What are the differences between housing cooperatives and public housing cooperatives and what is known about the categories of shareholder and developer?

Buyers of real estate in new buildings are often faced with a choice - what to buy, an apartment for a special education or a housing cooperative. For those ignorant of the topic of primary real estate, it may seem that these are just different ways of completing a transaction - in fact. The first option seems more secure for the shareholder, the second – more profitable. Let's figure out what the difference is.

What is a housing construction cooperative? Its difference from a housing and savings cooperative.

A housing construction cooperative is an association of interested parties pursuing the common goal of constructing residential properties and further managing them. At its core, it is a mutual lending society for the purpose of joint construction and purchase of new buildings. Housing cooperatives as a form of relationship between developers and home buyers are not very common in Russia.

Some cooperatives have survived from Soviet times. True, at that time the state provided them with a preferential loan for construction. The initiative to transform them into HOAs, put forward when the Housing Code was adopted, failed. The exact definition of the term housing cooperative can be found in Article 110 of the Housing Code of the Russian Federation.

If financial funds from citizens are accepted and invested in construction according to one of the many savings schemes, then such a cooperative is required to register as a housing savings cooperative. This form of management is based only on the financial obligations of shareholders. Also significant differences include the possibility of legal entities participating in housing cooperatives, while in housing cooperatives the participants are only citizens.

Otherwise, the functions, goals and objectives of these legal forms are very similar, if not identical. Therefore, in the future we will conditionally use the abbreviation ZhSK, keeping in mind that ZHK is just one of the types of housing construction cooperatives.

In their work, modern housing cooperatives pursue two main goals:

• construction of residential facilities;
• activities for managing residential and non-residential areas in the house.

Features of the organization and regulation of housing cooperatives

The decision to create an association is made directly by the founders, who become its members after the registration procedure of the organization. In accordance with the provisions of current legislation, the association must include at least five participants. The maximum number of housing cooperative participants must correspond to the number of residential areas (apartments)

in a property that was acquired by the cooperative.
Legal entities and individuals (citizens who have reached the age of sixteen)
.

The legal regulation of the norms of the association is based on the provisions of the Housing and Civil Codes of the Russian Federation, clauses of the organization’s charter.

What guarantees does the housing construction cooperative provide to its members?

Theoretically, housing construction cooperatives should be the most profitable form of purchasing housing for citizens. After all, the average nominal interest rate here should be only 6% per annum. However, from the point of view of the riskiness of purchasing apartments, the choice in their favor is not so obvious. We have already talked about the risks of buying new apartments here, now we will consider this problem from the point of view of housing cooperatives.

The law guarantees that the right of ownership of a member of a cooperative begins immediately after payment of the share (clause 4 of Article 218 of the Civil Code of the Russian Federation). Please note that after full payment for a facility that has already been built and put into operation, the building cooperative must issue its member a certificate confirming payment of the entire amount of the share contribution. It is issued within 10 working days.

Before this, the participant must sign the acceptance certificate, enter into a management and operation agreement with the operating organization and request the issuance of a supporting certificate. After this, subject to the fulfillment of all obligations under the agreement, the apartment is transferred to the cooperative participant according to the appropriate acceptance certificate.

One of the measures to ensure the fulfillment of obligations when purchasing a new building under a housing cooperative agreement is to conduct independent control over the activities of the cooperative. It is carried out by the audit commission elected at the general meeting. Its members include exclusively persons who are not members of the cooperative.

Main responsibilities of the audit commission:

• carrying out annual scheduled audits of economic and financial activities;
• presentation to the general meeting of housing cooperatives of an annual report, an independent opinion on the budget and the amount of contributions and mandatory payments.

An audit can be carried out at any time. During the inspection, the commission may request the necessary documents on the activities of the cooperative.

What is the difference and relationship between housing cooperatives and preschool institutions?

Recently, many developers have begun to actively use the cooperative form to sell apartments to the population in new buildings. Thanks to housing cooperatives, some companies skillfully circumvent the requirements of the legislation on equity investment (FZ-214). To understand this issue, you need to understand what exactly is the difference between agreements on participation in co-investment in construction, which are concluded within the framework of Law No. 215-FZ, and agreements on shared participation (DPA), valid on the basis of Law No. 214-FZ?

