legal structure
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Loan Stock can be agreed for any set period, at the end of which the stock is said to close and SHHECom would pay the entire sum back to a member at the agreed time. This is to allow for the building of new homes in the SHHECom property. It will allow payments to the Charity Bank mortgage by SHHECom to be assured for the first three years.
Once the community is established it will be bringing in its own cash flow so the Charity Bank can relax about mortgage repayments. It is expected that the capital value will increase (land, building, equipment). Hopefully in three years time new members will wish to buy in for a house or flat, thereby investing further capital (as Loan Stock) so that large slices of the Charity bank mortgage can be paid off, resulting in much lower repayments rates, and therefore rents.
We hope to negotiate an intital loan with the Charity Bank: a 26% of Buildings and Land cost mortgage of about £200k with current market value of a large house and land near Totnes being in the order of £500k.
b. Members who offer capital as Loan Stock and who opt to receive between 0% and 3% APR only can have their house or flat rent paid out of their Loan Stock with SHHECom.
On withdrawal of their stock they would have to pay for their rent at their home at the SHHECom agreed rates. This Loanstock would have to be a minimum of £50,000.
c. Members who have not purchased Loan Stock will have to pay SHHECom agreed rent for their flat or house. Currently this would be around £160 per calendar month for a flat and £240 per calendar month for a house.
After a minimum period of THREE years a renting member wishing to leave can 'sell' their flat or house to a new member only for the current market value at the time of sale. Funds raised from such sales will be shared between the departing member, who will receive up to 70%*, the remaining 30% will be retained by SHHECom in order to pay off the Charity Bank mortgage or to cover overheads.
In exceptional circumstances SHHECom will give fair remuneration if a member or members need to leave sooner.
* Please note:
1) Charity Bank will give mortgages to Eco-Sustaining Projects, that are Not For Profit or are a Charity, a fixed rate of 6%;
2) the share due to the departing member will depend on how long they have been renting (this may need to be more explicit, maybe agree some figures collectively).
The current majority view is the S.H.H.E. Community Cooperative should retain ownership of the whole property, so that only the eco-homes themselves would be sold to Members not a plot on which they stand. This way all Members of our Community would benefit from all the work, improvements, efforts they will do during their residency, expressed in the rise in value of the property.
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South Hams Holistic Education Community
Legal Structure - update
Refer to paragraphs 3 and 14 of the South Hams Holistic Education Community (SHHECom) Aims and Constitutional Objectives, October 2001/March 2005.
This document has been produced to clarify the following points:
- The economics of members Loan Stock, when making capital investments in SHHECom.
- Rents payable by members when occupying a SHHECom house or flat.
- Repayments due to members who do not hold Loan Stock, who have been renting a flat or house from SHHECom when those members choose to leave.
Loan Stock can be agreed for any set period, at the end of which the stock is said to close and SHHECom would pay the entire sum back to a member at the agreed time. This is to allow for the building of new homes in the SHHECom property. It will allow payments to the Charity Bank mortgage by SHHECom to be assured for the first three years.
Once the community is established it will be bringing in its own cash flow so the Charity Bank can relax about mortgage repayments. It is expected that the capital value will increase (land, building, equipment). Hopefully in three years time new members will wish to buy in for a house or flat, thereby investing further capital (as Loan Stock) so that large slices of the Charity bank mortgage can be paid off, resulting in much lower repayments rates, and therefore rents.
We hope to negotiate an intital loan with the Charity Bank: a 26% of Buildings and Land cost mortgage of about £200k with current market value of a large house and land near Totnes being in the order of £500k.
b. Members who offer capital as Loan Stock and who opt to receive between 0% and 3% APR only can have their house or flat rent paid out of their Loan Stock with SHHECom.
On withdrawal of their stock they would have to pay for their rent at their home at the SHHECom agreed rates. This Loanstock would have to be a minimum of £50,000.
c. Members who have not purchased Loan Stock will have to pay SHHECom agreed rent for their flat or house. Currently this would be around £160 per calendar month for a flat and £240 per calendar month for a house.
After a minimum period of THREE years a renting member wishing to leave can 'sell' their flat or house to a new member only for the current market value at the time of sale. Funds raised from such sales will be shared between the departing member, who will receive up to 70%*, the remaining 30% will be retained by SHHECom in order to pay off the Charity Bank mortgage or to cover overheads.
In exceptional circumstances SHHECom will give fair remuneration if a member or members need to leave sooner.
* Please note:
1) Charity Bank will give mortgages to Eco-Sustaining Projects, that are Not For Profit or are a Charity, a fixed rate of 6%;
2) the share due to the departing member will depend on how long they have been renting (this may need to be more explicit, maybe agree some figures collectively).
The current majority view is the S.H.H.E. Community Cooperative should retain ownership of the whole property, so that only the eco-homes themselves would be sold to Members not a plot on which they stand. This way all Members of our Community would benefit from all the work, improvements, efforts they will do during their residency, expressed in the rise in value of the property.
[last updated 04.08.08]
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