgreementeasiertoreadand
navigate.Theheadingsandsubheadingsarenotintendedtohaveanylegaleffectorlimitthe
scopeormeaningoftheprovisionscontainedinthisAgreement.

10.7 Severability:Ifanyprovisionofthisagreementisdeterminedbyacourtorarbitratortobeinvalid,
unenforceableorotherwiseineffective,thatprovisionshallbeseveredfromtherestofthis
agreement,andtheremainingprovisionsshallremainineffectandenforceable.

10.8 AgreementgovernedbythelawsofCalifornia:ThevalidityandinterpretationofthisAgreement
shallbegovernedbythelawsoftheStateofCalifornia.

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10.9 EffectiveDate:ThisOperatingAgreementofCambriaCohousing,LLC,effective
__________________________,isadoptedbytheMemberswhosesignaturesappearattheend
ofthisAgreement.

ExecutionofthisAgreement
Inwitnesswhereof,theMembersofthisCompanysignandadoptthisAgreementastheOperating
AgreementofCambriaCohousing,LLC.
Name:_______________________Signature:_________________________Date:____________
Name:_______________________Signature:_________________________Date:____________
Name:_______________________Signature:_________________________Date:____________
Name:_______________________Signature:_________________________Date:____________
Name:_______________________Signature:_________________________Date:____________

ListofExhibits:
1.
2.
3.
4.
5.
6.
7.

ExhibitA:Names,ContactInfo,CapitalContributions,andPercentageInterestsofMembers
ExhibitB:SampleOptiontoLease
ExhibitC:OccupancyPriorityList
ExhibitD:SampleResidentialLease
ExhibitE:BylawsandParticipantAgreementforCommunityProgram
ExhibitF:ScheduleofRents
ExhibitG:StandardofRepairforUnits

Page68of101

GETTINGLOANSORINVESTMENTSFROMFRIENDSAND
FAMILY
WhatisaSecurityandWhyDoesitMatter?
Youcreateasecuritywhenyouaskpeopletoinvestinorlendmoneytoyourcohousingcommunityor
otherproject.Itsimportanttoknowwhatisorisntasecurity,becausewheneveryousellorevenoffer
tosellasecurity,itneedstoeither1)beregisteredwiththefederalSecuritiesExchangeCommission
andwiththestateagencyineverystatewhereyouwanttoraisemoney,or2)qualifyforanexemption
fromregistration.

The25102(f)SecuritiesExemptioninCalifornia36
CaliforniaCorporationsCodeSection25102(f)offersaspecialsecuritieslawexemptiontocertainkinds
ofprivatesecuritiesofferings,iftheymeetthefollowingcriteria:

First,youmustbeexemptfromfederalsecuritiesfilingrequirements:
YourcompanymustbeformedunderCalifornialaw(i.e.,ifyouareacorporationyoufiledyour
articlesofincorporationinCalifornia,etc.)
YourplanonlytooffersecuritiestoCaliforniaresidents
Yourmustincludeinyourcontractwithyourinvestorsthattheywillnotresellthesecurityto
anyoneoutsidethestateforninemonths
YourbusinessisveryCaliforniafocusedhereisatestforthis:
o Yougetatleast80%ofyourrevenuesfromCalifornia
o Atleast80%ofyourassetsareinCalifornia
o Youplantouseatleast80%ofthemoneyyouraisewithinCalifornia

Then,youmustmeettherequirementsfor25102(f):
Youcansellyoursecuritiestoupto35investorsaslongastheymeetoneormoreofthe
followingcriteria:
o Theinvestorshaveapreexistingpersonalorbusinessrelationshipwithyouconsisting
ofpersonalorbusinesscontactsofanatureanddurationsuchaswouldenablea
reasonablyprudentpurchasertobeawareofthecharacter,businessacumen,and
generalbusinessandfinancialcircumstancesofthepersonwithwhomsuchrelationship
exists.Theseinvestorscanbefriendsorfamily;
o Theinvestorshaveenoughfinancialexperiencetoprotecttheirinterests;or
o Theinvestorshaveexperiencedprofessionalfinancialadvisors.
Youcansellanunlimitednumberofsecuritiestoofficersanddirectorsofthecompanyand
accreditedinvestors.Accreditedinvestorsare1)peoplewith$1millioninnetworth(excluding
theirhome)or$200,000inannualincome,or2)entitieswithmorethan$5millioninassets.
Yoursecuritiesofferingcannotbeadvertisedtothepublic.
Theinvestorsmustsignsomethingsayingthattheyarenotinvestingforthepurposeofre
sellingthesecuritiestosomeoneelse.
YouhavetofileasimpleNoticeofTransactionformwiththeCaliforniaDepartmentof
Corporationsandpayasmallfee:http://www.corp.ca.gov/LOEN/pdf/25102f.pdf

36

AdaptedfromahandoutcreatedbyJennyKassanoftheSustainableEconomiesLawCenter(www.theSELC.org)
Page69of101

ASAMPLEFRIENDSANDFAMILYPROMISSORYNOTE
PromissoryNote
for
CambriaCohousingLender

BackgroundInformation:CambriaCohousing,LLCiscurrentlyundercontracttopurchasea40
acrepropertyinCambria,Californiaforthepurposeofbuildingacohousingcommunity.
_________________________[NameofLender]isnowmakingaloanof$________________
toCambriaCohousing,LLCtoassistwiththepurchaseofthepropertyanddevelopmentofthe
project.Now,CambriaCohousing,LLCand_________________________[NameofLender]
wishtoclarifythetermsofrepaymentofthisloan,asfollows:

1. PromisetoPay:Thus,forvaluereceived,CambriaCohousing,LLC(Borrower)hereby
promisestopaytotheorderof_____________________(Lender),atanaddress
providedtoBorrowerbytheLender,asumof$__________________(thePrincipal),
togetherwithinterestontheunpaidPrincipalbalanceaccruingatanannualrateof
______%,withallPrincipalandinterestdueandpayablebythefollowingdate:
______________________________.

2. PaymentPlan:BorrowershallpayLender______________[monthly/quarterly/annual]
installmentsofatleast$_______________commencingonorbeforeJanuary1,2013.
EachpaymentunderthisNoteshallbecreditedfirsttointerestthendueandany
remaindertoPrincipal.ThisNotemaybeprepaid,atanytime,inwholeorinpart,
withoutpremiumorpenalty,aslongasanyPrincipalprepaymentisaccompaniedbya
paymentofinterestaccruedtothedateofprepaymentontheamountprepaid.

3. Default:IfBorrowerfailstopayanysumdueunderthisNotewithinsixmonthsof
whenitbecomesdueandpayable,thisshallbeconsideredaDefault.Intheeventofa
Default,theLendermay,athis/heroption,declarethisNotetobeimmediatelydueand
payable.

4. CollectionCosts:BorroweragreestoreimbursetheholderofthisNoteforallcostsof
collectionorenforcementofthisNote,whetherornotsuitisfiled(including,butnot
limitedto,reasonableattorneyfeesandexpenses),incurredbytheLender.

5. NoIntentiontoResellthisNote:Lenderrepresentsandwarrantsthathe/sheis
purchasingthisNoteforhis/herownaccountandnotforthepurposeofresellingthe
Notetosomeoneelse.

6. LenderisaCaliforniaResident:Lenderrepresentsthathe/sheisaresidentofCalifornia.
Page70of101


7. RelationshipBetweenBorrowerandLender:Lenderrepresentsthathe/shehasa
preexistingpersonalorbusinessrelationshipwith__________________________
[nameornamesofCambriaCohousing,LLCmembersthatlenderhasarelationship
with],andthisrelationshiphasinvolvedsufficientcontacttoenableLendertobeaware
ofthecharacter,businessacumen,andgeneralbusinessandfinancialcircumstancesof
CambriaCohousing,LLCandsomeofitsmanagingmembers.[Forthepurposeof
demonstratingapreexistingrelationshipundersection25102(f)oftheCalifornia
CorporationsCode,ithelpstoaddmoredetailaboutthenatureanddurationofthe
relationship].

8. AcknowledgmentofInformationProvidedtotheLender:Lenderacknowledgeshe/she
hasreceivedthefollowinginformationfromCambriaCohousing,LLC,priorto
purchasingthisNote,andthatthisinformationis:

a. [ListdocumentsyoullbeprovidingtotheLender]

9. GoverningLaw:ThisNoteshallbegovernedbyandconstruedinaccordancewiththe
lawsoftheStateofCalifornia.

Bysigningbelow,BorrowerandLenderagreetotheabovetermsandconditionsofthisNote.

Executedat___________________,California:

Dated:____________________

CambriaCohousing,LLC,Borrower

Signature:_______________________________
By:[NameofmemberwhowillsignonbehalfofLLC]
Address:[LLCAddress]

Dated:____________________ Name:
___________________________,Lender

Signature: ________________________________

Address: ________________________________

________________________________

Page71of101

TAXSTUFFANDCOHOUSING
Thissectionhasbeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

IndividualIncomeTaxImplications

Propertyownership,andparticularlyownershipofonesprimaryresidence,generallycomeswithtax
benefitstotheindividual.Theownershiparrangementinintentionalcommunitiesmayaffectthe
availabilityofcertaintaxbenefits,whichinclude:

a. Thecapitalgainsexclusion:TheIRScurrentlyallowshomeownerstoexcludefromtaxationthe
first$250,000(or$500,000foramarriedcouple)ofcapitalgainsonthesaleofaprimary
residence.37Unfortunately,individualsthatowntheirpropertythroughanentitythatdoesnot
meettheIRSdefinitionofacooperativehousingcorporation38orthatisadisregardedentity,
suchasasinglememberLLC,39willnotbeeligibletousethisexclusioniftheyselltheirshareofa
landholdingentityandrealizeagain.

b. Themortgageinteresttaxdeduction:Paymentofinterestonhomemortgagesisgenerallyatax
deductionforanindividual.40Thisisasubstantialtaxbenefit,sinceasignificantportionof
mortgagepaymentsconsistofinterestduringthefirstyearsofpayment,andthedeductioncould
reduceanindividualstaxableincomebytensofthousandsofdollars.Thistaxdeductionis
availabletotenantshareholdersofhousingthatmeetstheIRSdefinitionofcooperative
housingcorporation,anditallowsthetenanttodeducthis/hershareoftheinterestonthe
cooperativeblanketmortgage.
Theavailabilityofthemortgageinteresttaxdeductionisamajorconsiderationwhenagroup
ofpeopleiscontemplatingpurchasingamultiunitresidentialpropertytogetherandchoosing
betweenownershipastenantsincommonoralimitedliabilitycompany.Althoughthemembers
oftheLLCcannotclaimthedeductioninthesamewaydirecthomeownersmay,anLLCpasses
themortgageinterestthroughtomembersasabusinessexpense,whichusuallyresultsina
businesslossshownonthemembersK1(thestatementofamembersshareofprofits,losses,
deductions,andcreditsintheLLC).

c. Thepropertytaxdeduction:Homeownerscangenerallydeductfromincomeamountspaid
towardlocalrealpropertytaxes.Thisbenefitisavailabletodirecthomeownersandtenant
shareholdersofcooperatives,butmustbepassedthroughtomembersasabusinessexpensein
thecaseofownershipbyanLLCthatdoesnotmeettheIRSdefinitioncooperativehousing
corporation.