The difference between housing cooperative and residential cooperative agreements:

• the housing cooperative agreement is not subject to state registration;
• such a company may require payment of additional costs for the construction of a house, except for those included in the price of the apartment and paid in share contributions;
• when concluding a preliminary purchase and sale agreement, it is possible to demand the conclusion of the main agreement only by a court decision;
• The Law “On the Protection of Consumer Rights” does not apply to housing cooperative agreements;
• the shareholder does not have the right to demand termination of the contract, but can only withdraw from it;
• The shareholder cannot demand compensation for damages from delays in housing construction, penalties, or compensation for moral damage.

The most significant of the listed differences between housing construction cooperatives, which are also its disadvantages, can be considered the non-obligatory state registration of transactions. This means that shareholders of the cooperative, when purchasing a new building under a housing cooperative agreement, cannot be protected from double sales.

It is important that, unlike housing cooperatives, participants in shared construction are protected by Law No. 214-FZ, which establishes that upon sale, payment from the shareholder is allowed only after registration of the agreement in Rosreestr.

Advantages and disadvantages

In order to choose between a residential building or a housing cooperative, a future investor needs to understand the main differences in the rights and responsibilities of one or another form of interaction with a developer. Especially after January 1, 2017, when significant changes were made to 214-FZ.

DDU

If we consider buying an apartment under 214FZ and choosing a housing cooperative or a residential building, then the answer to the question of which is better can be given as follows:

Pros of buying by DD:

• There are permitting documents, there is a project declaration - all this is spelled out in the contract.
• The contract specifies the cost; it will not increase during the process. And you don’t care about the problems of builders who suffer from rising prices for mortar.
• The house will not suddenly become several floors larger
• The house will not have extensions and other strange buildings that were not in the advertising brochures
• A transparent scheme for terminating the contract and paying compensation for losses to shareholders
• There are clear terms of the developer’s warranty for different types of work

Unfortunately, there are also disadvantages:

• The cost is usually higher. And in new facilities it will increase by another 1-1.5%. After all, the law introduced the creation of a compensation fund, which will be formed from contributions from builders from each apartment sold. Naturally, these costs will be added to the price of the property.
• The process of registering a contract is quite long.
• The prescribed grounds for terminating the contract - if they are not followed, it is quite difficult to terminate the contract and return all the money
• There are problems with obtaining installment plans from the developer, which means that the price of the property will increase significantly due to obtaining a mortgage, if necessary.

Housing cooperative

The scheme for purchasing an apartment from a housing cooperative also has its pros and cons:

• The positive thing is that there are good discounts on not very popular apartments
• The price differs from DDU on a smaller side due to a small number of additional fees
• De jure, the shareholder takes part in housing cooperative meetings and decides how the house will be built

Negative points:

• You will have to pay an additional fee for joining the housing cooperative - usually 1-3% of the cost of the apartment
• There is a danger of double sales
• In fact, the shareholder has fewer rights to housing than the buyer under the DD
• You cannot resell an apartment to anyone, even by assignment. The buyer will have to join the housing cooperative
• There is a risk of an increase in apartment prices
• There is no responsibility of the developer for failure to meet deadlines

Important! You purchased an apartment under a shared participation agreement, the house has been completed and you are planning a new renovation. But before obtaining ownership of the property, the developer carries out mandatory measurements of your apartment with the help of BTI employees. And it turns out that the housing is actually larger. The developer offers you to pay for additional meters. Now the authorities are preparing changes to the law that will regulate this process in favor of the shareholder, but until they come into force, you have several options for interacting with the developer:

• You can simply refuse to receive a certificate for the apartment and demand money and a penalty
• You can pay the difference and receive a penalty
• You can find flaws in construction and demand from the developer a discount on the amount of the difference (the most popular option in practice)

In the case of housing cooperatives, you will have to pay for additional meters.

Is there any economic benefit to creating a building cooperative?

Of course there is. In addition to the above advantages, the developer, when creating a housing cooperative, has the opportunity to legally reduce the cost of construction of residential buildings. The fact is that the share contributions paid by shareholders for the opportunity to purchase a new building through a housing cooperative cannot be subject to VAT. At the same time, with the model of shared participation in construction, the developer is forced to include the tax amount of 18% into the cost of a residential building.

Another beneficial advantage is that housing cooperatives can attract financial resources at the earliest stages of construction. This also makes it possible to significantly reduce the cost of investment. In addition, they are exempt from income tax on property received in the form of a share contribution.

