Legal Structures & Ownership

The four shells a community can be held in, what you would actually own, and whether a lender will touch it.

The short version

Four legal shells cover almost everything: freehold (the home is yours), a share in a co-operative (the organisation owns the building, you own part of the organisation), a ground lease under a land trust (you own the building, a trust owns the ground), and a tenancy (a right to live there and nothing more).

Two questions tell them apart, and both have documentary answers: what could you sell, and to whom? and would a lender lend on it?

The second is the practical blocker. A freehold home is financed like any other. A land trust home is financeable through a specific route with conditions attached. A co-operative share is not real property at all, so an ordinary mortgage does not apply. And a tenancy, however long and however fully you take part in governance, builds nothing.

The legal shell is the least discussed part of community life and the part that decides what happens to you if it ends. It is also the part where the answer is written down and can simply be read.

The four shells

Generalisations across jurisdictions. The document in front of you outranks this table.
Dimension	Freehold	Co-op share	Ground lease	Tenancy
What is in your name	The home and its land	A share in the organisation	The building, not the ground	Nothing
Who owns the rest	An association you belong to	The co-operative	A trust owns the land	A landlord or the community
Can you sell it	Yes, on the open market	Yes, at the co-op’s price	Yes, at the formula price	No
Who chooses the buyer	You, often subject to membership	The co-operative	The trust	Not applicable
Financing	An ordinary mortgage	A share loan, from few lenders	A mortgage, on conditions	None needed
What your heirs get	The home	The share	The lease, formula included	Nothing

Two of these sit underneath the social forms rather than beside them. A housing co-operative can be a close community or an ordinary block of flats with a shared freehold; a community land trust says nothing at all about whether the residents eat together. The legal shell and the social arrangement are separate questions, and conflating them is the most common mistake people make reading listings.

Why the discount has a price

The structures that make a home cheaper to buy do it by removing something from the sale — usually the land, sometimes the right to sell at market.

Under a ground lease , you buy the building and lease the ground beneath it, so the land is off the market permanently and the entry price is lower. Under a limited-equity arrangement, your return on exit is capped by a resale formula .

Both are the same bargain seen from opposite ends. The reason the home is cheaper now is the reason you keep only part of the gain later, and the difference goes to the household after you rather than to anyone’s profit. That is the mechanism working as designed, not a catch — but it is a mechanism worth understanding before signing rather than at the point of leaving.

The mortgage question

This is what stops people who are otherwise ready, so it deserves a direct answer.

Freehold is ordinary. A lender treats it like any house, though it may want to see the residents’ association’s accounts and reserve fund.

Land trust homes are financeable, on conditions. In the United States there is an established route: the loan can be sold to Fannie Mae if the ground lease carries the Community Land Trust Ground Lease Rider — Form 2100 — executed and recorded, alongside a list of other requirements. Those requirements are worth reading as a checklist for the trust, not for you: it must have at least two years’ experience managing affordable housing, the lease must be based on a recognised model, and its term must run at least five years beyond the mortgage’s maturity.

An established trust using a model lease is straightforwardly financeable. A brand-new project with a bespoke lease its founders wrote is where people get stuck, and the fix is upstream of the buyer.

A co-operative share needs a different product entirely. The loan is secured on your shares and an assignment of your occupancy rights, not on real property. It is called a share loan and the market for it is far smaller.

In the UK and Europe, expect a specialist. Ecology Building Society, to take a lender that publishes its terms, lends up to 80% loan-to-value to housing associations and community land trusts and 75% to housing co-operatives and cohousing groups.

What protects you

Two provisions are worth knowing about, because a well-run organisation offers them and a badly-run one does not.

A formula cannot normally be changed under you. In the classic land trust structure, a change to the resale formula cannot be imposed on leases already in effect — existing homeowners must agree to amend their own lease. Ask whether the same is true of what you are being offered.

You are expected to have taken advice. The model ground lease documents informed consent in writing: a letter from the homeowner setting out their own understanding of the deal, and a separate letter from a solicitor confirming they reviewed it. That is a structure which assumes you got advice. Get advice.

Deep · why the paperwork looks like that

The elaborate documentation around resale-restricted ownership exists to defeat one specific accusation: that the buyer did not really understand what they were signing.

A structure limiting what somebody may sell their home for is vulnerable to being challenged as unfair years later, and the surest defence is a contemporaneous record that the buyer knew. Hence the letters of agreement and acknowledgement, which are not decoration.

The same guidance recommends something communities routinely skip: reminding homeowners of the terms periodically rather than at purchase and then never again. Most people read their resale formula exactly twice — the day they buy and the day they sell — with twenty years in between. Trusts using fixed-rate or indexed formulas can send an owner the current formula price each year, which both reinforces understanding and demonstrates that the organisation is accountable.

There is a general lesson for any community here. The documents that cause disputes are rarely the ones that were badly drafted. They are the ones nobody looked at again.

Sources & further reading

1 Owning, leasing, renting — the four shells in full, with a quiz on telling them apart
2 Fannie Mae — Community Land Trust Checklist — Form 2100, the model-lease requirement, and the foreclosure point
3 Resale Formula Design — Grounded Solutions Network (2011) — how formulas are built, amended, and explained to the people bound by them
4 Ecology Building Society — community-led housing mortgages — published loan-to-value limits, for a UK lender

Written by EcoHubs members, with AI assistance for drafting and editing, and reviewed by a person before publication. Facts are checked against the sources listed; anything we could not verify is marked. How this is written

Regenerative Community Operating System

Community Suitability Index

VoteCast

Seeking.Community