Living in a housing co-operative

A housing co-operative is a group of people who manage and control the housing in which they live. Each person is a member of the housing co-operative and has an equal say in decision-making. No member individually owns or makes profit at the expense of another. All members are expected to take an active role in providing and managing the accommodation and the level of rent the tenants pay reflects the cost of managing the housing.

Housing co-operatives are usually created as Industrial and Provident Societies and are registered with the Financial Conduct Authority.

This registration is a qualification for registration with the regulator of social housing.

In order to be eligible for funding from the regulators or from local authorities, most housing co-operatives become private providers of social housing (PRPSHs).

People interested in living in a housing co-operative can:

• apply to the local authority's housing register as this may be a requirement to be on a housing co-operative's waiting list

• ask the local authority's housing department for a nomination to a local housing co-operative.

• write to any housing co-operatives in the area to find out the likelihood of vacancies and keep in regular contact with them

Local authorities may be reluctant to nominate a person to a housing co-operative unless they have a duty to the person under Part 7 of the Housing Act 1996.  Housing co-operatives without office workers can be difficult to contact. Not all of them operate waiting lists and it is unusual for housing co-operatives to have a vacancy. It is difficult for housing co-operatives to attract funding for development and, without expanding the number of properties in the housing co-operative, their ability to provide housing for people other than existing tenants is limited. The local authority or a local advice centre will usually have details of housing co-operatives operating in their area.

The option of living in a housing co-operative has advantages and disadvantages.

The advantages of living in housing co-operative include:

• it can provide good quality housing at a reasonable rent

• tenants have collective control over how their housing is run

• tenants may receive support from other tenants

• in learning how to manage their own housing, tenants may learn new skills such as decision-making, budgeting and how to carry out minor repairs

The main disadvantage to living in a housing co-operative are that the co-operative may take up more time and energy than a tenant is willing to give, and occupiers may not have much security of tenure.

The type of co-operative affects the rights of the occupiers and how the housing co-operative works.

Fully mutual associations

Most housing co-operatives are fully mutual associations. If they are registered under the Industrial and Provident Societies Act 1965, they are legally called 'co-operative housing associations'. If so registered, the housing co-operative has an independent legal status separate from its members. All tenants of the housing co-operative are members of it.

Membership can also include prospective tenants.[1]

The two types of fully mutual association are par value co-operatives and co-ownership housing associations.[2]

Par value co-operatives

Par value co-operatives may also be called 'ownership co-operatives'. They also used to be called 'Housing Association Grant funded co-operatives'. Par value co-operatives are the most common type of housing co-operative.

Par value co-operatives require equality between members in regard to decision-making and financial interest. Par value status means that no member of the housing co-operative has a financial interest in the housing co-operative other than the face value of the individual share holding, which is normally a nominal sum such as £1. This means that individual members of the housing co-operative cannot be held responsible for the housing co-operative's finances. This arrangement is often called 'limited liability by guarantee'.

Co-ownership housing associations

Co-ownership housing associations are also called co-ownership societies.

Each tenant has an equitable stake in the housing association, calculated on the basis of the value of the property in which they live.

Short-life housing co-operatives

There is no specific legal regime for short-life housing co-operatives, which are subject to the normal rules relating to other fully mutual co-operatives. Short-life housing co-operatives are usually registered with the Financial Conduct Authority and the regulator of social housing because of the advantages which registration confers.

The main distinction between short-life housing co-operatives and other fully mutual co-operatives is the purpose for which they are set up. A short-life housing co-operative has property that has been borrowed from the owner to provide short-term accommodation for groups of people. Property owners, such as local authorities or private registered providers of social housing (PRPSHs) often allow property to be used on a short-life basis when they are unable to repair it, or cannot develop the area at that time due to financial constraints. Usually the owner grants a group of people, sometimes called a Short-Life User Group (SLUG), a licence to occupy property for a specific period of time, normally between one and five years. The owner is guaranteed vacant possession at the end of the agreed time. Although there is a great deal of variety, most short-life housing is in a poor state of repair.

Tenant management organisations and management co-operatives

Since April 1994 tenants of local authorities have been able to take over the management of the local authority's properties by the establishment of a tenant management organisation (TMO).[3] Prior to this date this could be done through the establishment of a management co-operative. PRPSH tenants may also take on housing management responsibilities by forming a management co-operative to manage their homes.

The tenant management organisation/management co-operative becomes the managing agent for the landlord. Depending on what is included in the management agreement between the tenant management organisation/management co-operative and the landlord, they may be responsible for a variety of management duties for the properties that the members occupy, for example ensuring that repairs are carried out.

A TMO is an organisation which satisfies the legal condition that it has a written constitution which must:[4]

• specify the area in which it wishes to enter into a TMO agreement with the local authority

• provide that any tenant of a house in that area may become a member of the TMO

• provide that the TMO will avoid unlawful discrimination when conducting its affairs

• provide that the affairs of the TMO must be conducted by either the members of the TMO at a general meeting, or by a committee or board of directors who have been elected by members of the TMO

Self-build housing co-operatives

A self-build housing co-operative is a housing association where the members build or improve the properties which they are to live in.[5]

The homes are likely to cost less to build than the market value of the property, and are likely to be built to a high standard. There is no requirement for self-build co-operatives to be registered.

