Please click on a question below:
1. What is a resident-owned community?
About two percent of manufactured home communities in the United States are owned by their homeowners as either a subdivision, condo or co-op.
In sub-divisions and condos, homeowners own their individual lot and have common ownership of community facilities.
In a co-op, homeowners own a share in the co-op which owns the community for the benefit of its shareholders.
Both provide homeowners with control over the land under their homes.
ROC USA® focuses its resources and expertise on co-ops because they work anywhere and can be done quickly. Co-ops can purchase the community without requiring each homeowner to either get a loan to buy their own lot or move (or sell) their home if they can’t. By far, co-ops are the easiest form of resident ownership to accomplish in the time-frame sellers generally expect.
Co-ops operate on the one-member/one-vote rule. Every household which owns a membership share has one vote on actions of the corporation based upon its Articles of Incorporation and By-laws. Except for what is discussed in number 2 below, the co-op itself borrows the money to purchase the community so each homeowner doesn’t have to and isn’t personally on the hook for the loan needed to buy the community.
Decision-making in a co-op is by majority or super-majority on major issues that affect the your community. Smaller, day-to-day type decisions are often delegated to a Board of Directors, a body that is democratically-elected by the members and possibly to a property manager. The monthly charges collected from the homeowners goes to pay the loans and expenses.
Generally, only homeowners in the community can become members. So, resident corporations or co-ops are controlled by homeowners who share an interest in having the community well-run.
No, homeowners have used two major types of co-ops to buy manufactured home communities:
1] Market rate co-ops; and
2] Limited-equity co-ops
Market rate co-ops raise some of the funds they need to buy their communities through the sale of member shares that can range up to tens of thousands of dollars. The reason for this is that market rate co-ops need to generate cash as a down-payment to buy the community. The co-op also borrows funds from a local bank for about 75 percent of what it needs.
Sometimes only a small group of homeowners can afford to buy the shares, so they become owners and everybody else stays on as renters (from their neighbors).
In market rate co-ops, members are free to sell their share at its market rate when they sell their home. That is, for whatever they are willing to take and what anyone is willing to pay for it. The members can make decisions about rents on the non-members.
The other type of co-op, the limited-equity co-op, is used as a means of keeping the share values low. The low share values help make them affordable to all homeowners. The co-op itself borrows a greater amount of the money through the help of non-profit and government lenders.
This approach helps attract the greatest number of homeowners as members. Our goal over time is to see all co-ops at 100 percent membership. Communities function best over time when everyone has the same ownership interest.
We have seen that high share values divide communities. We believe that communities are “better together.” Affordable share prices are important in achieving, over time, 100% membership in most communities.
Limited equity means that share values are fixed. If members pay $500 for it; they get $500 when they move out. It’s as simple as that. Members may sell their home for what they want and can get. Members sell back their share to the co-op for what they paid for it. That’s “limited equity.” This helps keep the community affordable. This is why non-profit organizations are willing to help these types of co-ops borrow more of the money itself and not demand it of homeowners.
3. Why doesn’t ROC USA® support subdivisions and individual lot ownership?
In our experience, subdivisions are difficult, and can be impossible, to accomplish under local subdivision regulations. Most manufactured home communities were not set up for subdivision from the start.
Further, for the purposes of a resident purchase of an existing community, each homeowner would have to pay cash or finance their lot purchase. Coordinating individual lot financing home by home is extremely time-consuming. As well, in most communities, some homeowners won’t qualify for this additional financing, creating a problem of what to do with them.
In a condo, if there is common property (say a community building, private roads, or a well or septic system) then the homeowners will still need a democratic association to collect fees and oversee these systems. From a day-to-day management standpoint, co-ops and condos are very similar. So, we see no real advantages there. Since the condo association doesn’t own any of the land, it can’t borrow to finance repairs and has to assess charges on each homeowner each time it has a big unplanned expense. If the homeowner can’t pay, they have a lien until they do.
Last, it is very rare for a seller to wait long enough to complete the engineering, legal, public approvals, and financing for a manufactured home community subdivision. Further, since it is a new subdivision request, the local government will sometimes impose new conditions.
4. Can homeowners do this in time if the community just went up for sale?
Manufactured home community conversions to co-ops have their challenges, too. While the exact process will vary in every state, co-ops have bought their communities in as few as 60 days. That takes a well-oiled machine but certainly gaining ownership in 90 to 100 days is done routinely.