37

SeeIRSPublication523,SellingYourHome.availableathttp://www.irs.gov/pub/irspdf/p523.pdf
SeeInternalRevenueCodeSection216(b),thetextofwhichisincludedinafootnoteabove.
39
SeeIRSPublication3402,TaxationofLimitedLiabilityCompanies,(March2010),page3,forwhenasinglememberLLCmay
beconsideredadisregardedentity.
40
SeeIRSPublication530,TaxInformationforHomeowners,availableathttp://www.irs.gov/pub/irspdf/p530.pdf
38

Page72of101


d. Sweatequity:Anothertaxissuetoconsideristheeffectofanagreementtograntaproperty
interesttoapersoninexchangeforworktheydoonaproperty.Clientsarefrequentlyshocked
whenItellthemthatsuchasweatequityarrangementgeneratestaxableincometotheperson
contributingwork,asmeasuredbythevalueofthelandinterestthattheyaregranted.

PropertyTaxes
InCalifornia,wherepropertytaxassessorsgenerallydonotreappraiseapropertyunlesstherehas
beenachangeofownership,agroupofcoownersmaywanttofindawaytopreventfrequentchanges
ofownership.Forexample,ifaCaliforniapropertyisownedby8peopleasaTIC,chancesarethatevery
severalyearsanownermaywishtoleaveandrelocate.Ifthatpersonsellshis/hershare,thiscould
triggerpartialreappraisalofthepropertyand,ifthepropertyvaluehasrisen,higherpropertytaxes.
Onewaytoavoidfrequentreappraisalistoownthepropertythroughanentity,suchasapartnership,
corporation,orLLC.UnderCalifornialaw,achangeofownershipmaynottakeplaceunlessthereisa
transferofmorethan50%oftheinterestsintheentity.41

41

CaliforniaRevenueandTaxationCodeSection64
Page73of101

ZONINGANDCOHOUSING
Thissectionhasbeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

LocalZoningandLandUseLaws:
Residentialzoninglawshavecarvedupcitiesandsuburbsintosinglefamilyhomesandunits,largely
separatinghouseholdunitsintoisolatedspaces.Asaresult,manycohousingcommunitiesencounter
zoninglawbarrierstothedevelopmentoftheircommunities.Hereisabriefsummaryofthetypesof
zoningbarrierssharedhousingandcohousinggroupsmayface:

1. Restrictionsonthenumberofunitsonaparcel:Mostcitiesrestrictresidentiallandusesby
cappingorsettingaminimumnumberofunitsthatmustbeputonaparcel.Whilethepurposes
ofdensitycappingareoftenrootedinmanagementandprotectionoflimitedresourcessuchas
water,cleanair,healthyecosystems,andthecapacityandupkeepofinfrastructuresuchsewage
treatmentsystems,transportation,andschools,densitycapscanpresentobstaclestogroups
wishingtocreatecommunityorientedhousingwithsharedspaces.
Manypeoplewishingtocreatesemisharedhousingarrangementshaveworkedaround
suchrestrictionsby,forexample,buildinganadditionontoahouseandincludingashared
kitcheninbetweentwootherwiseseparatelivingspaces.Thisisbecauseadwellingconstructed
withoutakitchensometimesdoesnotmeetthelegaldefinitionofadwellingunit.42
Insomeplaces,stateshavepassedlawsmandatingthatcitiesallowresidentstobuild
accessorydwellingunits,alsoknownasADUs,grannyflats,inlawunits,secondunits,accessory
apartments.Forexample,recognizingthatADUsmayprovidethemostimportantmeansby
whichwewillhouseourgrowingpopulation,theCalifornialegislaturepassedAB1866in
2003,requiringthatcitiesadoptmorestreamlinedpoliciesforthepermittingofADUs.
Wherepossible,citiescouldincreaseallowabledensity,eveninsinglefamilyresidential
areas,ifthelandwillbeusedinawaythatmitigatesthetypicalimpactsofdensity.For
example,ifacohousingcommunityorecovillageisbuiltwithsystemstocapture,purify,and
recyclewater,tomanageitsownwasteandwastewater,toproduceitsownenergy,andto
provideresidentswithacarsharingprogramandeasyaccesstopublictransit,thiswould
mitigatetheimpactonthesurroundingcommunity,localecosystems,andcityinfrastructure.
Formbasedzoningcodes,43alreadyimplementedincitiesaroundtheU.S.,mayoffer
groupsauniqueopportunityforsharedhousing.Suchcodesfocusonurbanplanningbasedon,
amongotherthings,theform,shape,size,andimpactofbuildingsonparcels.Thismodelmay
providegroupswiththeopportunitytoparticipateintheplanninganddevelopmentofcompact
urbanmultiusecommunitiesthataccommodatetheneedsofsharedliving.

2. Restrictionsontherelationshipsofornumberofoccupantsperunit:Inmanycitiesthroughout
thecounty,zoninglawsstillrestrictthenumberofunrelatedindividualsthatmaylivetogether
inaunit.Suchlawshavepresentedbarrierstogroupsthatintentionallyseektoliveinashared

42

Forexample,theInternationalResidentialCode(2009)definesDwellingUnitasAsingleunitprovidingcomplete
independentlivingfacilitiesforoneormorepersons,includingpermanentprovisionsforliving,sleeping,eating,cookingand
sanitation.
43
Formoreinformationonformbasedcodes,seetheFormBasedCodesInstitute:www.formbasedcodes.org
Page74of101

and/orsupportivelivingarrangement.MentalHealthAdvocacyServices,Inc.hasissuedasetof
recommendationsforhowcitiescanredefinehouseholdandoccupancystandards.44
Otherlawsrequirethatunrelatedindividualsinaunitbepartofahouseholdunitor
singlehousekeepingunit,meaningthattheysharefinancialresponsibilitiesandchores,and
act,insomerespects,likeafamily.Suchalawpreventsasingleownerofathreebedroom
housefromrentingoutherothertwobedroomstostudentsorotherpeoplefoundon
Craigslist.45

3. Mandatoryparkingspaces:Mandatoryparkingrequirementscanbeasignificantbarrierto
sharedhousing.InMountainView,California,thecostofonecohousingdevelopment
significantlyincreased,duetothecitysinflexiblerequirementthatthedevelopmentprovide2.3
parkingspacespernewunit.46Thisisunfortunate,becausecitiescouldactuallyincentivize
sharedhousing,carsharing,ridesharing,andpublictransitusebylooseningrequirementsthat
eachnewunitbeaccompaniedbyoffstreetparking,andbyfindingotherwaystoensurethat
streetparkingdoesntbecomescarce.Forexample,acitycouldrequirethatnewunit
developmentsbeaccompaniedbyacarsharingplanorprogram,transitpassesforresidents,
bicycleparking,andotherinfrastructurethatenablesresidentstonotownacar.Citiescould
alsorequireresidentsofnewunitstopayhigherfeesforstreetparkingpermits,sincethose
residentswouldnormallyhaveincurredtheexpenseofinstallinganewparkingspotonthe
property.

InclusionaryZoningLaws:
Inclusionaryzoningisatoolusedbycitiestoensureasupplyofaffordablehousingunits.Suchlaws
oftenrequirethatnewdevelopmentscontainacertainnumberofaffordableunitsand/orrentalunits,
ortheyimposefeeswhenmultiunitbuildingsareconvertedfromrentalpropertiestoresidentowned
condos.Atthesametime,suchlawssometimespresentbarrierstothecreationofcohousingunits.For
example,inOakland,California,ifagroupof10peopleweretobuya10unitbuildingforthepurposeof
creatingcohousingforthemselves,theymightberequiredtocreateacertainnumberofreplacement
rentalunitsintheirbuildingorelsewhereinthecity.47Suchlawsaddsignificantcoststoaprojectand
cannegativelyimpactthefeasibilityofresidentdevelopedcohousingprojects.Citiesshouldmake
specialexemptionsforowneroccupiedunitsthatarecooperativelydevelopedbythepeopleintending
toliveintheunits.

Notethatitmaybepossibletostructurethecohousingentityinsuchawaythatitavoids
meetingthedefinitionofastockcooperativeorcondominium.Forexample,ifagroupformsanentity
topurchaseamultiunitbuildingtorenttothemselves,andiftherearesomenonresidentownersof
thatentity,thisbecomes,ineffect,ahybridbetweenarentalpropertyandaresidentownedproperty,
anditmaynotberestrictedbyinclusionaryzoningrules.

44

FairHousingIssuesLandUseandZoning:DefinitionsofFamilyandOccupancyStandardsbyMentalHealthAdvocacy
Services,Inc.,September1998,Availableathttp://www.housingrights.org/pdfs/def_family.pdf
45
See,forexample,aproposedLosAngeleslawcalledtheStateLicensedFacilitiesordinance,CouncilFile110262,which
definesaboardinghouseas:Aonefamilydwellingwherelodgingisprovidedtoindividualswithorwithoutmeals,for
monetaryornonmonetaryconsiderationundertwoormoreseparateagreementsorleases,eitherwrittenororal.
46
CohousingandCarsharing:AGreatOpportunity,byNealGorenflo,publishedbyShareableonOctober11,2009,available
athttp://shareable.net/blog/cohousingandcarsharingagreatopportunity
47
OaklandMunicipalCodeSection16.36.070.
Page75of101

COMMONINTERESTDEVELOPMENTCOMPARISONTABLE
TYPEOFCID

DEFINED

COMMUNITY
APARTMENT
PROJECT
CACiv.Code
1351(d)

Undividedinterest
inlandcoupled
withrightof
exclusive
occupancyofan
apartment.

STOCK
COOPERATIVE
CACiv.Code
1351(d)

Corporationholds
titletolandand
improvementsand
shareholdershave
rightofexclusive
occupancyina
portionofreal
property(usuallya
unit).
Shareholdersmay
deductshareof
mortgageinterest
andpropertytaxes
ifthecooperative
meetsIRS
requirements.

COMMONAREA OWNERSHIPOF
DESCRIBED
COMMON
AREAS

Entireproject
Commonarea
exceptthe
ownedby
apartments
individual
occupiedby
ownersas
residentsand
tenantsin
anyincidental
common.
exclusiveuse

commonareas
suchasparking
spacesand
storageareas.

