Mobile home park conversions are complex and the exact process varies according to state law. The conversion to cooperatively held communities are complicated and there are multiple steps and state laws that must be recognized. Therefore the first step in the process is to retain an attorney and real estate consultant who will work with you and guide you through the process of forming a resident owned community.
The first step towards resident ownership is for the park residents to form an ownership entity which will purchase and own the park land. Ownership entities include non-profit co-operatives, non-profit corporations and land trusts. If the ownership entity formed is not a cooperative, ideally, the park should plan to transition to cooperative ownership over time.
Forming the ownership entity will require filing Articles of Incorporation and Bylaws with the state. Your attorney and real estate consultant should work with you through this process. The Articles of Incorporation establishes the corporation as a business entity, describes the kind and scope of the corporation and can be difficult to amend. The bylaws state how the corporation will operate and conduct business and describes the board of directors, board meetings and other rules of the organization. Bylaws generally can be amended by a majority vote of the board. A board of directors will need to be established as described in the bylaws.
While there are various types of ownerships entities that can be used in forming a resident owned community, this overview will focus on the cooperative ownership structure.
In a cooperative ownership structure, the co-op purchases and owns the land and resident members own shares in the co-operative but continue to own their homes individually. The cooperative method of operation is built around a Board of Directors which is democratically elected by the resident members of the coop and in accordance with the established bylaws. Each member household of the Cooperative has one vote and major decisions are made by majority vote of the member elected Board of Directors.
The cooperative functions through its Board of Directors, which acts on behalf of the members. One of the most important functions of the members is the selection and election of the Board of Directors. Thus the voting right means that the member participates through his/her elected representatives in the management of the Cooperative.
The Board performs important duties such as deciding how the park will be managed whether through self management, contracting with a property management company or employing staff to manage the park. Other responsibilities of the Board include establishing eligibility standards for membership admission, promulgating rules and regulations for the park; and adopting an operating budget.
Membership in the co-op is open to all owner-occupied households who have the option of joining the co-op or not. Households that choose to join the coop pay a one time membership fee that entitles them to ownership shares in the co-operative, a lifetime lease as long as rules are followed and voting rights. Households choosing not to join the co-op can remain in the park as tenants but generally will pay a higher monthly rent and do not have voting privileges. All households continue to pay monthly rent but instead of paying a landlord, the rent goes to the non-profit cooperative which then pays the mortgage and the costs to operate and manage the park. All of the rent goes back into the park as opposed to investor ownership where part of the rent is profit for the owner. Any new resident moving into the park must become a member of the cooperative. Member fees are returned to those members who move out of the cooperative park.
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