The conversion to resident-ownership (by a co-op or some other form of “resident corporation” that operates like a co-op) is best undertaken as a team.
First, a qualified technical assistance provider organization is recommended. This will be an organization that works with the resident group through the entire process and helps pull it all together. The co-op will also need a lawyer, an engineer, and lenders. ROC USA® Certified Technical Assistance Providers know of resoures for all of these needs.
5. So what will happen first?
Once you have an opportunity to purchase, the first step is education. Learn about what the options are and how to go about it. 6. How do homeowners form the co-op?
Invite the ROC USA® Network “Certified Technical Assistance Provider” or “CTAP” to a community meeting of homeowners in your community. These CTAPs are non-profit organizations in your area that are dedicated to assisting homeowners, and trained and certified by ROC USA Network.
Our work as non-profits is bound by the conditions of our IRS approval to do this work. Namely, we work with groups which are committed to preserving the community long-term as a resident-owned community and providing open and accessible membership for all homeowners in the community.
Forming the ownership entity will require the vote of some number of households in your community and filing Articles of Incorporation with a state government agency. And, you’ll need By-laws early on, too. 7. Who can become a member?
Your Certified Technical Assistance Provider will help you to find an attorney, and they both will work with you through this process. They will have template documents that will save your group and attorney time and money but you retain control to change the documents (within the law) as you see fit.
The Articles of Incorporation establishes the corporation as a business entity, and describes the kind and scope of the corporation.
The By-laws say how the corporation will operate and conduct business. They describe the Board of Directors, how meetings are called and held, and other rules of the organization. By-laws generally can be amended by a majority vote of the membership. The Board of Directors is elected by the membership and that process is described in the By-laws, as well.
Your ROC USA® Network Certified Technical Assistance Provider can provide you with a check list and the documents your co-op will need to work successfully through the process. We will help you get prepared.
It is the expectation of ROC USA™ that membership in the co-op is open to all owner-occupied households and that you will keep your membership fee affordable so that all homeowners can join. Households that choose to belong to the co-op pay a one-time membership fee that entitles them to an ownership interest (a share in most states) in the co-op, a lease and voting rights. Generally, the fee is not more than $1000 and is usually paid over time.
ROC USA also expects that any households that own a home in the community but choose not to join the co-op will be allowed to remain in the community. They will generally pay a slightly higher monthly site fee (based on the local market rates over time) and cannot vote on matters.
8. What does the co-op do with the money from membership share fees?
Membership fees are collected and used by the co-op for closing costs associated with the purchase or for operating expenses or reserves.
9. What other charges are there for the homeowners in a co-op?
The co-op also charges a monthly site fee, or lot rent. It is collected monthly to pay for operating expenses (taxes, insurance, trash, etc.), debt service (mortgage payments) and reserves (savings).
The budget dictates the level of the fee and it is set by the co-op.
10. Does ROC USA® finance resident-owned communities, too?
Yes, we set up one subsidiary – ROC USA Capital – to finance purchase loans for resident corporations. ROC USA Capital can make pre-development loans in most areas, too.
11. How can homeowners afford to buy the park?
ROC USA Capital is one source of high loan-to-value financing for resident corporations that are working with a Certified Technical Assistance Provider. Your resident corporation may be in a location where you have more than one choice for loans and that’s great! Resident corporations need much more financing than ROC USA Capital alone can finance so we encourage other lenders to support resident-owned communities, too. ROC USA Capital’s financing is critical to making resident ownership possible in a lot of places, is an excellent source, and its success will help show other lenders that homeowners and resident-owned communities are solid borrowers. At this stage, resident ownership is a niche not served by most lenders.
ROC USA Capital offers fixed rate financing on amortization schedules of 30 years, generally. The term of the loan may run between 10 and 15 years because the source of Capital’s financing isn’t any longer than that. ROC USA Capital will provide first mortgage loans that can be up to 105 percent of the purchase price or fair market value (whichever is lower.) Interest rates depend on market conditions and the location. ROC USA Capital is currently capitalized to finance $25 million in purchase financing for resident corporations.
A resident corporation will apply for financing once it has a contract to purchase the community. A Certified Technical Assistance Provider will help the resident corporation’s Board of Directors assess various financing opportunities based on your particular case.
