“Are there any more questions or comments?”

This was the second meeting for the final draft of a proposal at Port Townsend EcoVillage. We had finished another long, open discussion about our new proposal to switch plans from owning our property together as a Limited Equity Co-op (LEC), to owning it as a Limited Liability Company (LLC).

“Yes!” said one of our members. “I know we’ve discussed this for months, but tell us again why, after more than $2,000 in legal fees, hundreds of legal-team hours, and more than two years of thinking we were going to become a Limited Equity Co-op, we are now about to abandon ship and become a Limited Liability Company? I want to make sure I get it.”

“Well,” I said, “basically, an LLC is more in line with our values, gives us more flexibility to meet individual and community needs, will cost less money, and encourages us to be a bit more interdependent. It’s another step away from ‘my house’ towards ‘our community.’”

Silence.

“Is there any more discussion?” asked our facilitator.

Silence.

“I’m going to call for consensus. Are there any concerns?”

Silence again, and our facilitator let it be a looong silence. This was a big one!

“We have consensus,” she declared. “Let’s take a break and celebrate.”

And we did, with hugs and shouts of excitement!

We began looking at legal structures for shared property ownership more than two and a half years ago. At that time we had considered following the path of many other community developers and newly forming communities by first forming an LLC to limit our group’s liability during the forming and construction phase of our ecovillage, and then switching to a Homeowners Association, Condominium Association, or Limited Equity Housing Cooperative for our final legal structure. However, when we chose a Limited Equity Co-op to own our property together, the best co-op lawyer in the State said we didn’t need an LLC as a transitional legal structure. At that time we had never heard of an intentional community using an LLC as a permanent legal structure to own all land and buildings in common, and we didn’t consider the option.

About a year ago, though, several of our members began to explore how we could more creatively meet the needs of community members who might have different financial and physical needs, especially as families and living arrangements in our community might change over time. When we realized that the perpetually renewable co-op lease of an LEC is still fundamentally the “my own real estate; my own house” model, and an LEC only allowed one class of membership, the “owner”  of a lease, we yearned for more flexibility and interdependence.

In calls for help to community consultants Diana Leafe Christian, Laird Schaub, and Dave Henson, the idea emerged again of jointly owning all the property through an LLC with NO leases for individual home sites, simply consensus decisions, recorded  in the meeting minutes, specifying where people live. Dave is a member of Sowing Circle, a community in Occidental, California, the only intentional community we know of permanently organized as an LLC. Sowing Circle has only twelve owner members, most of whom work for the community’s very successful on-site nonprofit, Occidental Arts and Ecology Center (OAEC), which leases space from the LLC. This arrangement seems to be working well for Sowing Circle, but they are still working on a formula for returning a member’s equity over time when he or she leaves the community. Could it work for us with an anticipated 50 or so adult members and no established on-site nonprofit or business to bind us together? We’ll find out.

Financing the project is one of our major concerns. We are an urban ecovillage where building codes are stricter and land, housing, and development costs are higher than for our rural cousins. The founders and current owners are resident members who are willing to carry an owner-financing contract for $800,000. This will help our cash flow as we pay for the seven acres of land and current onsite housing for seven adults and two kids. But this arrangement still leaves an additional estimated $1.4 million up front to pay for general community infrastructure, common house, barn, and other structures, PLUS the cost of building most of the residences.

We’ll have to be very creative to finance our LLC and foster the kind of economic diversity we value as a community. While this is still being worked out, it appears that the average buy-in cost, without the cost of a residence, could average over $50,000 PER ADULT, (with about $16,000 of that on a contract with the LLC and founders) or perhaps $90,000 for a couple ($32,000 on contract). Mortgage-type “share loans” for a co-op lease holders are challenging enough to find and usually carry higher interest rates than do loans for owner members in Homeowner and Condominium Associations. It was going to be even more challenging with a Limited Equity Cooperative. Now as an LLC, these sort of bank loans for individuals, for either buy-in or a residence, will probably not be possible at all. 

We’ll try our own internal loan fund by borrowing from members, friends, and investors. We’ll apply for grants, lease space to our own nonprofit educational foundation, and develop onsite income-producing businesses. The first year of our CSA (Community Supported Agriculture) farm already involved over 20 members and produced abundant vegetables and flowers. Last summer our bees gifted us with 180 pounds of honey, an other growing business.

In order to help us decide between an LEC and an LLC, our legal team developed a table showing what we saw as the differences between them. (See below.) Some of these differences may be unique to Washington State, or to Port Townsend, with a population of only 8,500 people. There are no lawyers in our ecovillage and we take no responsibility for the accuracy of the comparison, but we found the table useful. We did not include in the table the many important ways that the LEC and LLC models are similar: for example, they both allow for shared ownership, the ability to limit equity, flexibility in creating additional legal entities, flexibility in adjusting assessments according to need, complexity of “operating agreements” (LLC) or “occupancy agreements” (LEC), etc. Both legal entities are probably scary and mystifying to the average property owner in the United States.

We have set ambitious goals for ourselves to establish a loan fund and successfully recruit members to join our ecovillage and co-own our property together through an LLC. We agreed to return to the Limited Equity Co-op model as our first default if we don’t succeed. Rumor has it there are many other intentional communities out there organized as permanent LLCs, but we can’t seem to find them. If your community owns its land through an LLC, please let us know. We would love to share our ideas and learn from your experience. We welcome all the help we can get!

How we saw the differences between an LEC and LLC: