Mutual home ownership
Dandelion Community Limited (the Company) will purchase the property and own the freehold. The permanent residents of the community will be members of this company, all equally owning all the land and buildings in a mutual ownership system.
The Company will take on a mortgage to purchase the property. Each of the private units (where people sleep and have their private space) will have a value which includes a share of the land and communal buildings.
When a person joins the community as a permanent member, they can put in the agreed value of the private unit as capital. Their capital is a loan against the private unit and they sign an “equity loan agreement” with the Company.
If a new member doesn’t have enough capital for the unit value, they take on a mortgage lender’s commitment and agree to make a monthly payment for their part of the shared mortgage. (Some of the members will need to put in capital, since the mortgage company will require a certain loan-to-value ratio.)
When a member wants to leave, they get back any capital they loaned the company. This capital will usually come from a new member coming in, or it could come from the company increasing its mortgage loan. If they person leaving made mortgage repayments, they get back most of the capital (but not the interest) they have paid as mortgage repayments. In this way a member who started off with no capital will gradually gain some over the years.
This mutual home ownership model enables people with no capital to share the mortgage and thus to “buy in” to the community.
Advantages of mutual home ownership:
- Members of the community can move to a new unit within the community property by agreement with other community members, rather than needing to buy a new home, for example if their family circumstances change.
- Moving to a new unit will not incur Stamp Duty Land Tax
- All members of the Company will be jointly responsible for the monthly mortgage payment, so if someone falls on hard times, the community can give them some flexibility.
- There is equality between people who put in capital and people who don’t; all are equal members of the Company with equal rights and responsibilities.
- It is in everyone’s interest to keep the buildings and the estate in good condition.
- For those who don’t have capital, if you work on upkeep and maintenance, you will know you are contributing to your own wealth and to the mutual wealth of your community members, not to that of a landlord.