Finance and Economics
Buying land via a Promissory Contract
The initial cost of the project will be buying the land.
A common model is to build a group of people and then find a land to buy together. However, it is often difficult to find a land that everyone likes. After having experience of this, Hari has initiating this project by starting with a big piece of land under a promissory contract arrangement. During the contract period, the aim is to attract investors and people to join as resident members.
A promissory contract agrees an intention to sell a land at an agreed price, and gives some time for the buyer to complete the purchase, after paying a deposit and/or rent.
By starting to live on a land with this arrangement, a group is able to form which likes the land and feels aligned on plans for developing an ecovillage there.
Loan funding from investors is necessary at the start, so that there is time to build up the group. Then as more people join, their joining investments can be used to pay back the investor loans.
(See investing page)
Co Ownership
The core of the financial model of the project is to own the land and common assets as a cooperative. All guardian resident members will be members of the cooperative by buying into the coop.
The ownership of the land and shared assets is shared by the members of the cooperative, and so decisions about its use needs to be made together. The founding members have started the project with a draft Ecovillage design, and future members will have a say in how it evolves. (see ecovillage design page and governance page)
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The current design is to assign common areas and private plots for the resident members.
A long-term leasehold contract gives them long-term security to live and work on their home plot of land. It gives some autonomy for them to make it their own, within certain restraints and conditions set by the coop (for example fire safety, size of house, ecological principles, having guests etc. Still to be decided)
The contract agrees a value of the plots and a schedule for rent and maintenance payments, depending on how much they invested at the start when joining.
Membership Joining Investment
The price to join the Ecovillage reflects the size of the plot being taken and the total projected costs of the project, including the land, legal fees, common facilities etc.
The joining investment is paid to the coop in exchange for membership and the contract giving the rights to use the assigned plot.
The minimum joining investment required is approximately €20,000 euros per adult member, with an aim to each invest a further €10,000-20,000 within around 6-8 years.
The more that joining members can invest at the start, the earlier we can develop the project.
This is based on the cost projections for the project, assuming a total of 12 adult residence members, plus children.
It is possible the prices can decrease if we decide to have more residence members. This partly depends on the outcome of the licencing processes.
There is some flexibility, and we encourage interested potential members to talk to us about their budgets and financial situation!
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Selling home plots
Members can develop their home plots by building houses, facilities, gardens etc. in line with the licencing we acquire. Records of the costs and labour should be kept and reported to the administrator as the plot is developed.
If a member then wants to leave, or change home plot, they will be able to sell the plot to someone that the coop accepts as a member. The seller can help recruit new members if needed.
The price of the plot can be calculated to include the joining investment that was made, plus ongoing investments and the value of what has been developed on the plot.
The minimum joining investment price might increases as the common land and facilities are developed.
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Sweat equity
Some of the values we assign to home plots will be from the work put in by the resident member. We have a process to honour such work and reflect it in the price when a home plot is sold/transferred to the next resident occupants.
This is called ‘sweat equity’ as it is equity (value, capital) gained from work, rather than investment of money.
We also value any work done to develop the project which is unpaid at the time, but can be honoured by the coop by recording the work done and giving payment later and/or credit in the coop.
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Managing the cooperative finances
Managing the cooperative finances is the role of the Administrator(s), with guidelines and rules set out in the statutes and internal regulations.
There is a cooperative bank account and we manage the coop money in a few different budgets and accounts. For example, there is a legal requirement to maintain a reserve account for use if we go into debt, and one for buying back the shares of members who leave the coop.
There is a requirement to keep records and good accounting, which are presented once per year to the members, investors and authorities. We have an external accountant who ensures we are meeting the legal requirements, and who sets up VAT/IVA refunds.
A development plan and budget is made each year with all the members of the coop. The Administrator(s) have some autonomy, but are required to consult all the members if they need to go outside the boundaries of the agreed budgets.
Our main revenue will be from loans and joining investments from new members.
There is a minimum amount we need for each stage of the project. The priority at the start is to keep up with the payments for the land. Ideally we have enough funds to continue developing the land also.