Shared Ownership Housing: Condos, HOAs, and Co-Ops

Shared Ownership Housing: What's the Difference?

Condos, HOAs, and Co-Ops
Part I

Condominiums, Homeowners Associations, and Cooperatives are all forms of shared real estate ownership.  From a living standpoint, these three entities may appear to be the same.  But from a legal standpoint, there are significant differences between condos, co-ops, and HOAs.  Today, we're continuing our series on Real Estate Law by discussing these differences.  It is important to understand the differences BEFORE investing in any one of these forms of property ownership.

What is Shared Ownership Housing?

There are many types of real property available today.  There are apartments, single family detached houses, townhouses, duplexes, condominiums, cooperatives, cabins, mobile homes, and prefabricated units.  With the exception of the single family detached house, many forms of housing today involve some form of shared ownership. And today, you'll find many detached houses are also a part of an association, especially in newer developments. As you enter many subdivisions, you will see signs that say "a deed restricted community,"  indicating some form of shared ownership housing is in effect.  

In a typical subdivision, there are streets and sidewalks.  There may also be parks or other types of green space, playgrounds, pools, trails, or tennis courts.  These may be open to the general public, or their use may be restricted to those that live in that community.  If the use is restricted at all, chances are, the subdivision employs some sort of shared ownership.  Those elements are owned, paid for, and maintained by those who share in their use.

Conversely, if amenities are for public use, chances are they are owned and maintained by the local government, funded through local taxes.  Even though they might require a "resident pass," they are publicly owned.  If the City oversees the amenities, chances are they are NOT a part of a shared ownership community.

Shared ownership housing is typically controlled by a Board of Directors.  There are documents that define who owns what, and there are bylaws and regulations by which all owners must abide.  There are generally monthly or quarterly fees that all owners must pay.  These fees pay for maintenance and insurance of the shared areas.

Currently, in the United States there are three common types of shared ownership housing: Cooperatives (commonly called co-ops), Condominiums (commonly called condos), and Homeowner Associations (referred to as HOAs).  All three can be made up of a wide variety of property types. They may be residential or commercial in nature.  But there are some significant legal differences amongst the three types of property.  It is important to know the differences BEFORE you buy in.

What is a Homeowners Association (HOA)?

A Homeowners Association (HOA) is an entity made up of homeowners within a defined area.  This area is defined within the Homeowners Association Documents.  These documents also contain the bylaws, covenants, restrictions, and rules by which all members must abide.  The Association itself is generally a Non-Profit Corporation.  

Each owner buys a lot (or lots) within the defined area.  That lot may or may not include building(s). If the lot is unimproved, all improvements must follow the guidelines and restrictions set in the Association documents. The individual owns, maintains, and insures everything on that lot.  And when the person buys into the Association, he pledges to uphold all guidelines and restrictions contained within the HOA documents.

The Association itself is governed by a Board of Directors, elected by the members of the Association.  This Board is responsible for upholding all of the covenants, restrictions, and regulations contained in the documents.  

Most HOAs also contain some common elements.  Those elements are owned in their entirety by the HOA.  Lot owners own no shared interest in those common elements.  They just have a right to enjoy their use, as dictated by the HOA itself, and as defined in the HOA documents.  Depending on the development, common elements may be restricted to things like roadways, sidewalks, and mailbox stations, or they may include things like swimming pools, playgrounds, and barbecues.  

All owners are responsible for paying monthly fees to the Association.  Those fees cover maintaining, improving, and insuring the common elements.  Individuals are responsible for paying to maintain, insure, and improve their own lots in addition to paying the HOA Fees.  Some HOAs include general landscaping maintenance on the individual lots; in others, lot owners are responsible for maintaining their own yards, including cutting any grass.

Although many HOAs consist only of single-family detached homes, others consist of a variety of structures.  Some townhouse communities are a part of a Homeowner's Association.  In addition, many office parks have adapted an HOA model, where an individual owns both the office building and the land on which it sits.  

