2009 California Civil Code - Section 817-817.4 :: Chapter 5. Housing Cooperatives And Housing Cooperative Trusts

CIVIL CODE
SECTION 817-817.4

817.  "Limited-equity housing cooperative" or a "workforce housing
cooperative trust" means a corporation organized on a cooperative
basis that, in addition to complying with Section 817.1 as may be
applicable, meets all of the following requirements:
   (a) The corporation is any of the following:
   (1) Organized as a nonprofit public benefit corporation pursuant
to Part 2 (commencing with Section 5110) of Division 2 of Title 1 of
the Corporations Code.
   (2) Holds title to real property as the beneficiary of a trust
providing for distribution for public or charitable purposes upon
termination of the trust.
   (3) Holds title to real property subject to conditions that will
result in reversion to a public or charitable entity upon dissolution
of the corporation.
   (4) Holds a leasehold interest, of at least 20 years' duration,
conditioned on the corporation's continued qualification under this
section, and provides for reversion to a public entity or charitable
corporation.
   (b) (1) The articles of incorporation or bylaws require the
purchase and sale of the stock or membership interest of resident
owners who cease to be permanent residents, at no more than a
transfer value determined as provided in the articles or bylaws, and
that shall not exceed the aggregate of the following:
   (A) The consideration paid for the membership or shares by the
first occupant of the unit involved, as shown on the books of the
corporation.
   (B) The value, as determined by the board of directors of the
corporation, of any improvements installed at the expense of the
member or a prior member with the prior approval of the board of
directors.
   (C) Accumulated simple interest, an inflation allowance at a rate
that may be based on a cost-of-living index, an income index, or
market-interest index, or compound interest if specified in the
articles of incorporation or bylaws. For newly formed corporations,
accumulated simple interest shall apply. Any increment pursuant to
this paragraph shall not exceed a 10-percent annual increase on the
consideration paid for the membership or share by the first occupant
of the unit involved.
   (2) (A) Except as provided in subparagraph (B), for purposes of a
return of transfer value, both of the following are prohibited:
   (i) A board of directors returning transfer value, either full or
partial, to a member while he or she still remains a member.
   (ii) An existing member accepting the return of his or her
transfer value, either full or partial.
   (B) A board of directors may return to an existing member and the
existing member may accept return of his or her transfer value in the
event that the member moves within the cooperative from a category
of unit initially valued at a higher price to a different category of
unit valued at a lower price.
   (c) The articles of incorporation or bylaws require the board of
directors to sell the stock or membership interest purchased as
provided in subdivision (b) to new member-occupants or resident
shareholders at a price that does not exceed the "transfer value"
paid for the unit.
   (d) The "corporate equity," that is defined as the excess of the
current fair market value of the corporation's real property over the
sum of the current transfer values of all shares or membership
interests, reduced by the principal balance of outstanding
encumbrances upon the corporate real property as a whole, shall be
applied as follows:
   (1) So long as any such encumbrance remains outstanding, the
corporate equity shall not be used for distribution to members, but
only for the following purposes, and only to the extent authorized by
the board, subject to the provisions and limitations of the articles
of incorporation and bylaws:
   (A) For the benefit of the corporation or the improvement of the
real property.
   (B) For expansion of the corporation by acquisition of additional
real property.
   (C) For public benefit or charitable purposes.
   (2) Upon sale of the property, dissolution of the corporation, or
occurrence of a condition requiring termination of the trust or
reversion of title to the real property, the corporate equity is
required by the articles, bylaws, or trust or title conditions to be
paid out, or title to the property transferred, subject to
outstanding encumbrances and liens, for the transfer value of
membership interests or shares, for use for a public or charitable
purpose.
   (e) Amendment of the bylaws and articles of incorporation requires
the affirmative vote of at least two-thirds of the resident-owner
members or shareholders.

