How does a housing cooperative work, and what are the benefits of joining one?

Own living space is one of the basic needs and dreams of almost every Russian family. Few people can afford to buy housing with their own funds, especially at a young age. The first option that comes to mind is a mortgage. But high interest rates make it unaffordable for a huge number of families. Few people know that modern legislation provides for the possibility of purchasing real estate through housing cooperatives. What is it, how does it work and what opportunities does it provide - read further in the article.

The meaning of a housing cooperative

From a legislative point of view, there are two documents regulating the activities of cooperatives - the Housing Code (Section V, Articles 110-134) and Federal Law No. 215-FZ dated December 30, 2004, as amended on June 27, 2019. Their definitions vary somewhat, but the essence remains the same - uniting people on a voluntary basis with the aim of providing cooperative members with residential real estate. It is a non-profit organization, that is, it does not have the goal of making a profit.

A housing cooperative is an opportunity to purchase an apartment in installments without paying banks millions in interest. Fees are paid for membership in the community, which are used to purchase housing for its representatives in the order of approved priority. The total amount of contributions is exactly the cost of the property, allowing you to become the owner of the living space without extra charges.

To become a member of a housing cooperative, you need to choose a suitable one, check the eligibility of its work and submit an application to the chairman of the board. Residents' consent will be required for a new member to join. A candidate for membership can be either a legal entity or an individual. In the latter case, his age should not be less than 16 years; the application is confirmed by the parents or other legal representative.

Responsibility

Legislative projects, on the basis of which the full legitimacy of the functioning of housing savings cooperatives is regulated, establish two fundamental points for which responsibility is assigned to the housing cooperative or removed from it.

These points can be found in Law No. 215 “On Housing Savings Cooperatives”, Chapter 1, Article 4.

This article states that if individual members of a housing cooperative have accounts payable and obligations, these obligations are not transferred to the whole association . That is, in simple terms, each member of the cooperative bears individual responsibility for those debts that are assigned exclusively to him due to his own financial activities. The second paragraph of this article states that for the general obligations of the cooperative, its members are liable with all property belonging to the housing cooperative in question , and responsibility in this case is distributed accordingly equally.

If we move away from the exclusively documentary and legal conventions of this topic, it should be noted that the fundamental responsibility of the housing cooperative is to maintain an appropriate level of provision of services provided and the overall quality of all work performed, in case of non-compliance with the standard, the shareholder members have the opportunity during the meeting challenge the results of the work carried out by the enterprise.

The capital and functioning of the cooperative are supported by funds contributed monthly by members of the cooperative, as well as contributions from new members.

Types of housing cooperatives

Such associations first appeared in the USSR, but that time was not distinguished by the variety of opportunities to obtain their own housing. In modern Russia, the legislative framework distinguishes three types of cooperatives:

housing (LCD);
housing construction (HCB);
housing accumulative (HNC).

Each of them has its own characteristics, while residential complexes and housing cooperatives are regulated by the Housing Code, and housing complexes by the relevant federal law.

Housing cooperative

Such an association is created for the sale of objects of a particular house, and one can become a member of the cooperative both at the stage of commissioning the house and during its operation. Check-in to the apartment before payment of the full price occurs according to the right of use. After payment of the entire amount of contributions, the property is transferred into ownership from the residential complex to its participant. The number of cooperative participants is not limited.

This type of association is the oldest and therefore time-tested. In addition, residential complexes are the most universal, including due to the peculiarities of legislation, while their number in the country is very small. The purchase of an apartment takes place on a first-come, first-served basis, with an average installment period of 10 years. Attracting credit funds is possible if this is provided for by the community charter.

Housing and construction cooperative

Its operating principle coincides with simple LCDs. The only difference is that with housing cooperatives, legal relations arise during the construction of a residential building. At the same time, only low-rise buildings can be built, and the number of participants in the housing cooperative must match the number of apartments in the planned building. Property documents are issued subject to two conditions: full payment of the share and delivery of the house.

This version of the cooperative is quite convenient, because the entire construction stage is controlled by the members of the housing cooperative, but it does have a lot of disadvantages:

construction of only low-rise buildings, which increases costs;
wait a long time to move in, because construction is often delayed;
the number of members is limited, and the departure of one of them complicates the work.

In addition, the reputation of housing cooperatives has been somewhat undermined due to the fact that, under the guise of a cooperative, construction companies often carried out fraudulent schemes with the withdrawal of contributions from shareholders. As a rule, such houses remained unfinished for a long time, and cooperative members had to go to court to protect their rights.

Another interesting point is that developers often registered their activities under housing cooperatives in order to receive benefits instead of concluding ordinary agreements on shared construction, which is regulated by Federal Law No. 214-FZ of December 30, 2004 instead of the above-mentioned FZ-215.

Housing and savings cooperative

The goal of housing cooperatives is to provide the members of the cooperative with living space, but there is one significant difference from previous types - apartments are bought in different buildings, sometimes even cities, and not in one specific building. Most often, the shareholder accumulates a certain share of the cost of housing, and after that the property is purchased for him. Until the end of payments, it remains the property of the cooperative.

ZhNK has a limit on the number of shareholders: their number should not exceed 5 thousand people. In addition, a member of the cooperative has the right to apply for the purchase of an apartment only after two years have passed from the date of joining the association. In case of termination of membership, the period for returning the already transferred share will be at least six months. The maximum return period is two years.

Federal Law-215 provides for the possibility of attracting loans from outside if there is a lack of own funds. The loan amount is limited - no more than 70% of the share contribution and no more than 40% of the entire value of the cooperative property. This practice became popular, which ultimately caused frequent bankruptcies of housing cooperatives and fraudulent activities with loans. Also, the use of credit funds leads to an increase in the cost of objects, reducing the feasibility of participation in housing cooperatives.

Housing cooperatives elect a chairman of the board and may also appoint auditors: one of the members not associated with the board or an outsider. The activities of associations are regulated by law, ensured by a charter and confirmed by transparent accounting reports. The text of the charter is prepared before the registration of the housing complex, discussed at a meeting of participants and approved by universal vote. Members of the LC must read the documents and sign them.

Advantages and risks of purchasing

Among the positive aspects of acquiring living space through participation in a cooperative, it is worth highlighting:

Relatively low price of the apartment. This is facilitated by the exemption of share contributions from taxation, while developers working under DDU include VAT in the cost of objects.
Speed of registration. A housing cooperative agreement does not require state registration, so it can be concluded in the shortest possible time.
Long installment plan. Partial payments for housing can be made not only at the construction stage, but also for several years after its completion and actual residence in the apartment.
Construction control. Members of the cooperative have the right to access documents of the association to monitor compliance with deadlines and other important aspects of construction. If the developer goes bankrupt, they can find a new contractor to complete the construction.

Against the background of these advantages, a number of risks of this home purchase scheme should be taken into account:

Increase in property value. Due to an increase in the cost of building materials and work during the construction process or other factors, the cost of the share may be increased in equal shares for each shareholder.
Delaying construction deadlines. In fact, the construction of a house can take much longer than originally agreed. Even if the deadlines specified in the agreement are missed, the law does not provide for any liability to shareholders.
Failure to obtain the desired apartment. Issues of providing housing according to paid fees, distribution of apartments, moving in of certain persons and related disagreements are resolved only at the General Meeting of Members of the Association. There are no regulations to regulate this area.
No right to compensation for losses, collection of penalties or elimination of housing defects. Similar methods of protecting the rights of citizens are provided for in Art. 7 of Law No. 214-FZ “On participation in shared construction...”, but the activities of cooperatives do not fall under its scope, and, accordingly, shareholders cannot use its provisions in case of violation of their interests.
Double sales. As mentioned above, contracts are concluded in simple written form and are not subject to mandatory state registration (unlike DDU), which means that fraudsters have the opportunity to sell the same object to several people at the same time.

The only way to protect yourself from major risks is to take a responsible approach to choosing residential complexes, giving preference to associations with a positive reputation and the presence of previously successfully completed projects.

Rights and obligations of cooperative members

To join the cooperative, you need to submit an application showing a person’s identity card - a passport. It is possible that representatives of the cooperative will additionally ask for an INN or work book to confirm the solvency of a potential shareholder. The applicant gets acquainted with the local regulations of the Housing Code, in particular the charter, which spells out all the rights and obligations of the members of the association.

A new participant in a housing cooperative is vested with the rights (Article 7 of Federal Law-215):

take part in the activities of the association and serve on the board;
participate in the disposal of the cooperative’s property;
receive real estate owned by the cooperative on a right of use;
enjoy benefits provided by law or local regulations;
manage the income of the cooperative, if any;
receive complete information about the activities of the cooperative;
with the consent of the association, dispose of property (will, donation, exchange);
return the paid share upon leaving the cooperative (does not apply to membership fees);
after paying the full cost, transfer the received property into personal ownership;
demand from the cooperative the quality of housing received within the framework of contributions;
protect your rights and interests in court.

The standard responsibilities of a potential shareholder are as follows:

comply with legal requirements and internal documentation;
transfer shares and membership fees on time;
participate in cooperative activities and meetings;
not create obstacles to the work of the cooperative and its participants;
bear the risks of losses within the accumulated share as a result of the activities of the cooperative.

Purposes of creation and rights of a housing savings cooperative

The first housing cooperatives appeared on the Russian market in 2005 after Federal Law No. 215 “On Housing Savings Cooperatives” came into force.

The purpose of organizing cooperatives is to satisfy housing requirements by combining in one fund all the share contributions made by its participants.

To achieve its basic goal, a housing savings cooperative has the right to:

Raise funds from citizens to purchase housing.
Invest funds received from citizens in housing construction , acting as a developer or participant in shared construction.
Purchase residential premises.
Attract borrowed funds for your work , but their total amount should not exceed 40% of the total value of the cooperative’s property.

The cooperative can act as a developer or play the role of a shareholder (participant in shared construction).

The main differences between a housing cooperative and a mortgage

The most popular competitor of housing associations is the purchase of real estate with a mortgage. For a real estate buyer, the situation is as follows: there is a certain amount for the down payment, which is not enough to purchase real estate. A mortgage is a loan of the required balance at a fairly high interest rate. As a result, it turns out that the amount of overpayments sometimes reaches the original cost of the apartment. Purchasing through a housing cooperative is an installment plan, that is, the cooperative does not make money on the debt of the shareholder.

With a mortgage, there are other significant disadvantages for many - this is the presence of an official job with a “white” salary, which will convince the bank of the client’s solvency. The second point is various mandatory insurances, without which the loan will either not be given or the interest rate on it will be increased. The minimum set is life insurance of the borrower and the real estate itself.

Purchasing through a housing cooperative also has disadvantages compared to a mortgage - there are not many associations in the country, and in fact, most such organizations often go bankrupt. And the second point is that with a mortgage, the borrower immediately becomes the owner of the home, and as a member of the cooperative, only after paying the full cost.

conclusions

Buying a home is a responsible and important matter. When for some reason you do not have enough personal funds to cover the full cost of the property, you can take advantage of membership in housing cooperatives. Its essence is the opportunity to purchase an apartment in installments. This type of association is regulated by Russian legislation. When choosing a cooperative, you need to pay attention to its reliability, reviews and financial statements - in this case, the risks will be minimal. If you have any questions, please contact the specialists of the Academy of Sciences “Transfer” for advice!