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101 Ways To Improve Your Cooperative

CHAPTER TWELVE: DEALING WITH TODAY’S ECONOMIC DISTRESS

        Nearly all Cooperatives are experiencing difficult times due to members not paying carrying charges and the resultant high vacancy rate of units. This section provides strategies to deal with these problems.

93. Hold the line on your screening standards. Too often Boards lower their admission requirements in the face of high vacancy rates. Moving people in to the Cooperative who should be rejected creates a vicious circle and will end up costing the Cooperative more in legal fees incurred to get rid of them. Avoid that temptation and keep your standards high.

94. Realize that your Cooperative is competing with other nearby forms of housing and since few non-members appreciate the significance of living in a community such as yours, you must develop strategies to educate. Accentuate the positive attributes of the Cooperative in your marketing plan and advertisements.

95. This is one reason it is important to freshen up your property once the HUD mortgage is paid off, as discussed above. Your units need to have “street appeal.” New siding, windows, cabinets and fixtures go a long way to make your Cooperative competitive.

96. Consider launching a community foundation within your Cooperative to serve the needs of your members. Other cooperatives have successfully implements programs such as day care, computer learning labs, latch key programs, job training and placement, and services for seniors. In some cases, government funding can be obtained. This can be a major marketing tool to attract new members. Check with the Management Agent and Cooperative Attorney for guidance on how to do this.

97. It may be necessary to consider alternatives, as many have done, to allow applicants to come into the Cooperative without paying the full membership fee up front.

98. One option is to allow the applicant to pay the membership fee over a period of months or years in addition to the monthly carrying charges. During this period, the person is treated as a tenant, not a member. Thus, he or she cannot vote until the full membership fee is paid in full. A variation of this is to make the applicant a tenant but grant an option to purchase for one dollar once the Cooperative has collected a sufficient sum to constitute the membership fee. To achieve these strategies, there may need to be amendments to the governing documents, and the Cooperative Attorney should be engaged to assist.

99. Some cooperatives find that it is difficult to fill one-bedroom units. If they are adjacent to one another, consider combining two one-bedroom units into a single two-bedroom unit. This will require an amendment to the governing documents.

100. For market rate cooperatives, it may be possible to negotiate “recognition agreements” with lenders who will loan money to applicants called “share loans.” The Board and the lender decide the amounts that may be made available for loans. If the member defaults in paying the share loan, it is called a “cross default” and the cooperative bears the responsibility to terminate the membership and evict the person, and then the lender takes over the unit, markets and sells it to a person who satisfies the cooperative’s admission requirements.

101. A variation of the share loan concept is for the cooperative to facilitate “seller financing” whereby the outgoing member defers full payment from the incoming member, and instead takes payment over a period of time.

Disclaimer

This primer is intended to provide the reader with a starting point to understand the law of housing cooperatives in Michigan. It should not be used as a substitute for qualified legal advice from a competent, experienced attorney licensed to practice law in the your state.

Copyright©

The content of this booklet is copyrighted by Randall A. Pentiuk. Any reproduction of it or any part of it is prohibited without the prior express written permission of the author. Requests for permission to reproduce it or any portion thereof should be addressed to Randall A. Pentiuk at 2915 Biddle Avenue, Suite 200, Wyandotte Michigan 48192, or by calling him at 734- 281-7100, faxing him at 734-281-7102 or emailing him at RPentiuk@pck-law.comcreate new email.

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