Definition and Legal Classification of Housing Cooperatives
Die Housing Cooperatives is a specific form of registered cooperative (§ 1 German Cooperative Act – GenG), whose primary objective is to promote its members through residential services, particularly by building, managing, and administering apartments for its members. It is a legally independent form of corporation and is comprehensively regulated under German cooperative law. Housing cooperatives are key players in Germany in providing affordable and non-profit housing.
Formation and Legal Nature
Formation Requirements
The formation of a housing cooperative takes place according to §§ 3 ff. GenG, requiring at least three founders who enter into a written cooperative agreement (statutes). The statutes must meet certain minimum requirements under § 6 GenG, particularly information concerning the company name, registered office, as well as the purpose and object of the cooperative. The cooperative obtains legal capacity upon registration in the cooperative register (maintained by local courts).
Legal Form
Housing cooperatives are legal entities under private law (§ 17 para. 1 GenG). Unlike corporations, cooperatives pursue the objective of promoting their members; profit-making is generally not the main goal. They are structured democratically—each member has one vote, regardless of the number of shares held (§ 43 para. 2 GenG).
Members and Membership Rights
Acquisition of Membership
Membership in a housing cooperative requires the acquisition of one or more cooperative shares and recognition of the statutes (§§ 15, 17 GenG). Upon admission, a comprehensive contractual relationship arises between the member and the cooperative.
Rights of Members
Key rights include in particular:
- the right to use a cooperative apartment (right of use, § 14 GenG)
- participation in democratic decision-making at the general assembly (§ 43 GenG)
- the right to information and inspection (§ 34 GenG)
- claim to settlement credits upon leaving (§ 73 GenG)
A unique feature is the right of use to a cooperative apartment secured by the acquisition of cooperative shares; this is a special form of long-term usage agreement.
Obligations of Members
The member obligations include:
- Payment of subscribed shares (§ 15 GenG)
- Share of additional contributions as stipulated in the statutes (§§ 22, 105 GenG)
- Compliance with statutory and contractual regulations, especially proper use of cooperative services
Governing Bodies of the Housing Cooperative
General Assembly
The central decision-making body is the general assembly (§ 43 GenG). It decides on fundamental matters such as amendments to the statutes, utilization of surpluses, or the appointment of supervisory board members.
Supervisory Board
The supervisory board (§§ 9, 35–41 GenG) supervises and advises the management board, audits the annual accounts and management, and is responsible for appointing and dismissing the management board.
Management Board
The management board (§§ 24–28 GenG) represents the cooperative in and out of court and conducts business independently.
Legal Particularities in the Housing Sector
Cooperative Use Instead of Rental Agreement
Unlike conventional tenancy agreements, housing cooperatives use the so-called long-term usage agreement (§§ 14, 16 GenG) in place of a regular rental agreement. The member receives a comprehensive and secure right of use to an apartment, without acquiring ownership of the apartment itself. Termination of the long-term usage agreement is generally only possible for good cause, which provides high residential security.
Exclusion of Termination for Personal Use
A cooperative apartment—unlike a rented privately-owned apartment—cannot be terminated by the landlord (the cooperative) on grounds of personal need, because the cooperative cannot claim any ‘personal residential need.’
Remuneration Regulation
The fees for use (comparable to rent) are calculated according to the cooperative cost principle. Surpluses usually remain within the cooperative and are used for maintenance or building up capital reserves.
Supervision and Audit
Housing cooperatives are subject to regular audits by audit associations pursuant to §§ 53 ff. GenG. The audit covers the financial circumstances, the regularity of management, and compliance with legal provisions and the statutes.
Membership in a recognized audit association is mandatory (§ 56 GenG). The results of the audits are documented in audit reports and communicated to the members.
Taxes and Charitable Status
Housing cooperatives are generally subject to tax but may be recognized as non-profit under certain conditions (§ 52 German Fiscal Code – AO), which grants tax benefits. The prerequisite is that the purpose serves the public good—particularly through providing affordable housing.
Dissolution and Liquidation
The dissolution of a housing cooperative occurs by resolution of the general assembly (§ 76 GenG), the opening of insolvency proceedings, or if all members leave. In the event of dissolution, liquidation takes place (§§ 79 ff. GenG), during which assets, after satisfying creditors, are distributed to the members in proportion to their shares, unless the statutes specify otherwise.