Owners in an HOA own individual parcels of real property, each with its own individual parcel number.  They are responsible for individually paying all property taxes on their lots, as well as paying their share of taxes for common elements.  (Taxes on common elements are figured into the monthly HOA fees, rather than being individually assessed.)  And although they are governed according to the documents, those documents do not get recorded.

With an HOA, the Association owns all common elements in their entirety; lot owners do NOT own a share of common grounds.  And the HOA Board may restrict the usage of these common elements. If a member is derelict in paying any fees or fines, his rights to common elements may be suspended. 

HOAs are generally governed by State Statute, and the statute supersedes what is written in the HOA Documents.  An HOA is subject to all provisions of the Fair Housing Act.  Your purchase application may need to be approved by the Board of Directors, but generally can only be rejected for financial reasons, (i.e. you do not appear to have the financial resources to pay the Association fees.)

What is a Condominium (Condo)?

With a condominium, an individual owns a particular unit within a larger complex.  That unit may be a townhouse, a half duplex, an apartment, or even a mobile home.  However, one does not own the land underneath the building, or even the building itself.  (There are some exceptions to this, which will be discussed later.)  Typically in a condo, one owns "from the drywall in."  The land itself and all improvements typically are owned by the Condo Association.  The unit owner is responsible for insuring and maintaining everything within the walls of the unit; the Condo Association is responsible for insuring and maintaining everything it owns.

The specifics of what a unit owner owns and maintains, versus what the Association owns and maintains, is outlined in the Condominium Documents.  Like with an HOA, these documents also contain the Covenants, Restrictions, and Bylaws for using your property, as well as the common elements.

In some states, a condo may be platted as a "Land Condo."  In those instances, the Association only owns the land; the parcel owner owns the actual building and all improvements.  In these cases, the parcel owner has a higher maintenance and insurance obligation.  In other cases, the Condo documents push maintenance responsibility on to the owner.  It is important to read the Condo documents BEFORE finalizing a purchase, so that you understand how much of a maintenance obligation your condo requires.  

In a Condo Association, each owner actually owns a share of the common elements, including the actual building, the grounds, any shared utility connections, and any amenities, such as a pool, a playground, or green space.  All of these are actually administered by the Board of Directors.  The Association also handles maintenance of the grounds, including landscaping and mowing grass.  

With a condo, although you may not own an actual building, you DO own a piece of Real Property.  You are able to build equity, just as you are with non-shared ownership housing. Each parcel in the condominium has an individual parcel number, recorded in the property database.  Every individual owner is responsible for paying property taxes on their parcel(s).  Each also pays his/her share of the taxes on the common grounds.  The Condo Documents define each owner's share.  Some condos define shares according to unit size, with larger units having a larger share and a larger financial burden.  Others split the common grounds into equal shares, regardless of the individual unit size.  In this case, all owners have an equivalent share of all common grounds and amenities, and all pay equally.

Like with an HOA, Condos are governed by a Board of Directors, elected by the members of the Association.  Most states also have statutes specific to condos, and those statutes supersede anything contained in the Condo Documents.  

Condo Associations usually maintain all roadways, sidewalks, etc. within the community.  Many also cover things like trash collection and recycling.  And of course, Association Members are responsible for paying monthly fees to cover all of these costs.  Should unexpected issues arise, the Board may impose a "special assessment" to pay for these issues.  These are in addition to the regular fees, also called "assessments: in condo lingo.  Each parcel owner is responsible for paying his share, as outlined in the Condo documents.

Condominiums often have two types of common elements: General Common Elements (GCEs) and Limited Common Elements (LCEs.)  Limited common elements are only available to a selected group of owners, while General common elements are equally available for use by any of the members of the Association.  Things such as parking spaces, balconies, patios, and car ports are generally Limited Common Elements.  Often, the financial burden for limited common elements falls to an individual owner, rather than to the Association as a whole.  The Board may demand you maintain a limited common element, and if you fail to do so, they can perform the work themselves and bill it to the parcel owner.  If the parcel owner fails to pay, the Association may put a lien on the unit.

