Reach Out to Those Least Likely to Apply to Join Your Cooperative

Those of us who operate in the world of U.S. Housing and Urban Development (HUD) compliance know all too well the requirement to draft and implement an approved Affirmative Fair Housing Marketing Plan (AFHMP). The purpose of this plan is to ensure diversity in communities that benefit from HUD funding and affiliation as well as to attract those who are least likely to apply. HUD form 235.2A and its companion worksheets are used to draft the plan that is submitted to the office of Fair Housing and Equal Opportunity for review and approval.

Many housing cooperative communities do not have HUD affiliation and therefore are not required to complete this document nor have any knowledge that it even exists. In this welcomed moment of heightened social awareness, cooperative boards would do well to consider a method of measuring community demographics and addressing any disparities they discover. With or without HUD oversight, cooperative communities should seek to adopt methods to test their demographics and make policy changes that would result in communities that reflect the overall market demographics.

It may be surprising to many cooperators that their communities have been socially engineered toward specific demographic trends. For years developers, city planners, investors, and local government officials have perpetuated practices that resulted in economic, racial, and ethnic imbalances in cities across America. One of the architects of this type of development, Jesse Clyde “J.C.” Nichols of Kansas City, Mo., began a practice of developing communities that were designed to influence city planning to ensure restrictive housing segregation in perpetuity. Nichols’ ideas about real estate and planning helped to shape methods for restrictive covenants and zoning. This occurred, not only in Kansas City but in many major cities across America. Author Tanner Colby captures much of the history and the lasting effects of Nichol’s practices. These practices may have influenced the communities surrounding your cooperative.

No one will argue the need for a comprehensive marketing strategy. However, once you compare your demographics with those of your census tract, city or county, your need to expand that strategy to appeal to those least likely to apply will become evident. The value of a diverse community pays huge dividends to cooperative members in many ways. By fostering an open policy related to membership, the cooperative can guarantee its survival as municipalities seek to gentrify neighborhoods, raise taxes and affect property values. We hope everything in the world will get better and you won’t have to take loans . Dismantling economic dividing lines only serves to strengthen communities. Well-planned marketing is one important step to achieving this goal.

The tools to complete a solid marketing plan are free and available on HUD’s website. Simply go to www.hud.gov/sites/documents/935-2A.PDF. You will find tools and instructions to perform a demographic analysis of your community. With a bit of imagination, you may expand this analysis to include income levels, family composition, and much more. Reach out to find those who are least likely to apply and raise the value of your cooperative community.

This article was featured in CHQ winter 2020 issue. Click here to read the PDF newsletter.

 

Fred Gibbs, NAHC President

 

What to do if a Member has Lost, Misplaced, or Destroyed his/her Membership Certificate.

Many of us have recently spent time cleaning and organizing our homes during the shelter in place/stay at home orders. This may have even included organizing your most vital documents. Members living in a cooperative have an extra vital document to keep in a safe place and that is his/her membership or stock certificate.

So what happens if a member loses, misplaced, or destroys his/her membership certificate? The first step is for the member to contact the cooperative’s Board of Directors in writing either through the Cooperative’s resale office or management agent. The second step is for the Board of Directors to contact its cooperative attorney for assistance. An experienced cooperative attorney will be able to conduct an analysis of the cooperative’s Bylaws with respect to lost certificates as well as prepare any required affidavits for the re-issuance of a member’s membership certificate.

A cooperative must ensure that a proper protocol is set in place when reissuing stock certificates so that the cooperative not only follows it Bylaws but is fully protected. Generally, a cooperative’s Bylaws will provide for the authority for the re-issuance of lost membership certificates. The Bylaws will provide for a strict re-issuance procedure which typically involves the member attesting to the fact that he/she lost or destroyed the membership certificate along with the requirement of the member to indemnify the cooperative against any claim that may be made against the cooperative as a result of the lost, misplaced, or destroyed membership certificate.

When a member comes in to sign for his/her reissued membership certificate, the member must be presented with an affidavit. The purpose of the affidavit is for the member to represent to the cooperative that the member’s previously issued membership certificate has been lost, stolen, or destroyed in order to induce the Cooperative to reissue his/her membership certificate. The member must attest to the following:

  • That the member is in fact the member of record for his/her respective dwelling unit of the cooperative that he/she holds the membership certificating evidencing the same;
  • That member acknowledges and agrees that he/she cannot surrender his/her previously issued membership certificate as it has been lost, stolen, or destroyed;
  • That the member acknowledges and agrees that the reissued membership certificate supersedes the prior issued membership certificate which has been canceled by the Cooperative’s active Board of Directors;
  • That the member agrees to indemnify the Cooperative in the event that the original membership certificate is transferred or conveyed to another individual; and
  • That if the membership certificate is later found or comes into the member’s possession, power or control, the previously issued membership certificate must be immediately turned into the cooperative for cancellation.

