Last update: 10/18/2019
Formally, housing cooperatives are voluntary non-profit associations of citizens created to meet the housing needs of the members of these cooperatives. This is a type of consumer cooperative.
In fact, housing cooperatives , most often, were created at the suggestion of Developers, for whom this form of selling apartments under construction is more convenient than selling apartments under DDU, since the legislative regulation here is much weaker than the strict requirements for shared construction.
Briefly it looked like this. For a separate project, a developer creates his own “pocket” housing cooperative (HCC) , with the shareholders of which Share Contribution Agreements or Share Accumulation Agreements , and thus quite legally raises money for the construction of a new house. The housing cooperative accumulates funds from shareholders and then enters into an investment contract with a development company for the construction of an apartment building.
The initial prices in such a cooperative were often temptingly low, but the responsibility of the Developer was minimized here. Therefore, buying a new apartment in a housing cooperative has always looked attractive, but quite risky.
True, as of July 1, 2021, legislators have closed this loophole for Developers, although purchasing an apartment through a cooperative still remains possible (more on this at the end of the article).
Scams and fraud with housing (special section). Instructive stories with practical examples.
Housing cooperative agreement - what is it?
Housing cooperative is a cooperative created for the construction of apartment buildings, management of construction companies , or developers. Citizens have the right to join a cooperative and become its members for the purpose of subsequently purchasing housing.
The housing cooperative, in turn, guarantees the provision of residential premises after the new building is put into operation , since upon completion of construction the cooperative acquires the status of housing and can dispose of the house at its own discretion.
It's time to find out what a housing cooperative agreement is - this is one of the most common schemes for selling real estate in new buildings.
Price component
Housing in a housing cooperative can be purchased cheaper than from a developer under the DDU. Within the framework of shared construction, there are certain restrictions that cause a higher cost of real estate compared to cooperative housing:
Firstly,
the developer must not only recoup expenses, but also make a profit, otherwise his activities become meaningless. Construction by a cooperative has different priorities; participants need housing, so the primary task is to cover construction costs;
Secondly,
The developer, when selling housing, is forced to include VAT in the price.
Self-construction (by a cooperative)
is not subject to value added tax;
Third,
the developer cannot avoid the costs that arise when insuring his liability to shareholders; the law obliges to insure risks, and the costs are also included in the price of housing. There are no such requirements for housing cooperatives; however, the lack of transaction insurance significantly increases the risks of cooperative members.
Advantages and disadvantages of the system
Having purchased housing, a citizen becomes a shareholder ; registration of property rights is carried out not on the basis of an agreement, but by providing a certificate from the housing cooperative confirming full payment for housing in shares:
- this certificate does not need to be registered with the FDSO;
- a housing cooperative agreement when purchasing a new building is quickly and easily drawn up;
- it does not need to be registered with Rosreestr;
- By joining a cooperative, you can independently monitor the progress of house construction and have the right to choose members of the housing cooperative;
- Contributions can be made in installments over a long period of time, regardless of the readiness of the object;
- owners pay less in future utility costs.
The disadvantages of joining a co-op are that:
- The housing cooperative cannot regulate construction and, in case of non-compliance with the deadlines for the delivery of the house, demand the payment of fines from the developers.
- Also, the cost of the object may well change, while the cooperative is not a developer, it is just a customer, which means that nuances and unexpected surprises are subsequently obvious.
In this chain of relationships, different and unpredictable situations may arise.
You can learn about the risks of housing cooperatives and housing cooperatives on our website. We offer you additional information about:
- leaving the cooperative;
- payment of shares;
- activities;
- registration;
- membership;
- and the general meeting of owners.
Quality guarantees
The quality of construction is one of the most important parameters by which potential equity holders/shareholders often choose a new building.
Purchasing under the DDU presupposes that the shareholder is a consumer, therefore he is protected by the Consumer Rights Law.
In turn, a member of the cooperative (housing cooperative)
it is not, because a member of a voluntary association, in fact, consumes his own services. Thus, the court will not help protect the rights of the cooperative participant regarding the quality of housing and other construction parameters.