When a resident corporation applies to ROC USA Capital for a loan, its managing director will underwrite the loan and ask a lot of questions. If he is satisfied with your application, he will recommend it to the Loan Review Committee, a committee of the ROC USA Board of Directors for a loan approval. Of the first $30 million that resident corporations financed in the first 14 months of ROC USA Network, $11 million or one-third of it was financed by ROC USA Capital. The rest has been financed by state agencies, banks and other non-profit lenders.
12. Who would collect the 'rent' and pay the bills?
When you boil it down, co-ops, just like investor-buyers, use lot rents to pay expenses.
Whether it’s a co-op or an investor-buyer, both will borrow money to buy the manufactured home community and lot rents will be used to pay that loan back. And, operating expenses will be covered by lot rents or other charges, too. Even though an investor might put more of his own money in the deal to earn a good return on his investment, it works about the same as when a co-op borrows more money and pays interest.
Your co-op’s budget will have to be prepared, reviewed and approved by your co-op’s membership. It is impossible to know exactly what it will look like before rolling up your sleeves and studying it. That’s what the Certified Technical Assistance Provider will do with your homeowner group. The co-op members ultimately decide whether it makes sense.
13. What is the risk to the homeowners?
Your co-op may decide to self-manage with the assistance of at least a paid bookkeeper or contract with either a property manager or employ staff to undertake these roles. All of this will need to be decided so the operating budget reflects the cost of management.
The initial plan may well require membership approval but ultimately the Board of Directors is responsible for overseeing the chosen management plan. The Board of Directors is usually five, seven or nine members who are in good standing and who are elected by the membership. The Board of Directors will oversee contractors, employees and volunteers.
14. What “strings” are attached to ROC USA® ?
Members of a co-op are not personally liable for the co-op's mortgages or other debts. The co-op should also carry insurances to protect members and Directors. It is important that the Board of Directors informs the membership as to what coverage is in place so that members know that the organization is protected.
Because ROC USA is a non-profit organization approved as tax exempt by the Internal Revenue Service (the “IRS”), we are obligated to provide a charitable purpose for our support of co-ops. 15. What if a homeowner decides not to become a member?
We do this in three basic ways:
- ROC USA Capital can only provide financing for your co-op if the homeowners fit a certain income guideline, or other community improvement and development guidelines, which we will be able to tell you by conducting an anonymous survey or by checking other community information. Most communities meet this test;
- We ask that membership share values be set at an affordable rate, generally less than $1,000 each AND that members be allowed to pay for them over time so that all homeowners can afford to join the co-op and vote;
- We ask that your co-op agrees not to sell the community for a profit in the future by forming as a limited equity co-op with restraints on what happens to the money if you sell the community and dissolve. This is usually consistent with the group’s goal of preserving their community long-term. Your home, keep in mind, is yours alone and can be sold for as much as you can get for it. We have committed to the IRS that we won’t help individuals make a commercial investment. We can help you if you’re interested in preserving an affordable community for yourselves and future homeowners;
- We also ask that when homes are listed ‘for sale’ that low-income households be provided an opportunity to buy them – at your price – for the first 30 days; and,
- In particular cases – where there are a large number of rental or seasonal homes – we may have other requirements, but these do not affect many communities.
These are our “strings.” Our customers enjoy benefits from our non-profit status and we adhere to the rules of the IRS approval we secured. If you have a question on these, please do not hesitate to ask. Other government and non-profit lenders may want to impose other conditions. These will be made clear to you through the process.
Homeowners may remain as site renters and pay the monthly lot rent to the co-op. Since members pay the membership fee and participate in the work of the co-op, non-members generally (although not always) will be charged a slightly higher lot rent than members.
16. How is the cooperative different from a homeowners’ association?
Sometimes a homeowners’ association is organized to buy the community but for clarity, let's call that a co-op. A co-op is a democratic corporation of homeowners, organized to buy and own their community.
What is often called a “homeowners’ association” is an organization formed by the homeowners for social purposes or to advocate or negotiate with the community owner over issues in the community (like rent increases or maintenance issues).
Many times, when an association is already in place when you seek to buy the community, a new corporate entity will be needed. Generally, associations are not structured for community ownership, operations and membership shares. As a new entity, the co-op will need new documents, a way to admit members, and a process for electing homeowners to the Board of Directors.
