Buying a house: Making dreams come true together
Anyone who wants to create a house community with colleagues or friends needs a fair amount of idealism. Tolerance and a fair set of rules are important. Otherwise friendships in the home threaten to fall apart.
Jürg Zulliger
Setting up a house community means dealing with a number of technical matters: The property market, finances, forms of ownership, as well as structural and technical issues. Interpersonal relationships have just as much weight. The “chemistry” has to be right, as the saying goes. Solid foundations include tolerance on the one hand, but also specific rules and good organization on the other.
Shared home ownership means sharing the good times, but at times also sharing the bad. How do you divide up the shared tasks and costs so that it is fair for everyone? Who is going to take care of the finances and deal with the banks? Who is going to volunteer in the garden and cut the hedges? Who is going to be the handyman when the heating malfunctions? “Starting a house community is very time-consuming. We put our heart and soul into it, in addition to money,” explains Jerome M., who together with his friends has founded a cooperative in Uster.
House community: Which form of ownership?
Those who team up with others have to consider in advance how closely or how independently everyone involved wants to cooperate. Choosing a specific organizational or ownership form sets important groundwork.
The law stipulates only three options: The possible ownership forms for property are sole ownership, joint ownership and co-ownership. Undertakings of this sort are widespread, typically in the form of condominium communities; legally speaking, however, condo ownership is a subcategory of co-ownership.
In the case of sole ownership, only one person is entered in the land register as the owner, who accordingly is free to act at his or her discretion. But with the underlying idea of “starting a house community” in mind, this does not sound much like idealism and community. Sole ownership is therefore only an option if the the people involved in the house community have very different financial circumstances, for example if one of them comes from a rich background and the others bring in very little. Under these circumstances, sole ownership would still be the more honest option than a pseudo-community.
Conversely, members of a house community are far more closely linked when they purchase a house in joint ownership. With this legal form, an individual can neither divide nor alienate the property. In matters of any kind, the joint owners have to come to a decision together.
Co-ownership is more likely to be the option of choice, as it provides for the possibility of allocating certain shares of the house to individual co-owners - if there are five parties and each contributes an equal amount of money, you can allot a share of 20 percent each. Everyone has their share at their disposal and can therefore alienate it should they wish to. If the co-owners do not set up their own usage and management rules, it remains open as to who can use which parts of the property and how. In practice, co-ownership shares are individual and hardly ever tradable, quite simply because the law grants all co-owners a right of first refusal.
House communities in condos
The best suited option for a joint house purchase is, therefore, a condo. Ownership of an apartment or a condo is a special form of co-ownership and allows for a special right to individual apartments or condo units. Condo owners benefit from various freedoms and rights, as they can use their rooms as they wish, living in them themselves, remodeling, renting or even reselling them.
Setting up a condo community, however, takes up valuable time. By the time a group of prospective buyers has organized itself, many of the good deals in the property market are already gone. Experts therefore recommend first jointly purchasing an apartment building and then dividing it up and creating condos.
Starting a house community: Good old money
One key condition for success is financing. Whether or not the banks even grant loans essentially depends on the chosen legal form and the financial criteria of the initiators. Banks rarely finance real estate in joint ownership or non-separated co-ownership, whereas they do finance condos.
Florian Schubiger from VermögensPartner had this to say: “When buying a house together, the bank financing it will look very closely at the liability for the loan.” In order to increase the security of a loan, banks would generally seek a joint liability of the persons involved, explains Schubiger. Even if a legal entity is involved, such as a cooperative or a joint-stock company, a lender will nevertheless want to implement this principle. This means that: One way or another, the persons involved generally have to assume liability for the money from the bank.
In terms of financing, condos are an asset. Since with this form of organization, everyone can settle their share or their mortgage directly with the bank. Each condo owner is free to mortgage their unit with bank loans and seek tailor-made financing. If, on the other hand, it is a matter of pure co-ownership without the separation of individual condo units, then everyone is jointly liable for the debts of others. Many banks refuse to finance co-ownership simply because the law grants the other co-owners a right of first refusal when it comes to the sale of a co-owned share.
Before embarking on a venture of this sort, exit channels still need to be examined. Within a few years, the interests and composition of individual households can change dramatically. Some couples have children, others split up or want to move away for professional reasons. There are several things in particular to consider when a property is purchased in co-ownership. Ideally, the members of a house community agree on a partnership agreement that regulates the sale of co-owned shares: Either the co-owners are able to pay out a member who moves away, or the property must be sold as a whole. In contrast, condo ownership is less complicated: Individually, condos are easily sold - every year thousands of them change hands.
Starting a house community: Assessing the risks
IAn undertaking of this variety involves risks, and these must be analyzed in advance. When suitable properties are put on sale, interested parties usually have to decide rather quickly. Of course, this carries the risk that you pay a translated price or that you pay too much for the property, considering its structural condition. Experts therefore recommend that you arrange your own property estimate before signing a purchase agreement.
Many buyers of apartment buildings generally underestimate the cost of maintenance and renovations. Even if the initial investment is significant, some idealists suffer a rude awakening: The house communities are sometimes even hit by unforeseen repairs. Or building maintenance and the associated costs are higher than one had anticipated. After all, the actual costs for maintenance, associated costs and repairs over the next few years can often not be seen from the outside. This applies especially to old buildings, of course.
Starting a house community: Cooperatives
For many people in Switzerland, setting up a house community is closely linked to the idea of a cooperative. It is a classic way of undertaking a project through mutual self-help. “The individual persons are not directly involved in the property. The property falls into the ownership of the cooperative,” explains Florian Schubiger, an expert on the topic of shared housing communities.
Starting a cooperative is not madness, in itself. Nevertheless, it may be worth consulting professionally in order to get the formal steps right. It needs, for example, written statutes, an inaugural meeting and an entry in the commercial register. It takes at least seven people to take over cooperative shares, i.e. to deposit capital. The cooperative form is common in Switzerland and essentially serves the purpose of promoting or securing certain economic interests of its members. With a cooperative house community, it is often a question of undertaking a joint project and providing members with affordable living space.
Conclusion: For many people starting a house community is an affair of the heart. Chances of success are at their greatest if you not only pool the money, but also combine knowledge and experience. Equally important is finding the right balance between self-reliance and community.
Information and advice sources
The Swiss housing association Hausverein Schweiz
www.hausverein.ch
The Swiss homeowner association Schweizerischer Hauseigentümerverband HEV
www.hev-schweiz.ch
The Swiss condo owner association Schweizer Stockwerkeigentümerverband
www.stockwerk.ch
Starting a cooperative
www.wohnbaugenossenschaft-gruenden.ch