Entireproject
Commonarea
exceptthe
ownedby
apartments
corporation
occupiedby
formedtohold
residents
titletotheland
(shareholders)
and
andany
improvements.
incidental
exclusiveuse
commonareas
suchasparking
spacesand
storageareas.

Page76of101

SEPARATE
INTEREST

Theexclusive
righttooccupy
anapartment.

Theexclusive
righttooccupy
aportionofthe
developedreal
property,title
towhichisheld
bycorporation.
Theowners
interestmaybe
heldasashare
ofstock,a
certificateof
membership,or
anotherway
andisdeemed
tobean
interestinthe
CID.

TYPEOFCID

DEFINED

COMMONAREA OWNERSHIPOF
DESCRIBED
COMMON
AREAS

Commonarea
CONDOMINIUM Anestateinreal
Alllandand
improvements
ownedby
CACiv.Code
property.
1351(f),783
Undividedinterest constitutingthe undivided
CIDexcept
interestsof
incommonin
individually
ownersinequal
portionofreal
ownedunits.
shares,oneper
propertywith
Interests
unit,unless
separatereal
CC&Rsprovide
propertyinterest conveyedby
deedandsetout otherwise.May
inunitlandor
infinalmap,
beheldas
structure.
tenantsin
Boundariesofunit parcelmapor
commonorby
mustbedescribed condoplan.
thehome
andrecordedina
owners
finalmap,parcel
association.
map,or
condominium
plan.

PLANNED
Development
Commonareais Commonarea
DEVELOPMENT otherthanthe
theentire
ownedbyan
CACiv.Code
abovethree
development
associationorin
1351(k)
havingeitheror
exceptforlots
commonby

bothofthese:
andresidences
ownersof
ownedby
separate
Commonarea
owners.
interestswith
ownedas
Commonarea
appurtenant
described;
rightstouseof
Associationhas rightsmaybe
conveyedby
commonarea.
powerto
mutualor
Maybeowned
enforce
inequalshares
reciprocal
obligationsof
astenantsin
easementrights
separateowners
appurtenantto commonbut
byassessment
titleby
theseparate
thatmay
association
interests.
becomelien
minimizes
againstseparate
liabilityto
property.
owners.

Page77of101

SEPARATE
INTEREST

Separate
ownershipof
unitwhichcan
bedescribedas
landonamap,
asphysical
structures
plannedorin
existencelike
ceilings,floors
andwalls,an
entirestructure,
orany
combinationof
these.

Separate
ownershipofa
lot,parcel,area,
orspace.

LAWSTHATDICTATECOMMUNITYASSOCIATION
GOVERNANCE
Partsofthissectionhavebeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

Manystates48havelawsthatgoverntheoperationofassociations,suchashomeownersassociations
andcondoownersassociation,formedforthemanagementofpropertyrightsandundividedinterestsin
land.Inacommunitywheretheownershiporleaseofaunitiscoupledwithanundividedinterestin
property,suchasinacondocommunityorcooperative,and/orwheretheConditions,Covenants,and
Restrictions(CC&Rs)provideforacommonmanagementschemeforpropertyrightsinaneighborhood,
itmaybenecessarytoadheretocertainregulationspertainingtothestructureandoperationofthe
communityassociation.Suchstatutestendtosetminimumstandardsformeetingprocedures,notice
requirements,quorum,numberofvotesrequiredtopasscertainproposals,electionprocedures,
requirementsfortheadoptionofincreasedassessmentsorspecialassessments,remediesfor
nonpayment,useofliensasamechanismforenforcement,andsoon.Suchstatutesmayalsoimpose
limitsontherightsofassociationstodictatehowapropertymayormaynotbeused.Forexample,
California49andFlorida50havebothpassedlawsprohibitingacommunityassociationfrommakinggrass
lawnsmandatory,andallowingresidentstoinstalldroughttolerantlandscapes.Coloradostatelaw
prohibitshomeownersassociationsfrombanningclotheslinesandsolarpanels.51

TheUniformCondominiumAct(UCA)52andtheUniformPlannedCommunityAct(UPCA)53are
examplesofregulationsoncommunityassociations,andtheseactshavebeenadoptedinsomestates.
InCalifornia,theapplicablelawiscalledtheDavisStirlingAct.Theselawssetmandatoryproceduresor
mandatoryminimums,whichcanoverriderulesplacedinanassociationsgoverningdocuments.Other
times,theselawssetdefaultrulesthatwillapplywhenanassociationsgoverningdocumentsaresilent.
NotethatinCalifornia,theDavisStirlingActwouldapplytoastockcooperativeinwhicha
corporationholdstitletotheland.However,itappearsthattheDavisStirlingActdoesnotapplytoa
communityinwhichalimitedliabilitycompany(LLC)holdstitletotheland.Thus,theLLCstructure

lendsitselfwelltocommunitiesthatwishtomaintainfullflexibilityinthedesignofgovernance.

48

CaliforniaandFlorida,forexample,bothimposeextensiveregulationsontheoperationofcommunityassociations.
CaliforniaAB1061,passedin2009,amendingSection1353.8oftheCivilCode.
50
FloridaSB2080,Enrolledin2009
51
ColoradoRevisedStatutesSection3830168,Unreasonablerestrictionsonrenewableenergygenerationdevices.
52
UniformCondominiumAct,availableathttp://www.law.upenn.edu/bll/archives/ulc/fnact99/1980s/uca80.htm
53
UniformPlannedCommunityAct,availableathttp://www.law.upenn.edu/bll/archives/ulc/fnact99/1980s/upca80.pdf
49

Page78of101

THEDAVISSTIRLINGACT

TheDavisStirlingActisCaliforniaslawthatgovernscommoninterestdevelopments(CIDs).
OtherstateshavelegalframeworksforgoverningCIDssometimescalledcondominiumactsor
plannedcommunityacts.

INCALIFORNIATHEDAVISSTIRLINGACTINVOLVESFOURTYPESOFCOMMUNITY
DEVELOPMENTS.

CommoninterestdevelopmentsinCaliforniagovernedbytheDavisStirlingActare:

Communityapartmentprojects
Condominiumprojects
Planneddevelopments
Stockcooperatives

Eachofthesetypesofdevelopmentsinvolvesinterestinaseparateresidenceorspaceandan
interestinacommonarea.PleaseseetheattachedtableforadescriptionofeachtypeofCID.

Ifyourintentionalcommunityfallswithinthelegaldescriptionofoneofthesedevelopments,it
issubjecttotheregulationsimposedbytheDavisStirlingAct.

REQUIREMENTSTHATMAYCONFLICTWITHGOVERNANCEOFINTENTIONALCOMMUNITIES

TheDavisStirlingActwaswrittentoprotectindividualswhobuyintoacommoninterest
development.ManyintentionalcommunitiesfindthatsomerequirementsoftheActarenot
wellsuitedtotheirdesignoftheircommunitygovernanceandoperations.

Forexample,CIDsmustadheretostrictrulesforelectionsandvoting.UndertheAct,whena
CIDassociationelectsorremovesofficers,makesadecisionaboutassessments,ordecidesto
amenditsgoverningdocuments,itisrequiredtouseasecretballot.Theuseofasecretballot
wouldbecontradictorytothenatureofaconsensusprocesswhichrestsoneveryperson
expressinghisorherideasandviewsonagivenproposalordecision.Inthiscase,the
communitycouldstillusetheconsensusprocesstoreachaproposalthatisaccepted,butinthe
end,toconformtotheAct,memberswouldneedtovotewithasecretballot.

DEFAULTPROVISIONS

AnotherimportantissuetospotintheDavisStirlingActandotherstatelawsisthatthereare
defaultprovisionsthatwillautomaticallyapplyunlesstheyarechangedinthegoverning
documents.

Agroupwillneedtodecidewhetheritwantsthedefaultprovisionorwantstomakeupitsown
rules.Forexample,inCaliforniaifagroupwantstocreateitsown:
Page79of101

rulesforconflictresolution,
latechargesforassessments,
thetimefornoticingmeetingsandtheplaceformeetings,and
responsibilityforrepairandmaintenanceofseparatelyownedareasandcommonareasand
facilities,or
dutiesofaboardofdirectorsoftheassociation

itwillneedtowriteitsownprovisionsontheseissuesingoverningdocuments.

REQUIREMENTSFORENFORCEABLEOPERATINGRULES
Anotherissueisthatifagroupwantstoenforceitsoperatingruleslike,forexample,what
managementteamswillbeformedandwhatauthoritiestheywillhavetheruleswillhaveto
meetcertainstandards.Tobevalidandenforceablerules:

havetobeinwriting,
theyhavetobeadoptedbytheassociation,
theyhavetobeconsistentwiththeprovisionsofthegoverningdocuments,and
theboardofdirectorshastobeauthorizedbythegoverningdocumentstomaketherule.

ALLGOVERNINGDOCUMENTSNEEDTOBECONSISTENT
Thisbringsupanotherissuetobeawareofthatallthedocumentsshouldbeconsistent
meaningtheyshouldnotcontradicteachother.Thearticlesofincorporation,bylaws,policies,
agreements,rulesandprocedureshavetobeconsistentandbackeachotherup.

Forexample,therulesforthegroupsconsensusprocesscouldbebackedupbythe
foundationalvaluestoreachdecisionsthataresupportedbythewholecommunityandto
promotetrustamongcommunitymembersandthepolicythatdecisionswillincludetheinput
andideasofallmembersintoafinaldecisionthatisacceptabletoallwithinaconsensus
process.

CHANGESTOUNITSORCOMMONAREAS

Anotherissuethatisimportanttospotformanycommunitiesishowtomakesurethatthe
communitygetsfinalapprovalofchangesownerswanttomaketotheirownunitsand
properties.Thecommunityassociationwillhavetomakesurethattherequirementfor
approvalofchangesisspelledoutinthegoverningdocumentsandtheprocedureforreviewing
andapprovingordisapprovingproposedchangeswillhavetoconformtotheActs
requirements.

Page80of101

GETTINGAPPROVALTOSELLCOHOUSINGUNITS
Thissectionhasbeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

Inmanystates,therearelawsthataredesignedtoregulatethesaleofsubdividedlandsbydevelopers
topurchasers.Inthesamewaythatsecuritieslawsweremeanttoprotectinvestorsfromlosingmoney
ininvestmentschemes,subdivisionregulationsaremeanttoprotectpurchasersfromlosingmoney
throughthepurchaseofapropertyinacommoninterestdevelopmentthathasbeenimproperly
managed,fiscallyorotherwise.