17. Can homeowners move out of the community?
Yes, in a co-op you can sell your house as you would today. When you sell your home, your membership share will be bought back by the co-op, in accordance with governing documents in your particular case. The buyer of your home will have to become a member of the co-op. 18. Will the community owner even deal with the homeowners? And, how can homeowners compete with developers and other potential buyers?
The goal of course is to make your home more attractive to buyers. Resident ownership is viewed by buyers as a positive attribute, in our experience. The job of the co-op over time is to keep site fees (lot rents) affordable and to keep the community attractive. In that way, people will want to buy homes in the co-op. It is in everyone's interest to make their community into a desirable neighborhood.
19. Does ROC USA® do other things? Where do you serve?
Nothing ventured, nothing gained, right? However, if you present yourself along with a strong team of professional supporters as interested and able, there are community owners who will consider a sale to a corporation of homeowners. In most states, owners not required to deal with you, however, letting them know in a respectful way that you’re interested definitely helps. Having your group supported by a team like ROC USA’s Certified Technical Assistance Providers is to your advantage. Give us a call or send an email and we'd be happy to check in with your community owner.
“I wouldn’t have considered selling it to the homeowners had a woman in the community not told me three years before that she wanted to see the homeowners have a chance to buy it and had I not received a post-card from Northcountry Cooperative Foundation [a ROC USA Network Certified Assistance Provider],” stated Dennis Dunker, a community owner from Minnesota who sold his community to a resident corporation.
ROC USA solves the basic problems that face homeowners – technical support and financing. We help put homeowner groups on a level playing field.
Of course, we have to persuade community owners that non-profit supported resident corporation buyers are as good, if not better, buyers than competing investor buyers.
The ROC USA® Network’s proven track record – with over 100 successful conversions by Network members – helps community owners see that homeowners can do it. Many community owners would like to sell to the homeowners if the price and terms were as good as competitors'. You are customers after all, and business people like satisfying customers.
ROC USA is focused on resident ownership, period. The reason we exist is to make quality resident ownership work for homeowners.
With an estimated 50,000 communities in the country, there is a need for a national system to make resident ownership possible in more places. ROC USA is the only national non-profit system of resident-owned communities.
The Certified Technical Assistance Providers in ROC USA Network are independent non-profit organizations which provide a wide variety of programs, including affordable housing and community economic development, in their regions.
Click here to view a US Map of Certified Technical Assistance Providers States
Within those states, ROC USA Network members will assess any “for sale” communities for resident ownership.
20. Does ROC USA® help co-ops and homeowner groups deal with the community owner about a purchase?
21. What kind of technical assistance and training does ROC USA® Network’s Technical Assistance Providers provide to resident corporations?
Yes, we will. We deal with community owners every week. We’ll be happy to call them and talk about your community and your interest.
If the community is for sale, many community owners just want to know that you can secure the financing and are represented by people who have a track record of success. While we clearly work for homeowners, we understand community owners’ interests and the asset they are selling. To make you an eligible buyer, we need to open up a conversation with the seller and understand his/her needs and interests. So, we call them and talk it through. We may have spoken to them first, too. It depends on who reaches out to us first.
In our experience, community owners prefer to sell to the homeowners as long as they know homeowners will have the support needed to be successful buyers. You are a long-time customer of theirs, and in many cases there’s a good relationship between you and the owner, and that can help.
ROC USA Network’s Certified Technical Assistance Providers provide both pre-purchase and post-purchase training and technical assistance (TA).
Pre-purchase TA work includes organizing, educating members, assessing the community’s financials, providing template documents to make efficient use of your, your lawyers and your engineer’s time, negotiating planning, working with the Board of Directors to secure financing, helping to prepare a management plan, and preparing your group to acquire the community.
Post-purchase TA includes assistance with implementing the management plan, training the Board of Directors, membership and committees, engaging contractors and third parties, and providing leadership coaching.
Over time, as new board members come on, Certified Technical Assistance Providers will give training and provide networking activities for community leaders in the region or state. Depending on lender requirements, the Certified Technical Assistance Provider may also play a role in ensuring that reporting is completed on time.
22. Does this work in every state?
The basic structure of communities is the same in all parts of the country: Homeowners own homes on land they rent from a community owner.