Condos are governed by what is in their documents.  And unlike with an HOA, these documents are recorded in the property database.  They become public record.Statutes are generally more stringent as to what these documents may restrict.  These documents also outline dispute resolution procedures for when an owner disagrees with the Board's interpretation of the documents.

Condos generally have some sort of screening process for prospective owners.  This process is usually more rigorous than with an HOA, and prospective owners may be rejected for a broader number of reasons.  Many Associations perform background and credit checks on prospective owners.  State statute and the Fair Housing Act define what a condo may or may not consider.  

What is a Cooperative (Co-Op)?

A Cooperative differs significantly from an HOA or a Condominium. Rather than owning a piece of "real property," an individual owns a share in a corporation or LLC.  This share gives the owner the right to lease a certain space in the building.  Legally, this is considered a piece of "intangible personal property," rather than an actual piece of real estate.  With a co-op, all buildings, improvements, and amenities are owned by the corporation, and you are buying shares in a corporation.  Usually larger shares mean the right to lease a larger unit, while smaller shares give you the right to lease a smaller unit.

Because you are not buying real estate in the eyes of the law, you do not build equity like you do in an HOA or Condo.  Co-op purchases generally cannot be financed with traditional mortgages either, but must be financed through other types of loans.  And because you own shares, rather than physical property, they pass to heirs a little differently as well.  Heirs inherit shares, just as if you left them 100 shares of Microsoft Corporation.  Legal structures such as "joint tenants with right of survivorship" are more difficult to set up.  And because you do not own actual property, you may not put your co-op shares into a Land Trust.  However, you can make them a part of a different type of trust arrangement.

Like with an HOA or Condo, the Co-Op is administered by an elected Board of Directors.  However, most co-ops have active membership meetings, and the individual shareholders have a far greater say in how the co-op is run.  More actions require a group vote, and generally more members are active in a Co-Op than in any other form of shared ownership housing.

Co-Ops are also governed according to the documents.  Ownership requires a pledge to abide by all of the covenants, rules, restrictions, and bylaws.  But unlike with Condos and HOAs, most states do NOT have statutes specific to Co-Ops.  Co-Op members are freer to apply rules and restrictions to any area the majority of owners agrees.  They have more flexibility as to what they can allow and prohibit.

Co-ops generally have a smaller buy-in commitment than do Condos or HOAs.  This is because you are only buying a share in the building, rather than buying an actual piece of the building.  However, they also have higher monthly obligations.  In a co-op, your monthly payment must include rent for your unit, in addition to monthly costs associated with maintenance and improvement.  .  Your monthly fee also covers your share of mortgage payments and taxes.  (Many co-ops do not own the building they are sharing outright; instead, each share also includes a share of the mortgage on the actual building.)

And although Co-op ownership is subject to the Fair Housing Act, co-ops have the most rigorous screening process of the three types of shared ownership housing.  Purchasing a co-op share almost always involves a background and credit check, as well as an interview in front of the Board and/or a Member Committee.  Because the co-ops have the most leeway, they reject far more applications than do HOAs or Condos.  Again, this is because you are buying into a partnership, rather than just buying a place to live.

Because of this, co-ops have fewer investors and more owner-occupied units than a typical HOA or Condo.  Many Co-Ops have leasing restrictions, and may require a tenant pass the same rigorous screening as an owner.  This can be highly beneficial when you are looking for a place to call home. However, this can be a huge drawback to an investor looking to diversify or expand his housing portfolio.

Co-ops are more often found in urban type areas, and can be great alternatives to renting an apartment.  However, owning a Co-Op unit greatly differs from owning a piece of real property.  But a co-op is great for a person looking for a small community in a large area,  Co-Op dwellers generally know their neighbors.  Many co-ops have amenities and social aspects not found in other communities.  And they probably involve the most "sharing" of any of the three types of shared-ownership housing.

Pros and Cons of Condos vs. Co-Ops vs. HOAs

This week, we looked at three types of shared-ownership housing: Condominiums, Homeowner's Associations, and Cooperatives.  We discussed the basics of each type of housing, as well as their legal definitions.  Part II of this article will discuss the pros and cons of each type.  We'll also discuss how co-ops, condos, and HOA units may fit into a Real Estate Investment strategy.