Lawsdesignedtoprotectthepurchasersofsubdividedpropertiesaresomewhatawkwardto
applywhenthepurchaserispartofagroupofpeoplethatalsodevelopedandissellingtheland,suchas
inacohousingcommunity.Thelegalhoopsthatsuchgroupshavetojumpthroughmayfeelincredibly
high,consideringthatthehoopsweredesignedforarelationshipwherethedevelopermaynoteven
knowthepurchaser.
InCalifornia,wheretherearefiveormoreunitsinacondominiumproject,cooperative,planned
unitdevelopment,communityapartmentproject,ortenancyincommon,theprojectmustundergoa
longandexpensiveapprovalprocesswiththestateDepartmentofRealEstate(DRE)beforetheunitsin
theprojectcanbesoldor,inthecaseofcooperativesandcommunityapartmentprojects,leased.In
approvingaproject,theDREexaminestheplanneddivisionoftheproperty,ensurescleartitletothe
land,examinesproposedgoverningdocuments,andmustfeelsatisfiedthatallnecessaryservices
(utilities,roads,etc.)areprovidedforeachunit.TheDREalsolooksatbudgetsandconsiderswhether
thefinancingstructurefortheprojectwillputbuyersattoomuchrisk,intheeventthatanotherbuyer
cantmakemortgagepayments.TheDREultimatelyproducessomethingcalledaPublicReportona
project,whichservesasasetofdisclosuresthatwillbeprovidedtoanyonewhobuysaunit.54

54

Cal.Bus.&Prof.Code11018
Page81of101

LANDLORD/TENANTLAWSANDSHAREDHOUSING
Thissectionhasbeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

Landlord/tenantlawsaredesignedprimarilytoprotecttenantsinwhatisseenasaneconomically
dependentrelationship.Landlordscontrolavaluableresource,andlandlord/tenantlawsgenerally
ensurethatpeoplethatdonotownlandwillbeabletohaveastablerelationshipwiththelandthey
occupy.Suchlawsmaygivetenantstheassurancesthattheywillnotbearbitrarilyevicted,thattheir
dwellingwillbehabitable,andthattheirrentwillnotberaisedtounreasonablerates.Landlord/tenant
lawsareaconstraintonthefreedomtocontract,justifiedbytheunequalbargainingpowerbetween
landlordsandtenants.
Atthesametime,landlord/tenantlawsdonotnecessarilyapplyhelpfullyinsituationswhere
thelandlordisthetenant,wherethetenantispartofacooperativethatservesaslandlord,orwhere
partiesseektocollaborativelycreateuniqueagreementsforthesharingofland.Manygroupsform
entitiestopurchaselandandproceedtoleasepartsofthelandtothemselves.Althoughthetenants
are,indirectly,ownersoftheproperty,thecreationofaleaseholdinterestmaytriggertheapplicationof
landlord/tenantlaws.Manygroupsfindtheapplicationoflandlord/tenantlawscounterintuitive,since
theythinkofthemselvesasownersandwanttheflexibilitytosetthetermsoftheiragreementsforthe
useoftheland.Aquestionremainsforfurtherresearch:Underwhatcircumstances,ifatall,have
courtsdeclinedtoapplylandlord/tenantlawstoasituationwherethetenantownsasignificantshareof
theentitythatisthelandlord?

Inthemeantime,herearesomeoftheprimarywaysthatlandlord/tenantlawsmayrestrictthe
kindsofagreementsgroupcanformtooccupylandasbothownersandtenants:

1. Tenantabilitylawsandthewarrantyofhabitability:Ifagroupformsanentitytopurchase
land,andthengrantleasestothemselvestooccupyselfconstructedunits,thisbringsupthe
questionofwhethertheentityisresponsibleforensuringthetenantabilityorhabitabilityof
thespacesoccupiedbythemembertenants.Thisisespeciallyimportanttoconsiderwhen
groupmembersarelivingoffthegridandusingcompostingtoilets,capturedrainwater,and
otheralternativestoregularplumbingorothercommonamenities.Manystatelawsprohibita
propertyownerfromrentingaresidentialunittoatenantiftheunithascertaindefectsthat
couldaffectthehealthandsafetyofthetenant.Evenifnorequirementsexistinstatutes,
courtsmayimposecertainrequirementsonlandlordstoprovideaspacethatishabitabletoa
tenant.Overtime,courtshaveevenadaptedthedefinitionofhabitabletoincludemodern
amenities,suchasflushtoiletsandrunningwater.55Thefactthatcourtshaveusedtheir
discretionindeterminingwhatisareasonablewaytolivemeansthatcourtscouldprobablyalso
recognizethatsomepeopleconsciouslychoosetoliveoffthegrid.Courtswouldhopefully
allowfortenantstovoluntarilyassumethiswayoflife.Now,however,somecourtshavealso

55

AleadingCaliforniaSupremeCourtcaseonthewarrantyofhabitability,Greenv.SuperiorCourt,517P.2d1168(CalSupreme
Court1974)providesthefollowingsummaryofhabitabilitystandardsinfootnotenumber22:TherecentcaseofAcademy
Spires,Inc.v.Brown(1970)111N.J.Super.477[268A.2d556]givesagoodindicationofthegeneralscopeofthewarrantyof
habitability.Inthatcase,atenantinamultistoryapartmentbuildingcomplainedofaseriesofdefects,including(1)the
periodicfailuretosupplyheatandwater,(2)themalfunctioningofanincinerator,(3)thefailureinhotwatersupply,(4)several
leaksinthebathroom,(5)defectivevenetianblinds,(6)cracksinplasterwalls,(7)unpaintedconditionofwallsand(8)a
nonfunctioningelevator.TheAcademySpirescourtheld:"Someoftheseclearlygotobarelivingrequirements.Inamodern
societyonecannotbeexpectedtoliveinamultistoriedapartmentbuildingwithoutheat,hotwater,garbagedisposalor
elevatorservice.Failuretosupplysuchthingsisabreachoftheimpliedcovenantofhabitability.
Page82of101

heldthatthewarrantyofhabitabilitycannotbewaived.56Othercourtshaveallowedthe
warrantytobewaivedundercircumstanceswhereitisdemonstratedthatthetenantor
homebuyerisfullyinformedoftheconditionoftheproperty.57
Notethatstateshavealsolikelyadoptedstatutesthatdefinewhatisorisnota
tenantabledwelling,buttheselawsmayallowforalandlordandtenanttowaivethelaws.For
example,inCaliforniaCivilCodeSection1941providesthatalandlordofabuildingintended
fortheoccupationofhumanbeingsmust,intheabsenceofanagreementtothecontrary,putit
intoaconditionfitforsuchoccupation,andrepairallsubsequentdilapidationsthereof,which
renderituntenantable(emphasisadded).ThedefinitionoftenantableinSection1941.1
includesrequirementsforrunninghotandcoldwaterandconnectiontoasewagedisposal
system.
Insum,ifgroupswishtoliveinsuchmodest,offthegrid,and/orexperimental
dwellings,andifgroupshaveformedanentityfortheownershipofproperties,itmaybe
importanttoensurethatthereisanadequatewrittenwaiverofhabitabilityandtenantability
betweentheindividualoccupantsandtheentity.Attorneysshouldalsoresearchstatestatutes
ontenantability/habitabilityandcommonlawcasesontheimpliedwarrantyofhabitability,in
ordertoknowif,when,andhowtherequirementscanbewaived.

2. Justcauseevictionlaws:Whengroupsformintentionalcommunities,theymayenvisionthat
communitymemberswillcooperateinvariousactivitiesandmakeagreementstoengageinor
withholdfromengagingincertainactivities.However,injurisdictionswithjustcauseeviction
ordinances,itmaybedifficulttouseevictionasameansofupholdingsuchagreements.Thisis
becausethelawleansheavilyinfavorofprotectingthetenureofrenters.Forexample,a
communitymay,forhealthreasons,wishtoadheretosomeof25PrinciplesforBuilding
Biology,58andagreetocreateacommunityfreeofcertainchemicals,noises,vibrations,
radiation,syntheticmaterials,andsoon.Ifacommunitymemberrepeatedlyviolateslease
provisionsrelatedtochemicaluse,thecommunitymaynotbeabletoevictthetenantonthe
groundsthatthetenantisindefaultunderthelease.Thisisbecauseacourtmayconsidersuch
provisionsunreasonableasgroundsforeviction.Thecommunitymustinsteadseekotherlegal
remedies,suchasobtaininganinjunctionmandatingthatthetenantcomplywiththeno
chemicalrule.

3. Rightsoftenantsincondoconversion:Whenapropertyisconvertedintoresidentowned
housing,suchasastockcooperativeorcondominium,locallawssometimesrequirethattenants
presentatthetimeofconversionbegivenadditionalrights,suchasthefirstrighttopurchase
thecondounit,ortherighttoleasethepropertyandnotbeevicted,butforjustcause.

4. Rentcontrollaws:Rentcontrollawscaptheratesatwhichlandlordsmayraiserents,thereby
ensuringthatatenantcancontinuetoaffordlivinginaunit.Inthecaseofresidentowned
housing,residentsmaywanttovotetoraiserentsinordertocoveroperationcosts.Ifrent
controllawspreventthis,however,itmaybepossibleforthetenantstodemandthateveryone
makeadditionalpaymentsasownersofabusinessentity,ratherthanastheentitysrenters.

56

See,forexample,CentexHomesv.Buecher,95SW3d266(TexasSupremeCourt2002),holdingthattheimpliedwarrantyof
habitabilitycannotbewaivedexceptunderveryspecificcircumstances,andalsoexaminingtheapproachtakenbyotherstate
courts.
57
SeeCrowderv.Vandendeale,564S.W.2d879,881(Mo.1978)
58
SeethePrinciplesofBuildingBiologyathttp://www.baubiologie.de/site/english/principles.php
Page83of101

BUILDINGANDFIRECODESANDCOHOUSING
Thissectionhasbeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

Buildingcodescansometimespresentabarriertotheoutsideoftheboxwaysthatpeoplewishto
housethemselves,orinsidetheboxways,forthatmatter,inthecaseofpeoplelivinginverytiny
dwellings.ThedocumentaryfilmGarbageWarrior,59forexample,documentedtheplightofNew
MexicoecoarchitectMichaelReynoldsinhisattemptstobuildexperimentalhousing(earthships)out
ofrecycledmaterials.Hewasrepeatedlycitedforbuildingcodeviolationsuntilhe,atlast,successfully
lobbiedtheNewMexicolegislaturetopassabillcreatinglimitedcircumstancesunderwhichpeoplemay
constructandliveinexperimentalbuildings.
Theclusteringoftinyhousesincombinationwithsharedspacesmayofferanaffordableand
sustainablehousingoption,yetbuildingcodesmayactasabarrier.Ownersofsuchunitsmay
encounterdifficultyingettinglegalclearancefortheoccupancyofsuchtinyhomes,sincemanycities
haveadoptedInternationalResidentialCoderequirementsthatadwellingunitincludeaminimumof
oneroomthatisatleast120squarefeetinarea,60andotherminimumareaandheightrequirementsfor
roomswithinadwellingunit.
Firecodessometimesapplymorestrictrequirementsinmultiunitbuildingsorothershared
housingarrangements.Forexample,inColorado,somecohousingcommunitieshavebeenrequiredto
includeexpensivefireprotectionsintheircommonhousekitchens,includinga$10,000exhaustsystem
installedoverthestove.61

59

http://www.garbagewarrior.com/
SeeCaliforniaResidentialCodeSectionR304.1:MinimumRoomAreas,providingthatEverydwellingunitshallhaveat
2
leastonehabitableroomthatshallhavenotlessthan120squarefeet(11m )ofgrossfloorarea.
61
EmailconversationwithKathrynMcCamant.
60

Page84of101

FAIRHOUSINGLAWSANDCOHOUSING
Thissectionhasbeenadaptedfrom
PracticingLawintheSharingEconomy,byJanelleOrsi(ABABooks2012).