Privately funded housing co-operatives

Some housing co-operatives are set up with private funds. Most of these housing co-operatives only have a small number of houses.

A tenant of a fully mutual association is usually an occupier with basic protection.

A tenant of a fully mutual association is exempt from protection given by the main Acts governing security of tenure: Housing Act 1988, Housing Act 1985 and Rent Act 1977.[6]

A challenge on human rights grounds to the exclusion of such tenants from security tenure was dismissed by the courts.[7]

Occupiers with basic protection

Occupiers with basic protection have the:

• rights given by the terms of the tenancy

• protection under the Protection from Eviction Act 1977[8]

• right to repairs given by Section 11 Landlord and Tenant Act 1985

The rights of fully mutual housing association tenants are further determined by whether they live in a par value co-operative or a co-ownership housing association.

Exceptions to occupiers with basic protection status

There are three situations when a tenant is not an occupier with basic protection. 

The occupier is a secure tenant if the housing co-operative is registered with the Financial Conduct Authority (FCA) under the Industrial and Provident Societies Act 1965, the tenancy was granted before 15 January 1989 and the association is not registered with the regulator of social housing as a private provider of social housing (PRPSH).[9]

The occupier could have the protection of the Rent Act 1977 if the fully mutual association is neither a PRPSH nor registered under the Industrial and Provident Societies Act 1965[10]

In some cases, the occupier is treated as having a tenancy for a term of 90 years. This is the case for a periodic tenancy when the agreement allows the landlord to end the tenancy only if the tenant fails to meet specified conditions, for example the failure to pay the rent. This should be distinguished from an agreement which allows the landlord to terminate the agreement on notice without being required to show a reason, where the tenant is an occupier with basic protection. 

A tenancy for a term of 90 years can only be ended by:[11]

• the landlord serving a notice of forfeiture following a tenant's non-rent related breach of the agreement, or a notice that rent is due where the tenant owes rent

• surrender

• the tenant serving notice

• the tenant's death

The High Court has held that an agreement for an uncertain term that only allowed the landlord to end the tenancy if the tenant fails to meet specified conditions would be a contractual licence where the parties had not intended to create a tenancy for life (or 90 years).[12]

Par value co-operatives

In addition to the statutory rights of occupiers with basic protection outlined above, par value co-operative tenants can also expect:

• a written tenancy agreement

• 'reasonable' security of tenure

• to be treated fairly in regard to race and ethnicity, disability, sexual orientation, sex, gender reassignment, religion or belief, pregnancy or maternity

• information about:

  • how the co-operative will deal with breaches of tenancy conditions and repossession

  • what services are provided

  • the policies and procedures for requiring members to move to alternative accommodation

  • the circumstances under which information about the tenant may be given to other organisations

  • details of the insurance cover provided by the co-operative and the tenant's own insurance responsibilities

  • service charges, rent policies and the rent collection rate of the housing co-operative

  • having people to stay and how the tenancy can be passed on

  • participation and consultation, and the complaints procedure

• rights to repairs and improvements, and information about deadlines for repairs and possible compensation if these deadlines are not met

These rights are usually found in the tenancy agreement or other information provided by the housing co-operative. The rights originate from the social housing regulator's Regulatory framework for social housing in England. . The housing co-operative should have a policy for dealing with discrimination and harassment.

For more information, see The Regulator of social housing.

Because a par value co-operative tenant does not have an assured tenancy, they are not able to have the rent determined by a rent assessment committee (RAC). The tenancy agreement should state the housing co-operative's procedures for changing the amount of rent that tenants need to pay.

A tenant whose tenancy started before 15 January 1989 will have, or can apply for, a fair rent under the Rent Act 1977.[13] This is regardless of the fact that the tenant may not have a regulated tenancy.

All par value co-operative tenants, regardless of when the tenancy started, are entitled to claim housing benefit if they are eligible.

Co-ownership housing associations

Tenants of co-ownership housing associations are not entitled to apply for fair rents under the Rent Act 1977, even where the tenancy started before 15 January 1989; nor are they entitled to claim housing benefit.[14]

When a tenant leaves the co-ownership housing association they are entitled to a payment, called a premium payment, based upon how long s/he has been a tenant. In some co-ownership housing associations the tenant has the right to purchase the freehold as an alternative to the premium payment.

A member of a short-life housing co-operative, like a tenant of a fully mutual association, is usually an occupier with basic protection.

Although it is extremely unlikely, it is possible for an occupier to have a secure tenancy or protection under the Rent Act 1977.

If the short-life housing co-operative itself has only been granted a licence of the property, then the occupiers may be licensees. Licensees would have:

• the rights given by the terms of the contract

• protection under the Protection from Eviction Act 1977

Tenants in tenant management organisations and management co-operatives are still tenants of the local authority or PRPSH (formerly known as RSL) and have the type of tenancy that these providers of social housing normally grants.

This means that the tenants are either secure tenants under the Housing Act 1985, or assured tenants or assured shorthold tenants under the Housing Act 1988.