Here at the Law Offices of Heath D Harte, we believe that a property should fit its owner.  There are some wonderful elements of shared ownership housing, as well as some limitations.  We want all of our clients to be informed, and to find the best match for their needs.  As well as handling purchases and closings, we have helped individuals with issues that arise AFTER they are settled into their property.  We've seen people buy into shared ownership housing that was a poor fit from the start. This is why we want everyone to be informed BEFORE they buy.

We'd love to hear our readers' experiences with co-ops, condos, and HOA.  We'd love to hear the good stories and the bad.  We invite you to share via Facebook, Twitter, Google+, or by the comment section of this post.  You can also contact us with your stories through our website.  And of course, we hope you'll be back for the second part of this article.  (Subscribe to this blog using the link in the sidebar, or join us on Facebook, Google+, or Twitter to receive notifications for Part II of this post.)

Part II: The Community Land Trust

Part II: The Community Land Trust
Setting Up a Community Land Trust

Last week, we started learning about Community and Conservation Land Trusts, and how these types of trusts are preserving communities.  This week, we'll talk about how one goes about starting a Community Land Trust.  Future posts will talk about how these types of trusts are being used across the country.

How To Set Up a Community Land Trust

Step One: Determine Your Goals

So you want to start a Community trust.  Why?  What types of goals do you hope to accomplish?  Are you looking to preserve affordable housing?  Preserve open space for recreation?  Do you wish to provide amenities not easily found in the area?  Who are you hoping to serve? Low income individuals?  Middle class? Service workers? First-time homeowners?  Nature lovers?  Boaters?

As with anything, your first step involves delineating your plans.  This will help guide you through the rest of the list of things you need to do.  Remember, these types of trusts always have one thing in common: they serve some sort of public benefit. Beyond that, your trust may have a very narrow focus, or it may have broader goals.

Many community trusts focus on housing.  However, others choose to focus on Day Care, recreation, or building parks and playgrounds.  Waterfront areas may develop trusts for community docks, swim areas, or fishing access.  Some trusts focus on preserving hiking or biking trails.  Historic districts may use trusts to preserve their "character."  Community trusts are not just limited to providing affordable housing.

People less experienced with building trusts may want to begin with a  more narrow focus.  Starting smaller may help lead to greater initial success.  

Step Two: Recruit an Organizing Committee

Most Community Land Trusts are non-profit organizations.  Many communities already have established groups that might be interested in sponsoring the trust. Once you have the goals outlined, the next step is to either find an established group to work with or to form your own, brand-new group.  Whichever option you choose, you'll want a committee to help.

When forming this organizing committee, keep your overall goals in mind, and try to invite people with skills and resources in those areas to join your group.  If you decide to form a new, non-profit, try to invite someone with expertise in this area to join your group.  If you are partnering with an existing group, your steering committee will consist of your people, plus a few from that established group.

In addition to forming the 501(c)3, your steering committee will need to raise the initial funds to get your trust off the ground.  This means you'll need at least one person with fundraising experience.  Funds may come from a variety of sources, including government grants, foundation grants, fundraisers, and good old donations. It is always helpful to have a philanthropist on your initial Board.  Real Estate personnel, builders, developers, and other people familiar with local regulations are also helpful.  If you cannot recruit such individuals for your steering committee, do not give up. Many National Non-profits began as small, grassroots clubs.  As you grow your trust, you can continue to try to recruit people to join your Board.

Step Three: Refine Your Goals and Beneficiaries

Now you have a committee together, it's time to refine your goals further.  Who exactly will the Trust serve?  And in what geographical area(s) will you provide services?  Will there be  income requirements or residency requirements for beneficiaries?  Again, this relates back to the purpose of your trust.  

