SHACKING UP – 21st Century Style

Shacking Up - 21st Century StyleHousing cooperatives (co-ops), a hybrid of condominium units and apartment complexes, have been around for decades.  Typically, a co-op has many residential units and is owned by a corporation.  Rather than each resident owning his or her individual housing unit or paying rent, a resident buys into a co-op by purchasing shares and becoming a shareholder in the corporation.  While co-op residents are responsible for paying their own utilities, they are also responsible for sharing in the cost of operating and maintaining the building.  Large co-ops have by-laws and are typically run by a board of directors, which is comprised of a subset of residents.  Smaller co-ops may be run by all residents, with everyone taking on shared tasks such as maintenance and landscaping.

The most attractive option of living in a co-op is that it often costs less than living in a condominium or an apartment, and even a house.  This has been the case for years in large cities, such as New York City, where the cost of living is high.  However, with the impact of the current economy and increase in the cost of living, many individuals across the United States are now electing to establish a form of co-ops known as “shared households.”  Shared households consist of a small number of individuals who purchase a house together and share in the costs and tasks of maintaining it.  There are certain rules that must usually be established and followed in shared households, such as visitors and visiting hours, pets, and chores.  This concept is catching on as shared households now make up 18 percent of all households in the United States—a 17 percent increase since 2007.

For all of its benefits, however, it should be remembered that a shared household is akin to a business partnership.  This means that there should be an established system of rules, formally drafted, such as by-laws.  The by-laws should contain not only the typical rules pertaining to visiting hours, maintenance, costs, and daily chores, but, and most importantly, the termination of residency.  Thus, the by-laws should contain provisions addressing how a resident might be evicted, if one wants to leave, or what happens if a resident dies.  This is particularly important if all residents are co-owners of the house.  Professionally drafted by-laws and deeds can help prevent the emotional and costly expense of litigation arising under such scenarios, particularly costly probate resulting from the death of a resident.  With respect to the latter scenario, effective estate plans should also be considered in order to further ensure that a resident’s share does not pass to an outside party upon his or her death.  Although becoming less of an issue, some municipalities still have laws prohibiting cohabitation between unmarried and unrelated individuals, and/or the number of individuals residing in one household.  Thus, similar to starting a business, consultation with an attorney can be invaluable when it comes to establishing a shared household.   

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