Lawyer to housing co-ops: You’re in a legal mess

California attorney Adrian Adams has published a comment calling into question whether housing cooperatives can properly exist under California law. Does his analysis hold up?

California attorney Adrian Adams has published a commentary on the legal status of housing cooperatives, calling into question how they can exist under California law.

According to Adams, California’s Davis-Stirling Common Interest Development Act defines a “declaration” (a.k.a. “CC&Rs”) as one of the prerequisites to that act applying to a housing development, but he says a stock cooperative, unlike a condominium association, cannot possibly satisfy that prerequisite, because it cannot have a declaration. Instead, says Adams, it has a lease or occupancy agreement defining the terms under which the co-op members occupy their units.

A reader might infer from Adams’s analysis that the members of any housing development, whether a co-op or not, can exempt themselves from Davis-Stirling act simply by not recording a declaration.

Adams, in addition, says that co-ops have both advantages and disadvantages in comparison with condominium associations. Cooperatives have the power to evict their members, while condominium associations can only wish they had such power. On the other hand, he says, cooperatives constitute an inferior form of property ownership for the purpose of obtaining financing.

How well does Adams’s analysis hold up under scrutiny? Are housing co-ops in California a legal contradiction? Here are two facts that may be relevant:

  • Housing cooperatives can have declarations, and some do. For example, Berkeley Town House Cooperative Corporation is a stock cooperative with a declaration recorded on 15 March 1989 in Alameda County.
  • The Davis-Stirling Common Interest Development Act defines a declaration of a stock cooperative as any document, “however denominated”, that contains (1) a legal description of the property, (2) a statement that the common interest development is a stock cooperative, (3) the name of the association, and (4) “the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes”. It qualifies all this with the phrase “recorded on or after January 1, 1986”, and one might wonder whether that is a requirement on all declarations or only a limitation on which declarations must contain the above 4 kinds of information.

What conclusions can we draw? I don’t know. The newsletter comment by Adams leaves questions unanswered, but may usefully provoke co-ops to review their governing documents and consider a more expansive set of possibilities than they have done before.

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