If you are focusing on housing, you will need to define your terms concretely.  If you are targeting "service workers," exactly who qualifies? Teachers? Fire Fighters? Police? Bus Drivers?  If you are targeting "the middle class," what exactly does that mean in your area?  If you are trying to preserve housing, must a potential beneficiary already live in a certain neighborhood, or will you accept people looking to move there?  If you are providing work force housing, must they be employed within a certain mile radius? And what happens if they lose that job?  Do they lose the housing too?  

If you are focusing on recreation, similar questions apply.  Are you providing trails for anyone, or for just the town residents?  Will someone need a membership card to use a trust-owned dock?  If so, who qualifies for membership?  Are there financial considerations, residential considerations, or both?  

If you decide to partner with an existing group, they may already have criteria for membership.  You may have to adapt your initial goals to be more in line with those of the organization.  Steering committee members may have ideas for funding sources, to which you'll need to bend your initial goals.  

Step 4: Organize and Formalize

You've made a plan, recruited an organizing committee, and refined that plan.  Now it's time to organize.  It's time to elect a Board of Directors, designate staff roles, and start filing the paperwork.

If you are working with an established group, you may not need a separate Board of Directors.  But you will still need to determine positions and roles.  If you will have any paid staff, you will need to write job descriptions and determine the chain of command.  Even with an all-volunteer group, you'll need to delineate roles and responsibilities, as well as who reports to whom.  You may need to break into committees and sub-committees and appoint committee chairs.

You'll also need to decide the structure for beneficiaries.  Will this be a "membership" group?  If so, what are the criteria for membership?  Are there dues to join?  Or will you require "sweat equity." Will they need to apply for membership? Is the membership limited in number, or is it unlimited? Will you have wait lists?

If you are establishing your own non-profit, you'll need to complete your 501(c)3 application.  It's best to do this BEFORE you start fundraising so that donations are tax deductible.  And of course, you'll need to name your trust, as well as figure out where your group will be physically located.  You may need to look for donated space, at first, until you've raised enough money to get your own.  This is also the time to recruit volunteers to help you develop your outreach materials.  Business located in your service area that may benefit from your activities are a good source for donations.  Businesses can donate either goods, like paper for flyers, or actual services, like a designer to help with flyers.

Step Five: Solicit Donations and Funding

Now you have the basics of your trust together, you need some actual land.  And to get land, you will need to raise funds.  Funding can come from a variety of sources. These include Federal and Local Government grants, tax credit programs, corporate donations, individual donations, matching grant programs, private land donations, Foundation grants, sales, galas, and special events.  

Many organizations like to plan a public initial fundraiser in the form of a local event. This can be something as lush as a black tie dinner or something as small as a car wash at the local High School. The purpose here is to market the new organization and to solicit volunteers as much as it is to raise funds.  A public fundraiser markets your group's goals and purposes, and helps the group find both donors and beneficiaries.  It can also help to expand the pool of volunteers.  

Again, soliciting entities in the community that may benefit from the trust's goals is key during this phase.  You must sell your organization at the same time you are raising funds to make it a reality. This is probably the most important phase of starting your trust, as well as the most frustrating.  But it is this phase that will ultimately mean success or failure.  

Step Six: Acquire Assets

Now you have yourself formally established, and you've raised some funds, it's time to start meeting your goals.  A Land Trust must consist of real property.  Now is the time to start acquiring that land.

Of course, the assets you acquire will depend on the goals of your trust.  If you are building playgrounds, you'll need to find some empty lots in a suitable area.  If you are focused on housing, now is the time to acquire land for housing units, and maybe even a few blighted buildings.  If you're developing community gardens, it's time to find spots to put them. Once you've acquired the property, it is time to develop or redevelop that property.

But the real property is not the only asset you need to acquire.  With a Community Land Trust, your beneficiaries are one of your greatest assets.  While you are obtaining land, you need to be recruiting members as well.  And depending on your model. these members may be key in helping you to redevelop that land so that it meets the goals of your trust.

And of course, all the information we reviewed about setting up a Land Trust applies here.  Once your organization acquires the Real Property, the parcels are all put into a Land Trust.  The basic steps for setting up a Land Trust all apply here.