Somegroupsmaywishtoformresidentialcommunitiesofacertaincompositionallseniorcitizens,all
women,orallBuddhists,forexample.TitleVIIIoftheCivilRightsAct,alsoknownastheFairHousing
Act,prohibitsdiscriminationonthebasisofrace,color,religion,sex,nationalorigin,disability,orfamilial
statusinthesaleorrentalofrealestate.Statesthathaveadoptedsimilarlawsmayhaveaddedtolist
ofprohibitedbasesofdiscrimination.Forexample,CaliforniasFairEmploymentandHousingActalso
prohibitsdiscriminationonthebasisofsexualorientation,sourceofincome,ancestry,mentaldisability,
andHIVstatus.62
Certainexemptionshavebeenmadetothelawtoallow,forexample,thecreationofsenior
housing.The1988AmendmentsandtheadoptionoftheHousingforOlderPersonsAct(HOPA)of1995
allowfortheexclusionoffamilieswithchildrenincommunitiesdesignedforseniors,solongasthose
communitiesmeetcertainrequirements.63
TheFairHousingActalsoexemptssomesmallowneroccupiedcommunities,rentingofsingle
familyhomes,andhousingoperatedbyorganizationsandprivateclubsthatlimitoccupancyto
members,64whichiswhatallows,undercertaincircumstances,fraternityhousestoprovidehousing
onlytomenorsororityhousestoprovidehousingonlytowomen.
However,theActsadvertisingrestrictionsmayapplyeventotheadvertisingofaroomrentalin
asinglefamilyhomeorthesaleofaunitinasmallowneroccupiedcommunity.Inthosecases,itisstill
likelyillegaltoadvertiseormakeanystatementthatindicatesalimitationorpreferencebasedonrace,
color,nationalorigin,religion,sex,familialstatus,orhandicap.65Agroupthatwantstocreatea
communityofacertaincharactermaystillcommunicatesuchavisioninadvertisingwithoutexpressing
apreferenceforacertainprotectedclassofpeople.Forexample,thecommunitymaystatethatpartof
itsmissionistocreateasafeandwelcomingplaceforlesbianandgayparentsandtheirchildren,butthe
communityshouldnotexpressapreferencethatprospectiverenterorpurchaserbelesbianandgay
parents.

62

Cal.Gov.Code1290012996
FairHousingItsYourRightU.S.DepartmentofHousingandUrbanDevelopment,availableat
http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/FHLaws/yourrights
64
Id.
65
Id.
63

Page85of101

SAMPLECARSHARINGAGREEMENT
Adaptedfrom
TheSharingSolution:HowtoSaveMoney,SimplifyYourLife&BuildCommunity,
byJanelleOrsiandEmilyDoskow(Nolo2009)

ThisagreementisbetweenCatherineLoveandTheoDancer,whoagreeasfollows:
1. AGREEMENTTOSHAREACAR:Weagreetoshareownershipanduseofa2008Toyota
Camry,VIN#:9723ks65,(thecar).
2. TRANSFERINGTITLE:Withinoneweekofsigningthisagreement,Catherinewilltransfer
titleofthecarfromhernametobothofournames,CatherineLoveandTheoDancer,as
tenantsincommon.Theowillpayalltaxesandtitlefeesrelatedtothetransfer.
3. OWNERSHIPOFTHECAR:Inconsiderationfor50%ownershipofthecar,Theowillpay
Catherine$4,150,whichweagreeishalfofthecurrentBlueBookvalueofthecar.
4. ACCESSORIES:WeagreethatthefollowingaccessoriesinthecarwillremainCatherines
separateproperty:theroadsideemergencykitandthesteeringwheellockingdevice.
5. PARKING:WewillkeepthecaratTheosapartmentonParkerStreet.
6. USEOFTHECAR:CatherinecanusethecaronSundays,Mondays,andTuesdays,andTheo
canusethecaronWednesdays,Thursdays,andFridays.Wewilltaketurnsusingthecar
everyotherSaturday.Wemayfromtimetotimenegotiateanewschedule.Ifeitherofus
needstousethecaronadaywhentheotherpersonisdesignatedtousethecar,that
personmayasktheotherforpermissiontousethecar.Thepersontowhomthecaris
designatedmayrefusewithoutgivingareason.
7. LONGTRIPS:Unlessweagreeotherwise,ifoneofusewantstousethecarforatriplonger
thanthreedays,thatpersonwillrentacarfortheothertouseonthedaystheother
normallywouldhavehadthecar.
8. DECISIONS:Wewillbothtakepartequallyindecisionsrelatedtothecar.Neitherofuswill
agreetosell,encumber,ormakeexpensiverepairsorimprovementstothecarwithoutthe
otherspermission.
9. RESPONSIBILITIES:Wewilleachbeequallyresponsibleforfillingthegastankandkeeping
thecarclean.Catherineagreestotakethecarforregularmaintenance.
10. RULES:Eachofusagreesnottolendthecartoanyonewithoutfirstdiscussingitwithand
gettingpermissionfromtheother.Wewillneverlendthecartoanunlicenseddriver.
Smokingisnotallowedinthecar.

Page86of101

11. COSTS:Wewilldivideallinsurance,registration,maintenance,andrepaircostsequally.We
willeachkeepourreceiptsinseparateenvelopesintheglovecompartment.Everysix
months,wewilladdupourcostsandreimburseeachanotherforanydifferencesin
expenses.Eachofuswillpayforthegasweuse.Ratherthankeepstrictrecordsofour
mileageandgasexpenses,wewilltrytobuygasinroughproportiontothenumberofmiles
wedrive.Thecargetsabout30milespergallon.
12. INSURANCE:Wewillcarryanautoinsurancepolicythatwillcoverupto$500,000per
victim,$1,000,000peraccident,and$50,000forpropertydamage.Catherinewillbelisted
astheprimarydriverandTheoasasecondarydriver.Wewilleachpayhalfoftheinsurance
premiums.Ifoneofusreceivesaspeedingticketordoesanythingtomarhisorherdriving
record,thatpersonwillberesponsibleforanyincreaseininsurancepremiumsthatresult.If
theinsurancecompanydeemsthatthecaristotaledandpaysustoreplaceit,wewill
splitthoseproceeds.
13. INDEMINFICATION:Ifoneownerisinvolvedinanaccidentforwhichthatownerispartially
orcompletelyatfault,thatownerwillpayanyinsurancedeductibles,andwillindemnify
andcompensatetheotherownerforanyexpensesrelatedtotheaccidentthatarenot
coveredbyinsurance.Thatownerwillalsopayforanyincreasesintheinsurancepremium
rates.

Ifoneownerisinvolvedinanaccidentforwhichthatownerisnotatfault,ownerswilleach
payhalfoftheinsurancedeductible(ifapplicable),anycostsrelatedtofixingthecar,and
anyincreaseininsurancepremiums.Anyothercostsrelatedtotheaccident,suchas
medicalbills,willbepaidbytheownerinvolvedintheaccident.

14. DISPUTERESOLUTION:Ifaconflictordisputearisesthatweareunabletosolvethrough
discussion,weagreetoattempttoresolvethedisputethroughmediation.Wewillseekto
mediatethroughSEEDSCommunityResolutionCenter
15. TERMINATION:Ifoneofuswantstostopsharingthecar,wewillconsidertheseoptionsin
thefollowingorder:1)theotherownerwillkeepthecarandpaythedepartingownerhalf
oftheBlueBookvalueofthecaratthattime;2)thedepartingownerwillkeepthecarand
paytheremainingownerhalfoftheBlueBookvalueofthecaratthattime;or3)wewill
sellthecarandsplittheproceeds.
Date:_______________________Signature:_______________________________

CatherineLove

Date:_______________________Signature:_______________________________

TheoDancer

Page87of101

TIPSFOREFFECTIVEMEETINGS
Meetingsareimportantforsharinggroups:Theycreateatimeandstructureformakingdecisions,
talkingaboutconcernsanddevelopments,andcheckinginwithoneanotherabouthowthingsare
going.Evenifyourgroupisjustyouandyourneighbor,youshouldstillsetasidetimespecificallyfor
discussinghowyoursharingarrangementisworkingout.Althoughmeetingsplayanimportantrolein
keepingasharinggroupfunctioningwell,youmaybehesitanttoschedulethem.Perhapsameeting
seemstooformal,oryourenotsureyouhaveanythingtodiscuss.Maybeyouvesatthroughtoomany
dullmeetingsatworkorforcharitablecauses,andyouarenteagertohavemoreofthemwithyour
friendsandneighbors.Butmeetingsdonthavetobestiltedorboring:Youcanhaveproductive,
interesting,andevenfunmeetings.Herearesomeguidelines:

Keepmeetingsasshortaspossibleandkeeptrackoftime.Thesedays,freetimeseemstobemany
folksmostvaluablecommodity,andfewofuslookforwardtospendinganyofourfreetimeina
meeting.Onewaytokeepthingsshortistohaveatightagendaandsetatimelimitforeachagenda
item.Also,ithelpstoreservemeetingsforimportantdeliberationordecisionsonly.Lessimportant
decisionscantakeplaceoutsideofmeetingsorbyemail.Forexample,ifpossible,dontputReporton
lastweeksgardeningclassontheagendaifthereisnothingthatneedstobediscussedordecided
aboutthatevent;writeupyournotesandcirculatethembyemailinstead.

Dosomethingfun.Meetingtimeisvaluable,butyoushouldspendabitofitlighteningupalittle.
Startingwithafunactivitycanbreaktheice,perkpeopleup,gettheirattention,lightenthemood,and
helppeoplefeelmoreconnected.Forideas,seeTheBigBookofMeetingGames,byMarleneCaroselli.

