The history of the limited-equity housing cooperative (LEHC) can be traced back to the mid-1900s. Originally, it served as an option to transition condominiums and cooperatives into affordable homes for those in the low to moderate-income demographic. Today, LEHCs have grown to more than 100,000 nationwide.
Finding agreement with all members of a mobile home community on pursuing a LEHC is an essential part of the process. Inherent challenges exist, specifically residents agreeing on the next steps. Once that obstacle is removed, the new cooperative must wait for approval by the California Bureau of Real Estate through the issuance of a Final Public Report.
Those involved in the coop should know that it is still only the beginning of a complicated and highly bureaucratic process in securing a LEHC. Additional approval must come from two government agencies:
- The Internal Revenue Service must approve the 501(c)(3) nonprofit corporation, a process not known for its fast pace. In fact, it represents the most complex and time-consuming step. However, it is a vital part of the process that helps the group move forward with a LEHC.
- The California Department of Business Oversight also must approve the permit – valid for one year – to sell shares.
Operations of a park do not cease while the process moves along. Prospective homeowners interested in buying a home in the proposed LEHC can still proceed. Admittedly, some may be dissuaded from moving forward with a transaction due to the perceived uncertainty. However, protections are in place during and following a conversion, even if closing on the home occurs before the LEHC formally launches.