Many Houses – One Foundation: The Basic Structure
The 167 projects and 19 project initiatives differ in terms of the size of living and floor space, location, mortgage volume, and number of tenants, etc. And yet there are also a number of common features: all projects are self-organized, the Mietshäuser Syndikat has a financial interest in every house-LLC to prevent sellouts, and all projects have committed themselves to making contributions to the joint solidarity fund.
In view of the long time periods on which our plan is based, negative developments cannot be precluded: what would happen, for example, if house projects with ample economic reserves were to become self-complacent and decide to flout the solidarity transfer and leave the network? It would be particularly fatal if, after years and decades, collective property were to be sold and/or privatized for a profit, against the best intentions and determinations of the founding generation. The history of self-organized projects offers enough such examples. No matter how idealistic and social-minded the statues of a house project or association might be formulated, with the requisite majority of the members, decisions could be made to privatize or sell a house and, if necessary, to change the statutes accordingly.
A Vote against the Sale of a House
In order to prevent such developments, all house projects of the Mietshäuser Syndikat exhibit a special feature: the title of ownership to the respective property is not in the name of the house association, but in that of a limited liability company (LLC). This house LLC has exactly two partners, the house association on the one hand, and the Mietshäuser Syndikat as a kind of control or monitoring organization on the other: in certain matters—such as the sale of a house, a conversion into condominiums, or similar access to the real estate assets—the Mietshäuser Syndikat has a voting right, namely, exactly one vote, the house association having the other. This ensures that a change in the status quo of such fundamental issues can only be decided with the consent of both partners: neither the house association, nor the Mietshäuser Syndikat can be outvoted.
To ensure that the tenants’ right of self-determination cannot be impaired by the “control organization,” the voting right of the Mietshäuser Syndikat is limited to few fundamental questions. In all other issues, the house association has the sole voting right: Who is going to move in? How are loans to be obtained? How and what is to be renovated? How high is the rent going to be? These decisions and their implementations are exclusively the concern of those who live and work in the respective house.
The House LLC as the Basic Module
Ironically, the LLC, a legal entity belonging to the alien world of capital corporations, is eminently suitable for the form of real estate ownership described above, with a “division of power” between the house association and the Mietshäuser Syndikat. In the statutes of the LLC, the “articles of partnership,” the above-mentioned provisions are agreed upon bindingly. The purpose of the company is also specified, for example, “Purchase of the property ‘Neuschwansteinstr. No.20’ for social-oriented and self-organized rental and administration.” It goes without saying that changes in statutes are fundamental issues that can only be decided jointly by both partners. This model of the house LLC is common to all projects of the Syndikat. It is based on an idea proposed by Matthias Neuling in Auf fremden Pfaden: Ein Leitfaden der Rechtsformen für selbstverwaltete Betriebe und Projekte (Berlin, 1985).
The Syndikat as Connecting Link
The individual house LLCs of the projects are the basic modules, so to speak, out of which our solidary network resulted practically on its own: since the Syndikat, in its role as “control organization,” is a partner in every house LLC, it is simultaneously also the connecting link between the house LLCs. This is a solid and permanent connection, since an LLC cannot be dissolved unilaterally by just one partner.
Withdrawal and Hostile Takeover
A house association could indeed terminate its participation in, and withdraw from the LLC. However, the Syndikat would still remain a partner, keeping the house LLC, together with its real estate assets, in the solidary network with the other projects. Moreover, the project is safe from both financial loss and unjust personal enrichment of any individual members who might want to be paid off by the association. As provided in the LLC contract, neither partner is entitled to any part of the increase in value that the property has experienced as a result of market developments. Thus, even the refund of shares in the common capital of house associations can be excluded. This is how any pullout becomes entirely unattractive for both the Syndikat and the house association. Also precluded by the LCC contract is a “hostile takeover,” that is to say, the selling of a share in the LLC against the will of the other partner.
Summary of the Syndikat model
The Syndikat’s interests in the house LLCs have resulted in a network of self-organized house projects committed to the idea of solidarity transfer from old to new projects. The projects’ overall autonomy is limited only by the Syndikat’s veto right against the disposition of real estate assets, thus preventing any potential reprivatization and commercial exploitation of the houses. The Mietshäuser Syndikat, as the connecting link, is the stable organizational backbone of the network in which a complex mesh of relations, even directly from project to project, is developed, and communication and solidarity transfer made possible.
Not a Cooperative Society
The idea behind the Mietshäuser Syndikat resembles that of cooperative projects. Nevertheless, the German legal form of the registered cooperative (eG) was not chosen when the organizational model was being worked out in the early 1990s. There are many reasons for this: individual cooperatives cannot be linked in the same manner as the LLCs in the Syndikat’s model; on the other hand, an umbrella cooperative that owns all the houses would not allow the individual house projects sufficient autonomy. Additionally, the legal form of an eG, with its complicated founding formalities and the monitoring by the German Cooperative Confederation, is difficult to manage. Nevertheless, we were all the more pleased when in 2012 the Mietshäuser Syndikat was awarded the Klaus-Novy Prize for Innovation in Cooperative Building and Living, which is awarded every five years by the Spar- und Bauverein eG in Solingen (the second-largest housing cooperative in the state of North Rhine-Westphalia).