Designateameetingfacilitator.Thepurposeofhavingameetingfacilitatoristoensurethatthegroup
movesthroughtheagenda,tokeepthediscussionontrack,toensurethateveryonesinputistakeninto
account,andtoguidethegrouptoavotewhenappropriate.(SeeTipsforFacilitators,below.)Take
turnsfacilitatingthemeetings,togiveeachmemberaturnatbeingtheleaderandguidingthegroup.

Designatesomeoneotherthanthefacilitatortotakenotesorwriteonaflipchart.Afacilitatorjuggles
manytasks:callingonpeople,followingtheagenda,restatingpartsofthediscussion,moderatingvotes,
andmostimportantly,listeningtowhatisbeingsaidandhow.Takingnotesmightaddonetoomany
ballstojuggle.Letaseparatenotetakerberesponsibleforwritingontheflipchartandfiguringouthow
tospellcooperatively.Anotetakercanalsoserveasanextraearandhelporganizeinformation.

Ifadecisioncanbedelegated,delegateit!Ifthegroupdecidestoholdapotluckonacertaindate,it
canappointapersonorcommitteetotakecareoftherestofthedetails.Thereisnopointinwasting
meetingtimesortingoutthedetailsifpeoplearehappytodelegate.

SendoutmeetingnotesASAP.Meetingscanbuildalotofmomentuminagroup.Decisionsaremade
andpeoplecommittotakingoncertaintasks...whichtheymaypromptlyforgetassoonastheyleave
theroom.Tokeepthegroupfromlosingmomentum,havesomeonetakenotesonthediscussionsand
decisions.Whensomeonecommitstodoingsomething,underlineandboldthatpersonsnameinthe
notessotheycaneasilyseewhattheycommittedto.Sendoutthosenotesrightaway.

Serveamealorsnacks.Often,thebiggestchallengeisgettingpeopletofitameetingintotheirbusy
schedule.Butthepromiseofcoffee,bagels,andfruitsaladcanimproveattendancedramatically.

Arrangeseatsinacirclewhenpractical.Thisallowseveryonetomakeeyecontactwitheachotherand
preventsafeelingofhierarchyinthemeeting.

Page88of101

RESTRICTIONSONRENTALSOFUNITS

Acommonissueincohousingcommunitiesariseswhenoriginalownerswanttorentoutspacein
theirhomeortheymoveawayandwanttorentthehouse.Canthemembersofacohousingor
otherintentionalcommunityrequireowneroccupancyofunits?Cantheyrestricthowandtowhom
anownerrents?Cantheylimitthepercentofunitsrentedoutatanyonetime?Cantheyrestrictthe
rightsofrenters?

INGENERALthelawdisfavorsanyrestrictiononapropertyownersrighttorenthisorherproperty.

RIGHTSAREBALANCEDWITHRESPONSIBILITIES.

However,therightsandconveniencesoflivinginacommunitythatsharescommonareasand
facilitiesarebalancedtheresponsibilitiesofgoverningthoserights.Incommoninterest
communities,thelawaccommodatesthelimitedlossofrightsincludinganownersrighttorentthe
propertywithoutrestriction.So,inCaliforniaandinsomeotherstates,commoninterest
developmentscan,undercertainconditions,imposereasonablerestrictionsonrentals.

SUPPORTANYRESTRICTIONSWITHPURPOSESLISTEDINGOVERNINGDOCUMENTS

InCalifornia,66ifyouwanttoputrestrictionsonrentalunitsinacohousingorintentionalcommunity,
youshouldsupporttherestrictionwithreasonablepurposesthatarespelledoutinyourgoverning
documentsanddesignedtoprotecttheinterestsofthecommunity,suchas:
Preservationofpropertyvalues
Protectionofasafecommunityforchildren
Protectionofstablecommunity
Costsofmaintenance
Needforenforcementofrules
Needtopreservetheabilityofhomeownerstoobtainfinancing

PUTRENTALRESTRICTIONSINTHEORIGINALCC&Rs.

InCalifornia,restrictionsonrentalofunitsaremorelikelytobeupheldincourtiftherestrictionsare
intheoriginalCC&Rs.Why?BecauseifarestrictiononuseofpropertyisintheCC&Rsandis
recordedwiththecountyrecorder,thebuyerispresumedtohaveknownoftherestrictionbefore
buyinginandtherestrictionispresumedtobereasonable.Thepersonchallengingtherental
restrictionswouldhavetheuphillbattleofshowingthattherestrictionisnotreasonableandwhy
theyshouldnotbesubjecttoaruletheyknewaboutbeforebuyingin.

AnotherimportantreasontoputrestrictionsonrentalsintheoriginalrecordedCC&Rsisthat,in
California,ownersareexemptfromrentrestrictionsiftheyboughtinbeforetherestrictionscame

66Ifyouarefromanotherstate,youneedtocheckthelawthere.

Page89of101

intoeffect.And,ifthecityorcountythatapprovedthedevelopmentrequiredlanduseconditionsto
berecordedintheCC&Rs,lateramendmentoftheCC&Rsmayrequireapprovalofthatcityor
county.

Ifyoudidntputrentalrestrictionsintoyouroriginaldocumentsandyouhaveownerswhoboughtin
beforenewrestrictionsgointoeffect,youcanaskthoseownerstosignanagreementtoabidebythe
newlyadoptedrestrictions,whichwouldbebinding.

DISCRIMINATIONISPROHIBITED

Norentalrestrictioncanbebasedonexcludingpeopleorfamiliesbasedonrace,gender,nationality,
religion,sexualorientation,disability,etc.

FAIRHOUSINGLAWS

Ingeneral,communitymembersneedtobeawarethatprocessesforselectingrentersmaybe
challengedincourtforviolationsoffederalandstatefairhousinglaws.

THEREASONABLENESSTEST

InCaliforniathetermsofgoverningdocumentswillbeenforcedonlyiftheyarereasonable.
Reasonablenessisdeterminednotonlybycommonsensebutisconsideredwithinthecontextofthe
purposesofthecommunity.Ananalysisofwhetheraparticularrentrestrictionmightbeconsidered
tobereasonablewouldinvolvethespecificcircumstancesandareviewofrelatedcasestoseehow
thecourtsdealtwiththosecircumstancesinthepast.

Page90of101

EXPELLINGMEMBERS

Manyintentionalcommunitieswanttoknowifmemberscanbeexpelledandifso,how.

Typically,lawsthatallowenforcementincommoninterestdevelopments(CIDs)makeitclear,asthe
DavisStirlingActdoesforCaliforniaCIDs,thatenforcementofthetermsofthegoverningdocuments
maynotprohibitanownerfromaccessovercommonareastohisorherpropertyandcannot
prohibitfulluseoftheirproperty.However,amemberofthecommunitymaybeexpelled,andthe
methodofexpulsionvariesdependingonthetypeofcommunity.

Condominiums:
Theonlywayincivillawyoucanexpelapersonfrompropertythattheyownasinacondominium
istoforecloseon,andforceasaleoftheirresidenceduetononpaymentofassessments.Thiscanbe
donebyajudicialforeclosurewherethecommunitysuestosellthepropertyandtocollectamoney
judgmentoranonjudicialforeclosurewherethecommunityplacesalienonthepropertyandforces
asale.(Pastdueassessmentsmayalsobecollectedbyasmallclaimssuitforthemoneyowed.)

Cooperatives:
ThesituationisdifferentforstockcooperativeswhicharedeemedinCaliforniaandotherstatesto
formalandlord/tenantrelationshipbetweenthecorporationandtheshareholdingoccupants.Inthis
case,landlord/tenantlawwouldapplyandresidentscouldbeevictedfromthedevelopmentfornot
payingrentorassessmentsunderalltherulesoflandlord/tenantlaw.Notethatthecooperative
wouldlikelyalsoneedtoadheretorulesintheCorporationsCodegoverningtheterminationofa
membershipinacorporation.

Page91of101

ENFORCEMENTOFRULESINCOHOUSINGCOMMUNITIES

Whileotherstatesmayhavesimilarrules,commoninterestdevelopmentsinCalifornia,including
thosethatareownedascondominiums,aresubjecttotheDavisStirlingActwhichprovidestermsfor
enforcementofgoverningdocuments.

REMEDIESALLOWEDBYLAW

Fines.Typically,communitiescanenforcerules,includingfailureorrefusaltopayassessments,with
fines.Iffinesareused,thecommunityisrequiredtostateaheadoftimewhatthefinewillbefor
eachkindofviolationandproduceascheduleoffinesthatisdistributedtoallmembers.

Suspensionofrights.Enforcementcanincludesuspensionofrights,liketherighttoparticipatein
decisionmakingandtherighttousecommonareasandfacilities.Amembercannotbeprohibited
fromenteringandusingtheirownpropertyandtheycannotbesuspendedfromusingcommon
accesstoreachtheirpropertyorunit.

Legalremediesforcollectingassessments.Whenanownerinacohousingcondominiumfailsor
refusestopayassessments,therearethreeoptions:
1) ajudicialforeclosurewherethecommunitysuestosellthepropertyandtocollectamoney
judgment;
2)anonjudicialforeclosurewherethecommunityplacesalienonthepropertyandforcesa
sale;and
3) alawsuitinsuperiorcourtwhichcanbeasmallclaimssuitdependingontheamountfor
themoneyowed.

STANDINGTOSUE

Violationsofgoverningdocuments.ACIDhomeownersassociationhasstandingtosueamember
forviolationsoftheassociationsCC&Rs(Covenants,Conditions&Restrictions).Theassociationis
requiredbylawtoenforcetheCC&Rsandiftheydont,membershavetherighttosuethe
associationforacourtordercompellingtheboardofdirectorstoenforce.Boththeassociationand
individualmembershavetherighttosueincourtforenforcementofthetermsofothergoverning
documentssuchasbylaws.Iftheassociationsuesithastobeinthenameoftheassociationandnot
ofitsboardofdirectors.

Harmstopropertyandpeople.Wheremembersortheirguestscauseharmtopropertyorto
people,theassociationand/oramemberhavestandingtosueincourtforinjunctiontostopthe
harmandformoneydamages.