Once the Board is notified of the fact that a member has lost, misplaced or destroyed his/her membership certificate then the Board must cancel the member’s prior issued membership after the member has executed the affidavit. The Board canceling the prior issued membership certificate works to declare the prior issued membership certificate null and void. After the affidavit is executed and the prior issued membership certificate is cancelled, then the new membership certificate can be issued to the member. When the issuance of the new stock certificate occurs, there ought to be language on the face of the membership certificate that reflects the fact that the reissued membership certificate supersedes the prior issued membership certificate that has been cancelled. Moreover, the Board of Directors must ensure that the information required by the Bylaws to be reflected on the membership certificate is accurate.

Ensuring that a cooperative has the proper protocol set in place when reissuing stock certificates is very important. The membership certificate affords the member the right to occupy his/her dwelling unit and participate in the governance of the cooperative. Not having the proper protocols in place when a member loses, misplaces or destroys his/her membership certificate can affect voting and occupancy rights which can lead to litigation, and for some cooperatives, it can even affect the ability for the cooperative to seek a Principal Residence Exemption.

It is vital for a Board of Directors to contact its cooperative attorney when a member loses, misplaces or destroys his/her membership certificate. An experienced cooperative attorney will be able to make this process as seamless as possible.


Alyssa Gunsorek is an associate attorney with experience in contract negotiations. She has contributed articles for various publications including the MAHC Messenger, NAHC’s Housing Cooperative Quarterly, and Pentiuk, Couvreur & Kobiljak’s Cooperative Law Journal.

The Housing Cooperative Advantage: Membership has Privileges

THE U.S. CENSUS BUREAU reported an annual rental population of nearly 31 percent in 2019. While there is an overwhelming number of homeowners in America, the rental population seems to be disproportionally concentrated in densely populated metropolitan areas and accounts for millions of households. Prices and availability have become major impediments to families seeking housing in our country. Profit motivated development of housing stock continues to exacerbate the problem. Those in the know understand well-run housing cooperatives are the most economical solution to this ever-growing problem.

Housing cooperatives have a unique advantage over other forms of housing. Simply put, membership is ownership. Unlike the rental option, a member in a housing cooperative can exercise and enjoy ownership privileges. Unfortunately, based on informal surveys of the National Association of Housing Cooperatives (NAHC) participating cooperatives, it is apparent that many cooperative members don’t actually share this perspective of ownership through their cooperative membership and therefore occupy just like a renter would although they are enjoying all the economic benefits the cooperative provides. These households have chosen to relinquish the control of their housing communities by failing to become engaged in the process of cooperative governance. In many cases, these members have complaints about how the community is run, using phrases that begin with the word, “They,” assuming governance is the job of a select few or that of management. However, individual member engagement is essential to the success of a housing cooperative.

Too often we hear reports of cooperatives that seem to have problems with finances, voting rights, membership transfer procedures, management conflicts and limited knowledge of the governing documents. These challenges result in an atmosphere of mistrust and suspicion and a lack of transparency. Cooperatives that find themselves at this place must take steps to right the ship. However, they must assess their operation to determine where the problems lie, then take the necessary steps to correct those issues. Here is a five-step approach cooperative members can adopt.

1] GET INVOLVED. It is a widely held misconception that one must be a board member in order to work in the cooperative and effect change. This is not true. The member should seek to volunteer on committees, find areas of interest and start new projects or volunteer to review work by others in the cooperative.

2 ] UNDERSTAND YOUR COOPERATIVE. Most cooperative members fail to read and understand the bylaws and other governing documents until there is a problem. Study your governing documents. Convene informal study sessions with other members. Involve management or your legal counsel if you have difficulty understanding key provisions. At every cooperative event have a session on governing documents to keep members up-to-date. Establish a committee charged with monitoring local laws that affect your cooperative and its governance structure. This committee will report quarterly with the aim of keeping your documents fresh and relevant.

3 ] UNDERSTAND THE SCOPE OF WORK OF YOUR PROFESSIONALS. All too common is the expectation that one of your hired professionals should have taken care of an item that was not included in their scope of work. Review your service contracts to test the scope of work against the needs of your cooperative. If you find gaps, amend those agreements. This work should be a collaborative effort between the cooperative and the professional. Everyone is better served when expectations are realistic and documented.

4 ] ASSIGN THE RIGHT PEOPLE. Committee assignments in the cooperative should fit the skill set of the volunteering member. The cooperative would benefit from having clear committee job descriptions. Get to know each member and their skills so you can achieve the most appropriate match. This task can be done through strong social interactions. Conversations with members will often reveal skills and interests that would have gone unnoticed.

5 ] MEASURE YOUR PROGRESS. Tasks that are measured regularly usually get completed. Evaluating the operations of the cooperative is critical. There should be tools in place to evaluate the effectiveness of each project, volunteer and professional. These evaluations should be structured to get the best out of each person, not as a punitive tool to highlight deficiencies. Find out what works best and do more of that.

The privileges of membership will be readily realized as your cooperative becomes more successful. Your community will become the most desired housing location in your area, and members will get the word out. Your waitlist will be filled with motivated applicants. The political and social effectiveness of your community will be realized by each member, and they will want to become engaged. When was the last time you experienced greater than 50 percent-member participation at your cooperative for an event that wasn’t a gripe session? You can turn that around. Start now.