Step Seven: Keep Repeating Steps Three, Five, and Six

A successful Community Land Trust needs to be self-sustaining.  Your group will need to keep fundraising to keep it alive.  And as the Community Land Trust matures, you'll need to keep reassessing your goals, service areas, and beneficiaries.  And hopefully, you will be successful enough to keep building your assets.  Whether that means you start with a quarter acre lot and 4 garden plots, and grow that to 6 acres and 2 dozen plots, or you start with 2 apartments and grow that into an entire building, a successful trust will expand to meet the community's needs.  You may start with a neighborhood and expand to serve an entire city.  

Likewise, you should always be looking to expand your stable of volunteers.  Your volunteer needs may change as you peak and plateau.  Your membership requirements will likewise change.  You may find your trust requires more "sweat equity" from beneficiaries than you initially thought.  

Your group may want to broaden their focus as your trust grows.  Committee and sub-committee needs will change.  Building your trust will be an ongoing cycle of building, recruiting, fundraising, and assessing.  That is just par for the course.

Summary

This week  we reviewed the steps needed to set up a Community Land Trust.  The steps for setting up a Conservation Land Trust are virtually the same, the only difference really is the trust's goals.  A Conservation Trust is really just a specific sort of Community Land Trust.  And a Community Land Trust is a specific type of Land Trust, with the beneficiaries serving some sort of public interest.

Our own offices are located in Stamford Connecticut and White Plains, New York.  Both are cities with a wide range of diversity.  We have the very rich, the very poor, and all income levels in between.    Both areas are Urban-Suburban areas, just a hop, skip, and a jump from more rural-suburban locales.  Our area is ripe for all sorts of Community and Conservation trusts, especially as public recreation areas are being lost to in-fill developments.

We truly believe that Community Land Trusts can improve the quality of life for people across the spectrum in our area.  In fact, it is becoming harder for the middle class here, as there is more housing available at either end of the spectrum than there is in the middle.  We are seeing more trusts being developed every year.  And each and every one is an asset to the area.On the lower end of the scale, people are organizing to try to stay in the area their family has lived for generations.  On the upper end, we see more people taking advantage of the tax benefits participating in community trusts can bring.

We hope you are enjoying this series, thus far.  As always, we welcome your feedback.  Questions can be submitted here or on our website at HarteLawOffice.com Or you may reach us through Facebook, Twitter, or Google+.

Whether you are an investor or a philanthropist, Land Trusts of all kinds can help you reach your goals, and we are here to help.  We can even help you locate properties for any type of Land Trust.  Please contact us today.  We'd love to help you with your Land Trust.

The Community Land Trust

The Community Land Trust

Thus far, we have been discussing the traditional Land Trust, built on the Illinois model.  However, there is a second type of Land Trust, and any discussion of Land Trusts would be remiss without a mention.  Today, we'll be looking at the Community Land Trust.

What is a Community Land Trust?

A community Land Trust is is a non-profit organization that focuses on preserving community amenities for the locals.  Some Community Land Trusts focus on conserving land, open space, or other natural resources, while others focus on maintaining and developing community assets like affordable housing, gardens, parks, or playgrounds.  Other trusts focus on preserving farm land, and protecting it from being converted to housing developments.  The trust acquires land on behalf of the community and retains it, in trust, for perpetuity.  It then can lease the land, develop the land, or protect the land from ever being developed in any way.

In 1992, the US Federal Government codified the Community Land Trust in The Housing and Community Development Act.  (https://en.wikisource.org/wiki/Housing_and_Community_Development_Act_of_1992/Title_II#Sec._213._Housing_Education_and_Organizational_Support_for_Community_Land_Trusts.) This Act says “The term ``community land trust´´ means a community housing development organization that is not sponsored by a for-profit organization; that: acquires parcels of land, held in perpetuity, primarily for conveyance under long-term ground leases; transfers ownership of any structural improvements located on such leased parcels to the lessees; and retains a preemptive option to purchase any such structural improvement at a price determined by formula that is designed to ensure that the improvement remains affordable to low- and moderate-income families in perpetuity.”

In 2011, there were approximately 242 Community Land Trusts, containing over 10,000 housing units.  82% of their residents had incomes over 50% below the local average.  (http://community-wealth.org/strategies/panel/clts/index.html)

What is a Conservation Land Trust?

A conservation Land Trust operates similarly to a Community Land Trust, but it's sole purpose is to protect land in its natural state, to protect land from development and urbanization, and to protect natural resources.  These may be small, local organizations or huge, International conglomerates. 

Perhaps the best known Conservation Land Trust is The Nature Conservancy. Often times, Conservation Trusts acquire land through donation.  The land owner will deed the land to the Conservation Trust in exchange for a large tax break.  In some jurisdictions, developers may donate land to a Conservation Trust in order to receive “credits” that allow them to develop other land in the same locality.

How Do These Trusts Benefit a Land Owner?

There are many reasons a land owner may choose to participate in a Community Land Trust.  Some of these are outlined below.

Financial Incentives

Many people choose to join these types of trusts for financial reasons.  First, there are huge tax incentives that come with donating land to a trust.  Second, there may be financial reasons to sell part of ones land to a trust.  Often, that serves the purpose of buffering ones land from development while still being able to enjoy the use of ones land.  This is especially true of farm land in rapidly urbanizing areas.

Sometimes, land is purchased with the intent of rezoning.  If the rezoning fails, especially if it fails due to public uproar, selling the land to a Community or Conservation Trust allows an investor to recoup the money outlaid.  It is often the best way to avoid having a perceived “useless property” in ones portfolio.  

Many times, a Trust will make an offer on a property just to protect its future use. In these cases, the Trust may pay above what one could get for the parcel on “the open market.”

Many localities are now offering developer incentives for donating land to trusts.  In many locales, a developer may receive incentives in another area for donating a parcel to a trust.  The developer may donate parcel A in order to receive concessions on Parcel B.  In some areas, that may mean increased density.  In others, developers receive permission to clear land for conserving different land.  

Finally, donating part of ones land to a trust may result in lower property taxes for years to come. Your donation may include an agreement that allows you to still “use” the land.  However, since you no longer own it, you will no longer be taxed on that portion of the land.  

Protection of Future Land Use

Many land owners choose to protect their land through a conservation easement. This is a legal agreement between the owner and a Land Trust that permanently limits uses of the land in order to protect its conservation values.  In most cases, the owner retains his ability to own, use, and sell this land, as well as pass it down to heirs.  

The terms of each conservation easement are individually negotiated.  However, they must include some sort of public benefit.   Benefits are simple, and include such things as preserving views, preserving access to waterfront, protecting wild life and/or its habitat, historic preservation, or even something as simple as protecting public space.  

Conservation easements can include provisions for future use.  For example, you may negotiate the future right to subdivide the parcel, or even to convert a portion to housing.  However, if you want to ensure your future heirs don't cut down all the trees on the Southwest corner, you can protect the future life of those trees with a conservation easement.  You can use a Conservation Easement to prevent your heirs from paving paradise to put up a parking lot.

Protect a Community

Many people are lamenting the affluenza epidemic that is attacking America.  Cities are rapidly gentrifying, and the middle class is rapidly being squeezed out of many places.  Many of our service workers can no longer afford to live in the areas they serve.  A lot of folks want to protect their communities from over-gentrification. The Community Land Trust is a fantastic way to do so. Community members can form trusts to buy up land and prevent it from being sold to the highest bidder.  

Habitat for Humanity is one of the largest organizations built on this model. However, Local Community Trusts are being established across the country every day.  These trusts benefit the community in many ways.  They offer opportunities for first time home-buyers, and allow young people to establish themselves in communities they could not otherwise afford.  In addition to protecting areas, trusts can help revitalize them.  Trusts often buy up properties in blighted neighborhoods with the goal of making that area vital again.  They provide housing for teachers, firefighters, and veterans.  And in many cases, they allow people to stay in the area in which they grew up.