Page92of101

BLOCKINGCONTROLINACONSENSUSPROCESS
WHYISCONTROLOFBLOCKINGINACONSENSUSPROCESSSOIMPORTANT?
Somecohousinggroupsthatuseaconsensusprocessrequireaunanimousapprovalofaproposalandallow
oneormorememberstoblockadecision.Thisisacriticalmatterbecauseacommunitysprogresstoward
projects,decisions,orproposalsthatallbutonememberwanttocarryoutcanbeblockedbythatone
memberifnoblockingcontrolproceduresareadoptedinthecommunitysgoverningdocuments.For
example,acommunitythatwantstoamenditsgoverningdocumentstoincludeablockingprocessmaybe
continuallystoppedfromdoingsobyasinglepersonwhoblockstheamendment.
ThereisanexcellentseriesofarticlesaboutthistopicintheJune2012issueofCommunitiesMagazine.
Aformingcommunitythatwantstouseaconsensusprocessandwantstoincludeaprocedureforcontrolling
blocksshouldincludeprovisionsinitsoriginalrecordedDeclarationofCovenants,Conditions,andRestrictions
(CC&R)that1)consensusprocesswillbeusedandthat2)theconsensusprocesswillincludeclearprocesses
forblockingandforgroupdeterminationofwhetherablockisappropriate.Theadoptedbylawsshouldthen
includeaconsensuspolicyanddetailedproceduresforconsensusandforblocking.InCalifornia,recording
CC&Rswiththesecovenantsmeansthatprospectivebuyershavenoticeoftheprovisionsandtheyare,if
challenged,presumedtobereasonable.
WHATIFYOURGOVERNINGDOCUMENTSDONTHAVEAPROVISIONFORCONTROLLINGBLOCKS?
Somecommunitiesestablishedtheirgoverningdocumentstoincludeaconsensusprocesswithoutprovisions
forcontrollingblockingbyoneperson.Thiscanfreezeacommunityinturmoilandconflict.

InCaliforniathereisaremedy.UndertheDavisStirlingAct,anindividualownerortheassociationmayfilea
lawsuitaskingthecourttostepinandreducethenumberofaffirmativevotesneededtoamendthe
associationsCC&Rs.Inthiscaseitwouldbetoreducethenumberofaffirmativevotesfromunanimity.For
example,anownerortheassociationcouldaskthecourttoorderthattheCC&Rscanbeamendedtoallow
decisionstobeapprovedbyunanimityminus,forexample,1or2,orby75%vote,orwhateverisreasonable
fortheassociation.OnceacourtorderallowsthemembershiptoamendtheCC&Rswithlessthana
unanimousagreement,themembershipcanamendtheCC&Rstoincluderulesforblockingincluding
qualificationsforeffectiveblocks.

Cohousingcommunitymembersinotherstatesmaywanttoresearchthepossibilityofthesametypeof
provisionintheirstatelaw.Ifnospecificprovisionexists,alegalremedymaybeacourtactionfordeclaratory
relief,thatis,arequestforajudicialdeclarationthattherequirementforunanimityisnotreasonable,andfor
acourtorderrequiringhowtheprovisionforunanimityinthegoverningdocumentsshallbechanged.

Page93of101

LANDUSE,ZONING,&ENVIRONMENTALLAWS

STARTWITHARESPECTFULANDFRIENDLYRELATIONSHIPWITHPLANNINGSTAFF

Whenyouknowthecountyorcitywhereyourcohousingprojectwillbe,thefirststepistodesignateacouple
offriendlyandpatientgroupmembersasrepresentativestovisitthelocalplanningdepartment.Make
contactwithstaffmembersandstartlearningaboutthelanduselawsandtheprocessesyouwillneedtogo
throughtogetpermitsforwhatyouwanttodo.Whenyoudescribeyourprojecttoplanningstaff,describeit
inplanningtermsnotasanintentionalcommunityorcohousingbutinlanduseplanningtermsas,for
example,acondominiumorplanneddevelopment.

KNOWWHATYOUWANT

Beforeyouevengototheplanningdepartment,youandyourgroupneedtoknowwhatyouwanttodo.If
youwanttodivideupspacesinanexistingstructureandraisechickensontheland,youwillneedtofindareas
wherechickenfarmsareallowedalongwithmultiresidentialdevelopmentandyouwillneedtoknowallthe
lawsthatregulatetheretrofitofexistingbuildingsandthedevelopmentandoperationofchickenfarms.
Manyifnotmostcountyandcitygovernmentshavedigitalaccesstolanduseareasorzones.Youcanalsogo
intoyourcityorcountyplanningdepartmentsandasktoseethezoningmaps.

SUBDIVISIONS

Ifyourprojectincludesdevelopmentoffiveormoreunitsorresidencesyouwillneedtomakesuretheproject
complieswiththeSubdivisionMapActandDepartmentofRealEstaterulesforsubdivisiondisclosuresinthe
SubdividedLandsAct.

LONGRANGEGENERALPLANSANDPOLICIES

Inadditiontoknowingwhatlandusezoneyourprojectwillhavetofitinto,somestatessuchasCalifornia
requireallcitiesandcountiestodeveloplongrangepoliciesandplansthatalldevelopmentandchangesin
landusemustfitinto.InCaliforniathisistheGeneralPlan.Youmayfindpolicies,plansandordinancesfor
thingslikedensityrestrictions,resourcemanagement,affordablehousingprograms,andinfrastructure
requirements.Themessageistoshapeyourprojecttofitwiththeselongrangeplanninggoalssoyoucan
avoidtimeconsumingredesignsandotherroadblocks.

VARIANCES

Ifyourprojectjustcantfitexactlyintowhatsrequired,itsimportanttoknowthelocalrulesforgettinga
variancewhichistypicallyaprocessthatrequiresaseparateapplication.

CALIFORNIACOASTALACT

IfyouwanttodevelopacohousingorintentionalcommunitynearthecoastinCaliforniayouwillneedto
checktoseeifyourchosensiteisinthecoastalzone.Ifitisinthecoastalzone,youwillberequiredto
conformtoanotherlayeroflawsthatprotectpublicresourceslikebeachaccess,andnaturalresourceslike
plantsandanimalsandtheirhabitatsinthecoastalareas.Thecoastalzonerangesfromseveralhundredfeet
toseveralmilesinland.

Page94of101

NATIONALENVIRONMENTALPOLICYACT/CALIFORNIAENVIRONMENTALQUALITYACT

NEPAisanenvironmentalreviewprocessthatappliestoallfederalprojectsanddevelopmentthatisfederally
funded.SoifyourprojectwillbeusingHUDfundsdepartmentofhousingandurbandevelopmentorother
federalfundsyouwillneedtomakesurethattheprojectcomplies.

TheCaliforniaEnvironmentalQualityAct(CEQA)appliestoallprojectsinCaliforniathatmaycauseaphysical
changeintheenvironmentbothhumanmadeandnatural.

BothNEPAandCEQArequireadevelopertoprovideinformationaboutandanalysesofthepossibleimpactsa
projectmayhaveontheenvironment.Thepurposeistocreateaninformedpublicdecisionmakingprocess
basedonpublicallyavailableinformationabouttheproposedproject,theenvironmentthatmaybeaffected
bytheproject,andthepossibleenvironmentaleffectstheprojectmayhave.

Ifthesiteyouvechoseninvolves,forexample,theretrofitofanhistoricalbuilding,hasastream,lakeor
wetland,orincludeshabitatsforprotectedplantsoranimalsyouwillneedtoallocateadditionalfundsfor
analysesandreportsonyourprojectsimpactsonthesepublicresources.

ApprovalsofpermitsanddocumentsrelatedtoNEPAandCEQAwillrequirepublicadministrativereviewand
approvalprocesses.Unlesssomeoneinyourgroupknows,orcanlearnabouttheseprocessesandguideyour
communitythroughthem,youmaywanttoconsiderworkingwithaplanningconsultantorlawyer.

Page95of101

PROTECTINGPLACEWITHCONSERVATIONEASEMENTS

WHATISACONSERVATIONEASEMENT?
Aconservationeasementisalegallimitationontheuseoflandinawrittendocumentthatis
executedbythepropertyownerandbindingonsuccessiveownersforthepurposeofretainingthe
landinitsnatural,scenic,historic,agricultural,forested,oropenspacecondition.Whilea
conservationeasementisanagreementbetweentwopartiesthepropertyownerandthe
easementholderitisfarmorethanjustacontract.Theconservationeasementdeedisanestatein
realpropertythatisrecorded,canbesold,andisperpetualinduration,thatis,futureownersbuythe
landwiththeeasementrestrictions.Thespecificinterestinthelandthatistransferredtothe
easementholderisdescribedintherecordedconservationeasementdeedandincludes,among
otherthings,theareaoflandtobeprotected,thespecificvaluestobeprotected,theusesand
activitiestobeallowedontheland,andtheusesandactivitiestobeprohibited.Thefederaland
stategovernmentsallowcharitabletaxdeductionsforthedonationofconservationeasementsthat
conformtospecificstatutoryrequirements.Insomestates,propertytaxreductionsarealso
available.
ISSUESRELATEDTOCONSERVATIONEASEMENTS
Conservationeasementholders.Toqualifyforfederaltaxdeductions,theeasementholdermustbe
astateorlocalgovernmententity,a501(c)(3)nonprofitcorporation,afederallyrecognizedNative
AmericanTribe,or,inlimitedcircumstances,anonfederallyrecognizedNativeAmericanTribe.To
beaneasementholder,a501(c)(3)nonprofitcorporationmustbeorganizedfortheprimarypurpose
ofpreservationofeasementvaluesnatural,scenic,historic,agricultural,forested,oropenspace
resources.Thebestsourceofinformationaboutlandtruststhatholdconservationeasementsisthe
LandTrustAllianceatwww.landtrustalliance.org.
Perpetuityandtheterminationofconservationeasements.Eventhoughaconservationeasement
maystatethattheeasementisinperpetuityandbindingonsuccessiveowners,therearediffering
legalopinionsastowhetherconservationeasementscanbeterminated.Ingeneral,thebasisfor
terminationisthedoctrineofchangedcircumstances.Thisdoctrineallowsoneoftheparties(usually
thepropertyowner)topetitionacourttoterminateaneasementbecausetheconditionsthatcalled
foritsexistencehavechanged.Forexample,ifaconservationeasementprotectsaforest,anda
droughtorfirecausesamajordieoffoftheforeststrees,wouldthedoctrineofchanged
circumstancesapplytoallowterminationoftheconservationeasementanddevelopmentofthe
land?Orifthesurroundinglanduseschangedsuchthattheprohibitedusesbecamemorevaluable
economicallythanthepermitteduses,wouldthepropertyownerbeallowedtoterminatethe
easement?
Toprotectthenaturalresourcesinperpetuity,aconservationeasementshouldincludea
statementofagreementbythelandownerandtheeasementholderthatspecifiedconditionsarenot
groundsforterminationbasedonimpossibilityorimpracticability.Intheabovecases,easement
Page96of101