Distinction from Other Forms of Housing
Housing cooperatives are to be distinguished from other organizational forms such as condominium owners’ associations, civil law partnerships (GbR), or housing companies (GmbH, AG). The key differences lie in the cooperative principle, collective ownership, and special membership rights.
Literature and Additional Legal Sources
- German Cooperative Act (GenG)
- German Civil Code (BGB), especially §§ 535 ff. (Tenancy Law)
- Fiscal Code (AO)
- Commercial Code (HGB)
Note: This article provides a comprehensive summary of the legal foundations and particularities of the housing cooperative and serves general informational purposes. For specific cases, consultation of relevant legal sources or qualified legal counsel is recommended.
Frequently Asked Questions
What rights does a member of a housing cooperative have vis-à-vis the cooperative?
Members of a housing cooperative have a variety of legally guaranteed rights, which are derived in particular from the Cooperative Act (GenG) as well as from the respective statutes of the cooperative. Central rights include the right to vote in the general assembly or representative meeting (see §§ 43, 46 GenG), the right to information and access to certain documents (§ 51 GenG), the right to a share in profits (dividends), and the right to use an apartment as conveyed by membership (right of use). Additionally, members can submit motions to the agenda and bring legal challenges against resolutions of governing bodies. The statutes may provide for further participatory rights, but may not fall below the legal minimum standards. Rights can generally only be exercised personally, although representation is permitted in certain cases.
What mandatory contributions and financial obligations exist for members?
According to the Cooperative Act, members are required to assume at least one cooperative share (§ 7 No. 2 GenG), with the amount specified in the statutes. In addition to the initial contribution, further mandatory shares or additional payments may be required if stipulated in the statutes (§ 17 GenG). The obligation to pay contributions is the prerequisite for the acquisition of membership and for having a claim to receive a cooperative apartment. In some cases, formation of reserves for financing the cooperative may be required. The financial liability of members is limited to the paid-in or statutorily due contributions and any mandatory additional payments. Personal liability beyond these amounts is excluded unless expressly provided for in the statutes.
Can the right of use to the apartment be withdrawn without further ado?
The member’s right of use is specified in the statutes and is generally protected as long as the member fulfills their obligations, in particular the payment of rent (usage fee) and compliance with house rules. The cooperative may only terminate the right to use the apartment for important reasons (e.g., default of payment, significant breaches of duty), whereby the legal protection against termination under the German Civil Code (in particular §§ 573 ff. BGB) applies accordingly. Arbitrary or unjustified withdrawal of the right of use is not legally permitted, and affected members may take legal action to continue the usage relationship.
How does withdrawal from the cooperative work and what notice periods apply?
Withdrawal from a housing cooperative is effected by written notice of termination of membership, with notice periods governed by the statutes, usually between six and twelve months at the end of the financial year (§ 67 para. 1 GenG). Membership ends at the expiration of the notice period, but this does not automatically terminate the rental or usage agreement for a cooperative apartment occupied by the member; the latter must be terminated separately. Upon withdrawal, the member is entitled to reimbursement of their cooperative share, unless it must be used to cover losses (§ 73 GenG). In practice, payout may be delayed, especially if many members withdraw at the same time and reserves must be formed.
What co-determination rights do members have in important cooperative decisions?
Members exercise their co-determination rights primarily through the general assembly or representative meeting (§§ 43, 46 GenG). There, they may vote on fundamental matters such as amendments to the statutes, election of the supervisory board, ratification of the actions of the management board and supervisory board, mergers, dissolution, or other significant measures. Members are also entitled to submit their own motions, participate in the appointment of governing body members, and be elected to a governing body themselves, provided they meet the legal and statutory requirements. Important decisions sometimes require qualified majorities as stipulated in the statutes. In cases of abuse of office or serious breaches of duty by governing bodies, members have legal recourse options, such as claims for damages or measures against the management and supervisory board.
To what extent are members liable in the event of insolvency or financial difficulties of the cooperative?
Member liability in the event of insolvency of the cooperative is generally limited to the statutory contributions and any mandatory additional payments specified in the statutes (§ 105 GenG). Personal payment obligations or further liability are only permitted if explicitly stipulated in the statutes. After a member leaves, a continued contribution obligation for liabilities arising during the period of membership lasts for up to two years (§ 73 para. 3 GenG). Creditors of the cooperative may only approach members within the framework provided by the Cooperative Act and the statutes; personal liability beyond the proportional contribution is not envisaged.