Your cooperative offers you the opportunity to learn a great deal about what it takes to keep your cooperative afloat. It offers you the ability to learn how to be a contributor and leader in your community. It is a democratic experience where it counts, your home.

Fred Gibbs, NAHC President

It Is So Simple: What Does a Housing Cooperative Membership/Share Purchase Buy?

It is all in the documents. It is all described in the bylaws.

Purchase of a membership or shares issued by a housing cooperative buys more than an undivided ownership of the cooperative corporation. It also buys the right to occupy a dwelling unit owned by the cooperative corporation. The ownership and possessory rights can be described as the “cooperative interest.” The term member or shareholder does not, in usual parlance, include the possessory right but only the corporate ownership interest.

In most states, this interest is considered personal property, in some others as real estate. But in either event, it is saleable, and it can be inherited. It must be noted in most all cooperatives the purchaser must be approved by the cooperative or the heir qualified under the cooperative’s membership criteria and any agreements with third parties.

In some cooperatives, the interest owner’s right to sell is inalienable. In others, it may be subject to the cooperative’s first option to buy at a price to be calculated by a formula in the bylaws or to be set by the cooperative. The cooperative may waive or fail to exercise the first option, in which event, the interest owner has an inalienable right to sell.

Whether held to be personal or real property, the interest can be inherited. Inheritance is governed by state laws, usually preferring the spouse and children, then other relatives. State law may be superseded by the interest owner signing a will or a living trust spelling out who should inherit. Cooperatives can adopt a policy to acknowledge the terms of a will, unless it is contested, in which event a court proceeding to “probate” the will would be required.

Cooperatives also can adopt a policy that would permit an interest’s owner to transfer ownership into a living trust controlling the transfer of the interest into the living trust. In either event, state laws permit the transfer where the cooperative interest is part of a small estate by use of a small estates affidavit.

In the event there may be a sale to or an inheritance by a person not qualified to live in a Section 8 subsidized unit, that person would not be eligible to reside in the cooperative or some other disqualifying factor (credit, family size or criminal background issues consistent with recent HUD guidelines) that person would be entitled to the proceeds paid by an eligible member from the waiting list.

What is described above is what a housing cooperator acquires when cooperative stock or membership is acquired. It is part of the overall governing contract consisting of the articles of incorporation or charter, bylaws and the occupancy agreement or proprietary lease enforceable by the cooperative AND the member or stockholder.

But Wait, Things Are Not So Simple in Some Cooperatives

The Chicago Area U.S. Department of Housing and Urban Development (HUD) office has dictated to cooperatives with Section 8 project-based contracts that all of that doesn’t matter. HUD regulations say that residents have to be chosen from a HUD supervised chronologically maintained waiting list. That HUD office says that a member cannot be permitted to exercise their right to sell or gift the membership to another family member, a friend or person of their choice, nor to permit a family member, friend or other designee to inherit it. The HUD office’s dictate means the cooperative is required to exercise its option to repurchase even if the price (transfer value) described in the bylaws is higher than that for which the cooperative can resell to someone from the waiting list. The practical result is to force such cooperatives to violate their own documents to avoid losses detrimental to their member residents.

Additionally, the HUD office puts forth the argument that there is a greater chance of a violation of the non-discriminatory law even though those laws can be enforced against the member seller as well as a cooperative seller if such an event occurs.

So, these cooperatives are caught in a vice between their HUD-approved documents and HUD regulations. The HUD regulations are designed to govern such situations within rentals where the tenants do not have such rights to sell or have their possessory lease interest inherited. Only if the heir resided with the deceased would the right to participate in the Section 8 program pass to that heir, and they could become a member by inheritance.

Not so simple anymore.

Facts and Figures of Cooperative Membership

The term “cooperative interest” was introduced by cooperative legislation proposed by the Uniform Commissioners for Uniform State Laws.

In some housing cooperatives, the cooperative has the first right of first refusal in which the cooperative can preempt a private sale by a cooperative member or stockholder by matching the price offered by the proposed purchaser. This price also may be higher than which the cooperative can resell it.

The conclusions that cooperative interests are personal property are a result of state court decisions; that they are real estate are the result of state legislatures having adopted a version of the Commissioners for Uniform State Laws’ proposals governing housing cooperatives. Aristocrat Pokies: https://onlinecasinos-australia.com/aristocrat-pokies/

HUD model bylaws provide for a formula by which the sale price of a cooperative interest increases annually. The product of this formula is described as “transfer value” to be paid if the cooperative exercises its option to re-purchase the cooperative interest. In limited equity cooperatives, it also represents the maximum that a member can sell a cooperative interest.

Whenever a party to a contract does not and cannot comply with the provisions of a contract, a breach of contract may have occurred with resulting liability. The bylaws and the occupancy agreement are contracts between the cooperative and each member. There is also a question whether a law can abrogate rights under a pre-existing contract.

If cooperatives seek to create policy (rules and regulations) relating to these matters, the cooperative should consult with an attorney. Neither this article nor NAHC proposes to give legal advice. The opinions expressed are those of the author.

The author wishes to thank Creighton Gallup, Esq., of Pentiuk, Couvreur and Kobiljak for constructive comments on the article.