termscouldincludeastatement,forexample,thatweatherandothereventsthateliminatespecies
orharmecosystemsshallnotbegroundsforterminatingtheeasementorthatchangesinthe
surroundinglandusesthatcausetheeasementtobeeconomicallyimpracticalshallnotbeaground
forterminatingtheeasement.
Whatyouwanttoprotectandhowyoudecidetoprotectitinlightofforeseeableoranticipated
economicandclimaterelatedchangesshouldbewellthoughtthroughinordertocraftaneasement
thatwillprotectland,environment,andcommunityovertime.
Taxdeductionsfordonationofconservationeasements.Thedonationofaconservationeasement
isagiftofaninterestinrealproperty.Tobeeligibleforfederalincometaxdeductionsasacharitable
donation,aconservationeasementmustrestricttheuseoftheland,theuserestrictionmust
promotespecificconservationpurposes,theeasementmustbeperpetual,andtheeasementholder
mustbeaqualifiedorganizationasdescribedabove.Statesalsoprovidetaxincentivesfor
conservationeasements.Forexample,inCalifornia,countytaxassessorsarerequiredtoconsiderthe
effectofenforceablelanduserestrictionsonpropertyvalue.Thefederalgovernmentalsoallows
estatetaxdeductionstoreflectthevalueofthepropertywiththeeasementrestrictions.
Conservationpurposes.Theconservationpurposesrequiredforfederaltaxdeductionsare
preservationoflandforpublicrecreationoreducation,protectionofnaturalhabitatforfishand
otherwildlife,plantsorecosystems,preservationofopenspaceincludingfarmlandandforestedland
forpublicscenicenjoyment,orpreservationofanhistoricallyimportantareaorstructure.
Baselinedocumentationreport.Abaselinedocumentationreportisawrittendescriptionwithmaps
andphotographsoftheconservationvaluesandpublicbenefitsthatexistontheland.Thereport
recordsboththeexistenceandconditionoftheresourcesatthetimetheconservationeasementis
created.Thereportsupportsqualificationfortaxbenefitsandprovidesthebaselinedatafor
monitoringandenforcementoftheeasementsterms.
Mineralrights.Therighttoextractminerals,gas,andoilmaybeownedbysomeoneotherthanthe
ownerofthesurfaceofland.Anyoneinterestedinbuyinglandforpreservationinaconservation
easementshouldcarefullysearchthetitlerecordstodetermineiftheunderlyingmineralrightsare
separatelyowned.Theholderofmineralrightshasthelegalrighttoaccesstheminerals,gas,oroil
toberemovedandtodisturbthelandssurfacetoremovethem.Oncetheyareremovedtheyare
thepersonalpropertyofthemineralrightholder.Forthepurposeoffederaltaxbenefits,the
requirementforprotectionoftheconservationpurposesinperpetuitymaynotbemetifthereare
underlyingseparatelyownedmineralrightsonthelandthatmayberemovedinthefuture.
Ifyouhavepurchasedthesurfacerightstolandwithouttheunderlyingmineralrightsandyouwant
toprotectthelandanditsresourcesfromdisruptioncausedbymininganddrillingactivities,aquiet
titleactionmaybeanavailableoptiontoreattachthemineralrightstothesurfaceoftheland.
Recordationoftheeasement.Aconservationeasementshouldberecordedimmediately.
Recordationisessentialtoprovidelegalnoticeoftheeasementbecauseanunrecordedeasement
maybechallengedorterminatedifthelandissoldtoabuyerwithoutnoticeoftheeasement.A
prospectivebuyerisconsideredtohavebeennotifiedwhenaneasementisrecorded.
Page97of101

Amendmentofeasements.WhileCaliforniaandseveralotherstatesdonotprovideforlegal
amendmentsofconservationeasements,manystatesdo.Thefederalrequirementforperpetuity,
however,mayconflictwithaneasementthatallowsamendmentstothetermsrelatedtoprotection
andpreservationoftheconservationvalues.
Marketablerecordtitleactsanotherpossiblethreattoperpetuity.Oneoftheoverarchingland
usepoliciesinthisnationispromotionandencouragementofthesalabilityofland.Tosupportthe
policy,manystateshavestatutesthatcauseantiquatedliens,easements,andoptionsthatmay
hamperthesaleofpropertytobeextinguishedafteraspecifiedtime.Whilesomestates,including
California,excludeconservationeasementsfromexpirationundertheact,amarketablerecordtitle
actwithoutthatexclusioncouldbedetrimentaltotheperpetuityofaconservationeasement.
Coownedproperty.Oneownerofanundividedinterestinland,suchasanowneroflandasa
tenantincommon,cannotcreateaneasementthatbindsthesharesofothercoowners.Allowners
mustparticipateinexecutionofaconservationeasement.

Page98of101

ADDITIONALRESOURCES FORSHARINGANDCOHOUSING

FellowshipforIntentionalCommunitywww.ic.org(Hasadirectoryofecovillages,cohousingandother
intentionalcommunitiesthroughouttheU.S.andtheworld).
CohousingAssociationwww.cohousing.org(Anationaldirectoryofcohousing,withdetailedinformation
andstatisticsabouteachcommunity,andlotsofgreatarticles).
GlobalEcovillageNetwork,www.ecovillage.org(includesaglobaldirectoryofecovillages)
CoopDirectoryServicewww.coopdirectory.org
EastBayCohousing:www.ebcoho.org
SharingSolutionWebsiteandBlog:www.sharingsolution.com
Shareable:www.shareable.net
Websitesdesignedtofacilitateneighborhoodsharing:
www.nextdoor.com
www.ohsowe.com
www.rblock.com
www.rentalic.com
www.neighborrow.com
www.neighborgoods.com

Books:

TheSharingSolution:HowtoSaveMoney,SimplifyYourLife&BuildCommunity,byJanelleOrsiand
EmilyDoskow(Nolo2009)

SharingHousing:AGuideForFindingandKeepingGoodHousemates,byAnnamariePluhar(Bauhan
Publishing)

Superbia:31WaystoCreateSustainableNeighborhoods,byDanChirasandDaveWann(NewSociety
Publishers)

Cohousing:AContemporaryApproachtoHousingOurselves,byKathrynMcCamant,CharlesR.Durrett,
andEllenHertzman(TenSpeedPress)

CreatingCohousing:BuildingSustainableCommunities,byKathrynMcCamantandCharlesR.Durrett
(NewSocietyPublishers)

TheCohousingHandbook:BuildingaPlaceforCommunity,byChrisScottHansenandKellyScottHansen
NewSocietyPublishers)

SeniorCohousing:ACommunityApproachtoIndependentLiving,byCharlesDurrett(TenSpeedPress)

CollaborativeCommunities:Cohousing,CentralLiving,andOtherNewFormsofHousingWithShared
Facilities,byDoritFromm(VanNostrandReinhold)

TheGreatNeighborhoodBook:ADoitYourselfGuidetoPlacemaking,byJayWalljasperandProjectfor
PublicSpaces(NewSocietyPublishers)

CreatingaLifeTogether:PracticalToolstoGrowEcovillagesandIntentionalCommunities,byDiana
LeafeChristian,(NewSocietyPublishers)

ToolboxforSustainableCityLiving:ADoitOurselvesGuide,byScottKellogg,et.al.(SouthEndPress)

TheConservationEasementHandbook,byElizabethByersandKarinMarchettiPonte(TheTrustforPublic
LandandTheLandTrustAlliance)

Page99of101

LISTOFRESOURCESFORLESSEXPENSIVEHOUSES

www.oasisdesign.net

Earthplasterbuilding

www.grisb.org/plans

GeigerResearchInstituteSustainableBuildinglowcosthouseplans

www.tumbleweedhouses.com

TumbleweedTinyHouseCompany

www.tinyhousedesign.com

TinyHouseDesignMoreAttainableandSustainable

www.thistinyhouse.com

Thistinyhousebewell,travellight,andgiveitallaway

www.tinyhouseblog.com

LivingSimplyinSmallSpacesincludingshippingcontainerhomes

www.tinyfreehouse.com

Forcreativeuseofusedpallets

www.tinypallethouse.com

Pallethouses

www.designboom.com

Tinyhousessmalldwellingsofeveryshapeandsize

www.smallhousestyle.com

Plans,photos,andbuildersofsmallhouses

www.dornob.com

Shippingcontainerhomeplans

www.designcrave.com

Photosandinformationaboutshippingcontainerhomes

www.newavenuehomes.com

Designsandbuildssmallhomes

www.yesmagazine.org

SeetheirOctober2008postingLivingLargeinaTinyHouse.

www.yesmagazine.org

YesMagazine,Spring2012onMakingitHome

www.instructables.com/id/HowtoBuildDirtCheapHouses

AdditionalResource:
ExcellentArticleSeriesonMakingCohousingAffordable:WitharticlesbyBetsyMorris,BradGunkeland
ReneeHart:http://www.cohousing.org/cm/article/affordable_1

Page100of101

Legal Services for


Cohousing, Nonprofits, and Cooperatives
Servicesinclude:LegalEntityFormationAgreementsRealEstateLaw
JanelleOrsiisanattorneyandmediatorinOakland,andadvisesindividualsand
groupsthroughoutCalifornia.Sheworkswithcohousingcommunities,ecovillages,
socialenterprises,nonprofits,cooperatives,communitygardens,localcurrencies,
andothersdoinginnovativeworktocreatemoresustainableandsharingcommuni
ties.JanelleisalsotheDirectoroftheSustainableEconomiesLawCenterinOak
land.SheattendedUCBerkeleysBoaltHallSchoolofLaw.
JanelleiscoauthorofTheSharingSolution:HowtoSaveMoney,Simplify
YourLife&BuildCommunity(NoloPress2009),apracticalandlegalguideto
cooperatingandsharingresourcesofallkinds,andauthorofPracticingLawin
theSharingEconomy(ABABooks2012).

Law Office of Janelle Orsi


3871 Piedmont Ave. #55, Oakland, CA 94611
510-649-9956, Janelle.Orsi@gmail.com

www.JanelleOrsi.com

Legal Services for

Cohousing and Intentional Communities


Environmental Protection
Government Accountability
CynthiaHawleyslawpracticeincludeslegalservicesforthedevelopment,
organization,andongoingsupportofsustainablecohousingandintentional
communities,andcivillitigationforenvironmentalprotectionandgovern
mentaccountability.Cynthiarepresentsindividuals,nonprofitcorporations,
andassociations.SheservedasanelectedmemberoftheCambriaCom
munityServicesDistrictBoardofDirectors,cofoundedtheCoalitionto
SaveCambriaandSanSimeon,andcurrentlyservesasdirectoronthe
boardsofLandWatchSanLuisObispoCountyandtheWomenLawyersAsso
ciationofSanLuisObispoCounty.CynthialivesinCambriaontheNorth
CoastofSanLuisObispoCounty.

The Law Office of Cynthia Hawley


1306 Tamson Drive, P.O. Box 29, Cambria, CA 93428
Phone: 805-927-5102, Fax: 805-927-5220
cynthiahawley@att.net

www.CynthiaHawley.com