817.1.  (a) A "workforce housing cooperative trust" is an entity
organized pursuant to this section that complies with Section 817 and
with all of the following:
   (1) Allows the governing board to be composed of two classes of
board members. One class is elected by the residents, and one class
is appointed by sponsor organizations, including employer and
employee organizations, chambers of commerce, government entities,
unions, religious organizations, nonprofit organizations, cooperative
organizations, and other forms of organizations. Resident members
shall elect a majority of the board members. However, sponsor
organizations may appoint up to one less than a majority of the board
members. The numerical composition and class of the sponsor and
resident board members shall be set in the articles of incorporation
and in the bylaws.
   (2) Requires the charter board of a workforce housing cooperative
trust to be composed of only sponsor board members, to remain in
place for one year after the first resident occupancy. One year after
the first resident occupancy, the resident members shall elect a
single board member. Three years after the first resident occupancy,
resident members shall elect a majority of the board members.
   (3) Prohibits the removal of the appointees of sponsor
organizations, except for cause.
   (4) Allows for the issuance of separate classes of shares to
sponsor organizations or support organizations. These shares shall be
denominated as "workforce housing shares" and shall receive a rate
of return of no more than 10 percent simple interest pursuant to
subparagraph (C) of paragraph (1) of subdivision (b) of Section 817.
   (5) Requires, in order to amend the bylaws or articles of
incorporation of a workforce housing cooperative trust, the
affirmative vote of at least a majority of the resident-owner members
or shareholders and a majority of each class of board members. The
rights of the sponsor board members or the sponsors shall not be
changed without the affirmative vote of two-thirds of the sponsor
board members.
   (b) A workforce housing cooperative trust shall be entitled to
operate at multiple locations in order to sponsor limited-equity
housing cooperatives. A workforce housing cooperative trust may
either own or lease land for the purpose of developing limited-equity
housing cooperatives.
   (c) A workforce housing cooperative trust may be created when at
least 51 percent of the occupied units in a multifamily property that
is in foreclosure support efforts to buy the building or property.

817.2.  The procedure for the dissolution of a limited-equity
housing cooperative or workforce housing cooperative trust that
receives or has received a public subsidy shall be as follows:
   (a) The city, or the county for any unincorporated area, in which
the limited-equity housing cooperative or workforce housing
cooperative trust is located, shall hold a public hearing. The
cooperative or trust shall pay for all costs associated with the
public hearing.
   (b) The city or county shall provide notice to all interested
parties. The notice shall be given at least 120 days prior to the
date of the hearing. The city or county shall obtain a list of all
other limited-equity housing cooperatives and cooperative development
organizations in the state from the California Center for
Cooperative Development, if the list exists, and provide notice to
all of the entities on the list in an effort to create a merger with
an existing limited-equity housing cooperative or workforce housing
cooperative trust. The notice shall be mailed first class, postage
prepaid, in the United States mail.
   (c) If the dissolving limited-equity housing cooperative or
workforce housing cooperative trust merges with an existing
cooperative or trust, to the extent possible, the merger shall be
with the geographically closest cooperative or trust.
   (d) If the dissolving limited-equity housing cooperative or
workforce housing cooperative trust does not merge with an existing
cooperative or trust, both of the following shall occur:
   (1) Upon completion of the public hearing required pursuant to
subdivision (a), the city or county shall adopt a resolution
approving of the dissolution and make a finding that the dissolution
plan meets the requirements of state and federal law, meets the
donative intent standards of the United States Internal Revenue
Service, and is free of private inurement, which includes, but is not
limited to, a prohibition on any member receiving any payment in
excess of the transfer value to which he or she is entitled pursuant
to subdivision (b) of Section 817.
   (2) The city or county shall forward all of the information and
written testimony from the hearing to the Office of the Attorney
General for the Attorney General to consider as part of his or her
ruling on the dissolution.

817.3.  Each entity named as a sponsor organization of a workforce
housing cooperative trust formed pursuant to Section 817 shall have
the legal standing of a member unless it revokes, in writing, its
sponsorship.

817.4.  (a) In any action instituted on or after January 1, 2010,
against a board of directors and its members based upon a breach of
corporate or fiduciary duties or a failure to comply with the
requirements of this chapter, a prevailing plaintiff may recover
reasonable attorney's fees and costs.
   (b) If an organization formed under this chapter uses public
funds, it shall not use any corporate funds to avoid compliance with
this chapter or to pursue dissolution if the intent or outcome is for
some or all of the members to receive any payment in excess of the
transfer value to which he or she is entitled pursuant to subdivision
(b) of Section 817.


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