Features and risks of buying an apartment through a cooperative

The activities of housing cooperatives are regulated by Articles 110 - 123 of Chapter 11 of the Housing Code of the Russian Federation, and the provisions on consumer cooperatives - clause 2, § 6 of the Civil Code of the Russian Federation.

Consumer housing cooperatives can be created in the form of:

• housing construction cooperatives (HBC),
• housing and savings cooperatives (HSC),
• consumer mortgage cooperatives (PIK).

Each of them has its own specific features of buying an apartment and the associated risks. Let's look at them one by one.

!!! Online order Extracts from the Unified State Register and other SERVICES for purchasing an apartment - HERE.

What are "apartments"? How are they better than a regular apartment? Or worse? See the note at the link.

Housing and construction cooperative (HBC)

Purchasing an apartment in a housing cooperative was the most common way to purchase housing through a cooperative until July 1, 2021.

Housing cooperative acted as an alternative option (compared to DDU) for attracting funds from the population by the Developer for the construction of apartment buildings. For the Developer, this option is quite comfortable, because... firstly, it was permitted by law (clause 2 of article 1 of Federal Law-214 - no longer in force on July 1, 2018), and secondly, it did not oblige the Developer to comply with strict requirements, as in the case of DDU, incl. made it possible to attract money from the population at the excavation stage, without waiting for all permitting documentation to be completed.

For Apartment Buyers, on the contrary, this situation is not very attractive (not counting the price). Buyers here do not buy square meters of a specific apartment, but shares of housing cooperatives, becoming shareholders . Members of the housing cooperative act within the framework of the Charter of the housing cooperative. A member of a housing cooperative acquires rights to an apartment only after full payment of the cost of the share (which, by the way, may change during construction). Until this moment, the cooperative itself has all rights to the apartment.

The activities of housing cooperatives are not regulated by Federal Law-214, but by the norms of the Housing and Civil Codes (see links above), and therefore do not provide the protection of the rights of shareholders that is provided by Federal Law-214.

Shareholders of the cooperative are not directly related to the Developer, but enter into agreements only with the cooperative itself (legal entity - housing cooperative). The cooperative, in turn, is connected with the Developer by an investment contract , the terms of which determine the responsibility of the Developer to the cooperative (and not to a specific shareholder). And since the housing cooperative, most often, was created by the Developer himself (more precisely, by a legal entity affiliated with him, in order to legally attract money from the population), it is obvious that the investment contract was always drawn up in such a way as to maximally protect the Developer himself.

The basic rules for accepting a new apartment from the Developer - see the Glossary at the link.

Using the housing cooperative scheme , the Developer in relations with Apartment Buyers is, in fact, no longer a Developer (in the sense of the owner of the land and construction project), but a general contractor. The cooperative acts as a general investor, and its shareholders act as co-investors in construction.

The developer (the legal entity in whose name the land is registered) and the construction customer (the legal entity in whose name the design and permitting documentation is drawn up) can be either the cooperative itself or the Developer who created it. In the latter case, the Developer enters into a construction co-investment agreement with the housing cooperative, regarding apartments paid for by shareholders . It was under this scheme that most apartment purchases through cooperatives took place until mid-2021.

True, acting through the housing cooperative scheme , the Developer also had certain legal risks - from a change of board of the housing cooperative to the loss of the construction site.

And the shareholder always had to remember that the initially lower price of apartments in the housing cooperative is not fixed, and may increase during the construction process. Since the housing cooperative is an investor in construction (i.e., it hires a developer to build a house), if there is a lack of funds to complete construction, the cooperative is obliged to finance this deficiency. At the same time, members of the housing cooperative (shareholders) jointly and severally bear subsidiary liability for the debts of the cooperative to the Developer, i.e. must pay additional amounts from their own pockets to complete the construction.

In this regard the risk of purchasing an apartment in a housing cooperative is much higher than purchasing housing under an equity participation agreement (DPA).

In addition, a shareholder of a housing-construction cooperative, in addition to actually paying for shares (i.e., money for an apartment), is forced to bear additional costs for maintaining the cooperative itself (entrance and membership fees), as well as additional share contributions in the event that the cooperative incurs losses.

Unlike the conditions of the DDU, purchasing an apartment through a housing cooperative does not provide clear deadlines for completion of construction, and also does not protect the Buyer from “double sales”, because agreements between a shareholder and a cooperative do not undergo state registration (although the cooperative itself, of course, maintains its own register of shareholders).

And most importantly, the shareholder cannot influence the Developer, nor make claims against him, nor recover damages (including it is extremely difficult for the shareholder to defend his rights in court).

You can read more about purchasing a new building through housing cooperatives

Is it possible to return the deposit or advance payment for an apartment if the Buyer changes his mind about buying it - see the note at the link.

Housing and savings cooperative (ZhNK)

ZhNK , in essence, is an alternative to purchasing housing on credit. This is a kind of mutual aid fund. When joining a housing cooperative , a new shareholder makes an initial contribution and determines for himself a convenient scheme for saving money for an apartment - the timing and amount of the amounts contributed. When the accumulated amount is 40-50% of the cost of the selected apartment, the shareholder has the opportunity to take the missing money from the general cash register (at %) and buy the apartment for the cooperative. He himself can register and live in the purchased apartment, gradually paying off the debt to the cooperative. The shareholder receives ownership of the apartment only after full payment of the debt.

An apartment in housing complex can be purchased both on the primary market (in a building under construction) and on the secondary market (finished housing). In addition, repairs can be made to the purchased apartment using funds from the “common cash”, if this is stipulated in the terms of the shareholder’s participation in the cooperative.

If an apartment in a new building is purchased through a housing cooperative during the construction process, then here, just as in the case of a housing cooperative, the shareholder cannot make demands on the Developer directly, since the agreement with the construction company is concluded by a cooperative (legal entity). The shareholder can make claims (on terms of transfer, quality of construction, etc.) only to the cooperative itself, and his responsibility to the shareholder here is much lower than the responsibility of the Developer to the shareholder under the DDU.

Buying an apartment in a civil marriage - what is the best way to arrange it?

And in the event of liquidation (including bankruptcy) of the cooperative housing cooperative, the shareholder loses the right to purchase (receive) an apartment, even if it has already been purchased by the cooperative, and the shareholder himself has already moved into it. An exception is if the shareholder managed to pay the full cost of the share before the liquidation or bankruptcy of the housing cooperative.

In the event of liquidation, the remaining shareholders are returned to the property of the cooperative (proceeds from its sale) after the claims of all creditors are satisfied. The balance of these funds is distributed in proportion to the shares.

A housing and savings cooperative (ZhNK) differs from a housing cooperative by more detailed legislative regulation (FZ-215 of December 30, 2004 “On Housing Savings Cooperatives”), and their activities are controlled by the Federal Service for Financial Markets (FSFM). Therefore, if the Developer, before July 1, 2021, chose a scheme for raising money from the population through a housing cooperative , then he, as a rule, chose a more free form of housing cooperative .

What happened after July 1, 2021 - read at the end of the article.

How the purchase and sale of an apartment takes place, and whether a realtor is needed for this - see this article.

Consumer Mortgage Cooperative (PIK)

PIK , in its purpose, is the same ZhNK , but in a broader sense. PIK , like ZhNK , is NOT aimed at construction, but at purchasing existing apartments on the real estate market, using funds “from the common pot” of the cooperative. But if the activities of housing cooperatives are regulated by a special federal law FZ-215 of December 30, 2004 (see link above), then the activities of a consumer mortgage cooperative (PIK) are regulated only by general provisions on housing and consumer cooperatives (see links to these laws at the beginning of the article ).

A consumer mortgage cooperative is the same alternative to a mortgage as a housing cooperative , but in a freer and less controlled form.

Compensation fund for the protection of the rights of shareholders. What it is? How it works? See the link.

From the above, it follows that the risks of purchasing an apartment through a cooperative (in any form) are significantly higher than the risks of purchasing an apartment under the strict rules of Federal Law No. 214 (i.e., under an Equity Participation Agreement). But since prices in housing cooperatives are very attractive, there is still a demand for cooperative apartments, and they are still present on the market.

At the same time, a housing cooperative is created for the construction of a specific apartment building, and a housing cooperative or PIK are not limited by these frameworks - a member of a housing cooperative or PIK can buy an apartment in any building on the market. But in all cases with cooperative apartments , having moved into such an apartment, the shareholder does not receive ownership rights to it until he fully pays off the cost of the share (as opposed to buying an apartment with a mortgage).

What is a Preliminary Participation Agreement? Why is it dangerous for the Buyer of a new building?