Homeowners are more secure when they own the community. “He who owns the land controls the future,” is an old adage that is particularly on point for today’s homeowners.
The basic barriers to resident ownership – financing, technical capability and willing sellers – are the same in all states.
To overcome these barriers, ROC USA® Network has combined the best of both worlds – a national umbrella made up of local Technical Assistance Providers with expertise and connections to financing, which helps resident corporations complete their community connections.
23. What are the attributes of successful resident-owned communities? How does a ROC USA® resident-owned community differ from other kinds of resident ownership?
A successful resident-owned community is a place where all or nearly all of the homeowners are invested in the success of their community. Beyond community ownership and the security of ownership, resident ownership offers homeowners an opportunity to build a community that is healthy and mutually supportive – a place where individuals, families, and seniors can thrive and feel financially secure among neighbors and friends. ROC USA’s brand of resident-owned communities emphasizes the importance of open and accessible membership so that most if not all homeowners are owner-members.
Peter Bartlett of Freedom Hill Cooperative in Loudon, NH said, "Before the co-op bought the park, people just drove by. Now, everyone waves and we watch out for each other."
A ROC USA supported community is structured in a manner that will help bring forth better home financing and other benefits as we expand and grow. We are deeply committed to building value for homeowners in co-ops. That’s what we’ve done in New Hampshire (see background piece
, PDF 1.03 MB) and what we envision now nationally.
We also honor your voice. The community leader seat on our Board of Directors is currently filled by Lois Parris. Lois is a director of the Lakes Region Co-op in Belmont, NH and is also now the President of the Manufactured Home Owners Association of America (MHOAA). Lois brings her first hand knowledge of co-ops and homeownership to the ROC USA Board of Directors.
24. Given what is going on with real estate and jobs, isn’t this a bad time to buy our community?
ROC USA® is not a reaction to the current real estate market or the subprime home mortgage-financing crisis in the United States.
Resident ownership has been market-tested and proven for more than 25 years. Co-ops have thrived through all sorts of market conditions, including deep real estate recessions.
Since we support existing homeowners in existing manufactured home communities that are for sale, the key to success is a good understanding of the particular community and a properly structured transaction. Good purchase opportunities are present in today’s market. Is your community one of them? Perhaps. Let’s see!
25. What if the community is ‘for sale’ now?
If you know your community is for sale, please call or email the ROC USA® Network Certified Technical Assistance Provider (“CTAP”) in your state or region or ROC USA right now.
If you’re in a state or region without a CTAP, please email ROC USA anyway. We may be talking with a non-profit in your state who can be of assistance. Every situation is a little different. Send an email and describe that to us. We promise to respond, telling you what we can to help you out.
26. What can homeowners do right now to prepare for the time when the park goes up for sale?
Being ready is a good thing. In some states, having a Homeowners’ Association in place and having officially told the community of your interest in buying is required in order to get a notice that the community is for sale. You can review state notice laws and what is required of you at the National Consumer Law Center website: www.nclc.org
. Having an association in place is probably a good idea anyway. Your state may have a state association that can help. See www.mhoaa.us
for a list of state homeowner associations.
As an informal group, you can still gather information, hold a meeting, and distribute materials. It shouldn’t be secretive. An interest in buying the community as a resident corporation is perfectly understandable. Don’t make it an organizing campaign about “getting” your community owner and you’ll be fine.
Groups – be they formal or informal – ought to let the community owner know of their interest. Community owners often have told us that they first came to consider selling to the residents because someone in the community asked. Most community owners are as interested in selling to the homeowners as much as they would anyone. Your owner needs to know you’re interested.
By introducing the community owner to ROC USA®
and your local non-profit Certified Technical Assistance Provider, you will be educating him or her about the resources that exist to support your group. It will surprise them. Most owners don’t realize what is available to homeowners in terms of technical help and financing.
27. Where should homeowners go to obtain help with other community problems?
There certainly are other types of challenges facing homeowners in some communities. We want to see you get the support you need.
Generally, state Homeowners Associations are a great resource for finding local assistance. A list of state associations (where there is one) is available through the Manufactured Homeowners Association of America www.mhoaa.us.
Alternatively, if you’re facing an eviction issue, your Legal Services organization is often a source of good information and legal representation. www.lsc.gov.
Each state has different consumer protections. Look up your state law on-line; many states have specific statutes governing manufactured home communities.