According to the DDU, the developer bears warranty obligations to the shareholder for five years. That is, if, after a certain time after accepting the apartment, the shareholder identifies shortcomings, the presence of which could not be determined at the time of transfer of housing, the developer is obliged to eliminate these shortcomings. Warranty period, which must be specified in the DDU (according to Federal Law-14)
is 5 years. In turn, housing cooperatives cannot be forced to eliminate shortcomings, since Federal Law-215 does not say anything about the warranty period.
When and in what cases does it consist?
An agreement between the housing cooperative and the owner is concluded immediately upon joining the cooperative. Citizens become shareholders and are exempt from taxes.
Having concluded an agreement on participation in a housing cooperative, the buyer is provided with an installment plan for a long period , unlimited in any way. The shareholder can continue to pay contributions while already living in his apartment, and this is a plus of this scheme, and a good alternative to a mortgage.
The procedure for registering real estate does not cause difficulties, since it is not subject to registration with the state. organs
The rights of shareholders are spelled out in the charter of the housing cooperative , which was formed even before citizens joined the cooperative. The charter specifies the amount of contributions, the frequency of their payment, as well as the conditions for leaving the cooperative, the amounts that the shareholder must return without fail. But this is ideal; there are many pitfalls.
Types of documentation
Developers offer different forms of agreements. The price of real estate, the level of possible risks and losses depend on the type (form).
The most reliable forms are considered to be DDU; according to Law 214-F3, the agreement is concluded by the developer and the shareholder, as well as the housing cooperative. Both types are not subject to state registration, so you can expect anything from unscrupulous developers.
You can also purchase a new building by:
- drawing up a loan agreement;
- payment by bills;
- a pre-drafted purchase and sale agreement;
- equity participation agreements;
- agreements for the assignment of consumer rights.
All species are not registered, which means they are not protected by the state . Citizens are not prohibited from entering into transactions or choosing any type of contract, which is completely legal, but the risks become much higher.
How to conclude?
A housing cooperative agreement upon joining a housing cooperative is a mandatory condition for regulating subsequent relations between the two parties to the transaction.
The terms of interaction are determined at the initial stage, the rights and obligations of the parties are prescribed in the contract.
The document is drawn up in two copies ; both representatives of the housing cooperative and the owners of individual apartments, that is, shareholders, can maintain, manage, own and transfer property.
The responsibilities of the cooperative include:
- home maintenance;
- house maintenance;
- making payments for utilities, at the request of the owners.
The responsibilities of the owner or member of the cooperative include:
- maintaining the living space in proper condition;
- compliance with safety regulations;
- timely payment of utility bills, costs associated with repairs, and other home needs;
- redevelopment of the apartment is possible only with the permission of the cooperative.
When signing a document, both parties can supplement and change it . Upon termination of the contract, the owner’s responsibilities include concluding a similar contract with another organization and assigning certain obligations to it.
Agreement with housing cooperatives: sample.
Step-by-step instruction
- Find out who exactly you will have to sign the housing cooperative agreement with (a sample can be downloaded above). Pay attention to the reputation of developers and investors.
- Request an agreement that must be drawn up between the housing cooperative and the developers, study the documents . There must be a clause stating what the risks are in the event of termination of the contract between the housing cooperative and the company due to unfulfilled obligations of the cooperative. The developer has the right to refuse to transfer apartments, even if this is stipulated in the contract.
- Familiarize yourself with your capabilities as a shareholder , what kind of apartment by area, floor, plot the cooperative should present to you.
- Check the documentation from the developer , ask to see the certificate of ownership of the land intended for building a house, the development permit, its validity period, and the declaration for the project.
- Find out if the housing cooperative you have chosen is bankrupt . Try to secure your status as a shareholder by submitting an application to the housing cooperative and becoming its member. Your application must be reviewed and approved by the members of the cooperative. You will be required to pay a membership fee.
- You must comply with all the conditions of the housing cooperative prescribed in the charter , otherwise you may be automatically expelled, which you will not even know for sure.
- Making a share contribution does not mean concluding an agreement , the transaction is void, and the court may rule not in your favor.
- To be safe from unforeseen nuances , request a certified receipt stating that you are indeed a shareholder and have paid the contribution.
- Keep receipts for subsequent payments, target and membership fees.
- Pay attention to the subject of the agreement in the document. What the shareholder will receive in the end must be clearly stated. Find out how the transfer of future real estate will take place.