Philanthropy

Many people like leaving some sort of legacy.  Establishing a community trust is one of the more affordable ways to do so.  While an individual might not be able to afford to have their name on the wing of a hospital, they may be able to leave the community a park.  While the Carnegies may have left a legacy of libraries, Mr. Jones may choose to donate a small pocket park to his community. Future generations will remember him when they play under the trees in Jones Park.  And though the donation may be made for vanity purposes, the donor will still reap a myriad of financial benefits from the donation.

Summary

This week, we learned about Community and Conservation Land Trusts.  These are a specific type of Land Trust, set up to promote the public good.  But although charitable in nature, these types of trusts still financially benefit the donors in many ways.

Next week, we'll continue to examine the Community Land Trust.  Future posts will talk about how these land trusts are being used across the US, and about how you go about setting up or contributing to one.

Here at the Law Offices of Heath D Harte, we truly believe in building communities.  Real estate is an important component of community building and revitalization.  Effective real estate investors know how to build their own net worth while investing in the local community.  We believe ALL types of Land Trusts can help an individual become successful with Real Estate.  As your portfolio grows, you will need to balance your tax liabilities.  Using Community Land Trusts, you may increase your own bottom line while growing your community.  

Many Land Trust courses only focus on using the Illinois Model to grow your own net worth. However, the judicious use of Land Trusts can balance your investment properties with investments in the community itself.  That, in turn, will help your other community investments to grow in value. One type of Land Trust can grow your investment in another.  This is why it is important to be aware of both types.

As always, we invite your comments, questions, and general feedback.  Please use the comment form below, or connect with us on Facebook, Twitter, and Google+ using the links in the sidebar.  And as always, we are here to help you with all of your Land Trust  and Real Estate Law needs.  Please visit us at HarteRealEstateLaw.com or HarteLawOffice.com, or contact us and let us know how we can help.

Shopping for Real Estate During The Holidays

Shopping for Real Estate During The Holidays

Believe it or not, Shopping for real estate during the Holidays can be a good thing. There is a lot you can learn about a neighborhood during the Holidays.

Many HOAs and condo associations have restrictions on what types of decorations can be hung.  A simple drive through the community can let you see these restrictions for yourself.  And if you like to live in a place that cannot be seen from space during the Holidays, you'll get a good feel for the intensity of lighting allowed.  If the community you are interested in does not have a single light or lawn ornament, chances are the community restricts decorations in some way.  You can also see whether your own holiday decorating traditions would be appropriate for the neighborhood you are considering.

Holiday decorations usually reflect personal style.  In condominiums and Homeowners' Associations, they can reflect the community's style.  Again, a simple Holiday drive through can help you feel out if the community's style is a good match for your own.  If the displays on common areas are “tacky” in your opinion, you may find that the community is not a good match for your personal style. Conversely, if you love the feel of the community during the Holidays, you'll probably love the feeling the rest of the year too.

You can also gauge neighborhood safety during the holidays.  Are the decorations locked to the surrounding environment?  Are there packages sitting on doorsteps, and are those same packages still there when you circle a second time?  Or are there obvious “decoy packages,” left to deter theft of the real ones?  The presence or absence of these things can tell you a lot about how secure these types of items will be throughout the year.

Finally, you can learn a lot about the social aspects of a community during the holidays.  If you are looking for a more social community, be sure to check community bulletin boards and the Club House, if the community has one.  There you will find information about the scope and type of activities planned throughout the Holidays.  (You may also find reminders about what is and is not allowed.)  If the social aspects of community are important to you, these will be much easier to assess if you visit a community during the Holidays.

If you are looking for property, either as a primary residence, a second home, or as an investment, make it a priority to tour the community during the Holiday season, if at all possible.  You'll get a wealth of valuable information not available at any other time.

Here at the Law Offices of Heath D Harte, we wish you all a very Happy Holiday Season.  And if you visit our offices, we hope you will enjoy our simple Holiday style.  We have finished our observation of Hanukkah, and now, we are decking the halls for Christmas and Kwanza.  We wish all of our clients and readers a very Happy Holiday Season and a Happy New Year.