[WSBARP] Family Cabin Ownership Structure

[Nick Bergh]

Happy Holidays!

 

I have a client interested in setting up an ownership structure for a 5th
generation family cabin.  There are enough family members so that a
co-tenancy would be unwieldy. In addition, the client wants to reduce the
possibility that less interested members of the family could force a sale of
the cabin down the road in order to realize on its value.

 

I have considered using an LLC or a non-profit corp/homeowner's association
structure. The cabin would be donated to the LLC, and membership would be
open to all family members. To discourage profiteering, a low entry price
would be set, unrelated to the value of the asset, with the same amount
payable to any withdrawing member. The property could not be sold without a
unanimous, or near unanimous vote.

 

Use would be determined by lottery. Members would be jointly responsible for
upkeep, utilities, taxes, reserves and other recurring expenses, probably
based on frequency of use. Improvements would require a substantial vote,
but not as high a threshold as approving a sale.

 

Management would be elected by the members, with set terms. Regular
membership meetings would be held to elect management and approve budgets.
More detailed rules would be established by bylaws or rules established by
management and/or member approval.

 

I would prefer to use the non-profit corp/homeowners association rules as
the client is already a  member of two associations and is familiar with the
workings. However, I am concerned that the membership structure limited to
family members might not be allowed under the non-profit statutes, or that
the use of the HOA statutes would not be allowed for governance of a jointly
owned single structure. 

 

I have not seen an LLC structure used for this type of organization, and
most of the LLCs I have seen have a far more rigid structure and are
designed to operate a for profit business, although I understand the LLC
statute allows for lots of flexibility, and an operating agreement could
likely be tailored to meet the needs of the client. I believe administration
of this organization as an LLC would require more effort and expense than
would a non-profit corp.

 

Any thoughts or experiences on the best structure for this organization,
LLC, non-profit corp or otherwise,  would be greatly appreciated.

 

 

________________________

Nick Bergh

Law Office of G N Bergh

2006 South Post Street

Spokane WA 99203-2049

ph 509-624-4295  | fx 509-344-1844

nick at gnbergh.com

www.gnbergh.com <http://www.gnbergh.com/> 

 

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