- All points must be reflected in the charter. By signing the agreement, you agree to all points, so first carefully read the charter , perhaps contact a lawyer for clarification. In exceptional cases during legal proceedings, you will not be able to plead ignorance, because you have read the terms of the contract and the basic law of housing cooperatives?
- Study the law so you know how to act if the situation develops unfavorably.
In practice, shareholders rarely manage to obtain compensation through the court if the delivery of a house is delayed, as well as to demand compensation from housing cooperatives in case of non-compliance with the terms of the agreement. - The cooperative has the right to increase the cost of housing per 1 square meter. Please note that the cost of construction must be indicated in the contract and fixed . A cooperative can legally collect additional funds only if such a decision is made at a meeting. All this must be done in an open manner so that there are witnesses to support the decision to increase contributions.
- Find out who will pay for utilities ; often such an obligation is assumed by the housing cooperative, and then deducted from the shareholders. However, many months pass from putting the house into operation until the residents move in. What then will you pay for if you don’t use the services yet?
- Study the conditions under which you can leave a housing construction cooperative ; the contract must contain this clause. The basis for excluding you from the number of shareholders is failure to fulfill your obligations, delay in contributions for more than 1 month, for each day of delay you may be required to pay up to 0.2% of the penalty.
- You can leave the cooperative if construction deadlines are delayed or you are dissatisfied with the developer; this is a voluntary matter. At the same time, you will get your share payment back, but you may not see the entrance and membership fees if the members of the cooperative find even the slightest clue not to pay them, for example, for a penalty, a sudden increase in utility bills, etc.
- Some housing cooperatives can withhold up to 10% for the so-called hassle of their labor . There are a lot of pitfalls when joining; a shareholder has fewer rights than, for example, a shareholder in a private trust. The shareholder cannot change the clauses in the contract and has difficulty defending the truth in court in the event of the promised housing not being received.
- Of course, not all developers want to cooperate with housing cooperatives only in order to deceive. There is less collection of documents and registration red tape, which certainly attracts both developers and shareholders. Due to the rapid registration of apartments, lack of registration with government agencies, the percentage of unresolved issues, risks, and various nuances is growing; the state cannot protect the shareholder, because he joined the cooperative voluntarily.
- Before joining, carefully study all the documentation , pay attention to all the details when signing the contract, demand documentary evidence for all actions of the housing cooperative, and prepare mentally for the fact that you are responsible for yourself.
In some cases, it is better to join a DDU; getting involved with a housing cooperative is a risky business. Consult with an experienced lawyer , keep control over the work of both housing cooperatives and developers until you move into your long-awaited housing.
Refund, penalties, compensation
Housing cooperative: hard facts
Residents of Saratov remember the high-profile case of how the chairman of the Kapitel-2002 housing cooperative left 274 participants without apartments, while about 160 million rubles were stolen, and construction stopped at the level of the eighth floor. Needless to say that the cooperative members never received any compensation?
According to Federal Law-214 (amendments that came into force in 2017)
The development company must be a member of a self-regulatory society, have an authorized capital and pay contributions to the compensation fund
(common for all developers)
.
In the event of bankruptcy of the developer, all payments in favor of shareholders will be compensated with funds from this fund. That is, if at the time of bankruptcy the house is not completed or put into operation, the shareholder can expect that the money will be returned to him or the house will be completed (in such cases, the SRO can transfer the property to another developer)
.
In such cases, achieve something from the cooperative (housing cooperative)
problematic.
The housing cooperative will be able to return the money only if it is in the account (although the fact that construction has stopped in itself indicates a lack of money)
.
Of course, you can’t count on additional payments (penalties, compensation)
, the return procedure is determined by the cooperative itself; if a cooperative member manages to return at least part of it, that will be very good.
To be fair, it is worth noting that the new amendments to the DDU are still only at the implementation stage, but there are already mechanisms that make it possible to ensure payments to shareholders - this is liability insurance and a bank guarantee.
In the case of housing cooperatives, insurance is not a mandatory requirement. So, if the management in organizing construction work turns out to be ineffective (which cannot be ruled out, since members of the board of the cooperative are not necessarily professionals in the construction market)
, and there is not enough money to complete construction, then you will either have to find additional funds or try to somehow realize the unfinished project.
