Dreamship shares their Co-Ownership LLC Agreement

Very generous. Thanks Dreamship!

We get asked a lot for open sourced co-ownership agreements. Well, here ya go.

This guest post is from Brayden McLean of Dreamship, a co-owned property in Berkeley. Brayden is very generously open-sourcing their LLC documents so that others can learn from how they structured things. 

A very important note: We are not lawyers. This is not legal advice. Don’t just take this agreement and use it without talking to a lawyer. The way to use this post is as starting point for a discussion with your own lawyer (and hopefully help save some fees).

Context on Dreamship

A DALLE-fied version of Dreamship

• Dreamship is an intentional community with multiple families that co-purchased a property in Berkeley in 2022.

• It is a 4,500 sqft single family house (including ADU), with private bedrooms and large common areas.

• Many residents of Dreamship have previously lived together since 2015 as renters multiple prior rentals in San Francisco.

Dreamship LLC was incorporated in 2022 to realize the collective dream of our community members of having shared ownership of a property, to help us have increased control over our environment and destiny as a community.

Below we’ll share with you the LLC agreement template that our four families ended up using to establish joint co-ownership of our Berkeley home.

Incorporating as LLC is somewhat different from the more popular Tenancy In Common (TIC) arrangement. While a TIC might be simpler, an LLC allowed increased flexibility in managing ownership interests to meet our varied needs, similar to the Radish ownership model. We hope that by contributing our docs to the commons we can help further demystify a viable option that could help other communities.

If the bullets below aren’t the same as your goals or constraints then this LLC model is likely to not be the best fit for your unique situation - your mileage may vary!

Our design considerations

• We designed this under the expectation that between three and six families would want to collectively own and live together under one roof in a "single family home", however we also wanted to reserve the flexibility to accommodate renters as residents too.

• We wanted to allow for families in different financial positions to be able to have a wide difference in their ownership stake, and to permit these ownership interests to vary flexibly over time. This was supported by the LLC managing equity via the concept of units or shares that could be bought and sold as needed between members. Unlike Radish, we don’t seek to return a fixed financial profit to investors or incentivise investors beyond just those who live at the community.

• We didn’t want to carve up the house and sell folks the fixed portion that they used, but allow a hybrid rent model, so you could own a larger share than you lived in or vice versa. This was solved by setting monthly rent that flows back to owners.

• We cared about all residents bringing a strong ownership mindset, and not relying on a single primary owner to bear the bulk of the responsibility for the burdens of managing the property. We incentivised everyone leaning-in together by creating a more equitable governance model, so we could all invest time and effort to manage the property and reap the benefits of a collective ownership mindset.

How we sequenced execution

• We first formalized our shared alignment that this was a pathway that we were all committed to, knowing that it would be hundreds or thousands of collective hours of effort to establish this model and take many months.

• We then found a house that we thought had the best floor plan to be compatible with community living, and all collectively made a commitment to join this house and become owners if we could pull-off the purchase.

• We luckily had one couple that was willing to take on the outsized risk of purchasing the house outright by themselves, with our collective agreement and commitment that others would lead putting in the labor to establish the necessary legal framework for collective ownership. They bought the property, and we committed that the collectively owned LLC would buy the title of the house back off that family within 12 months.

• We searched for and picked a lawyer that we thought could incorporate all our needs above into a formal structure. We worked together to draft and iterate on our LLC operating agreement and understand all the operating implications. This was the most time-consuming step as it required us to…

  • Wrap our heads around many novel formalities including how to manage an LLC

  • Get insurance

  • Fail to establish financing from a lender

  • Choose how we wanted voting and formal governance to work for the LLC

  • Find and work with an account to set up bookkeeping for tracking investments and expenses

  • Clarify how we should think in terms of shares or ownership stake; explore how to minimize tax burdens that could come from paying rent to yourself; and agree on principles for accounting for decreases or increases in property valuation (e.g. due to market changes or investments in major home improvements).

  • All together designing and reaching a shared understanding of all of these operating mechanisms took hundreds of hours,  and took a toll on the community.

• We finally reached sufficient confidence to execute our LLC operating agreement, which involved the original family transferring the title of the house to the LLC, and then all our other families wired large cash payments to the original family in return for receiving a proportional percentage ownership in the LLC (represented as shares)

• Since then we’ve been filing taxes annually and holding formal quarterly meetings to ensure the LLC manages the property well in the service of our community’s mission.

LLC Operating Agreement Template

[drumroll …]
(Click here)  to access the final version of our templated LLC ownership agreement.

Lessons Learned

• Ultimately, via this model we successfully implemented the shared ownership model we had dreamed of, split the ownership between four parties, and executed this on our twelve month anniversary in the house.

• Since we had a simple way to buy and sell shares between parties, the model was further able to smoothly support us in transitioning from having four owning parties down to three owning parties in 2023 when one of the families moved out.

• It took ~500 hours over that 12 month period to design all our operating principles and execute on the LLC agreement. This pushed right up against our self-imposed deadline. Despite our shared enthusiasm and buy-in, the effort and time pressure contributed to relationship strain

• The final LLC ownership agreement comes across as quite dry and includes lots of boiler-plate that our lawyer recommended. It doesn’t convey all the interesting details around our day to day operating mechanisms (e.g. how does rent work; or how many shares should we give someone if they invest in a major home improvement; or who has what roles in managing the LLC). All of this was instead documented separately, and intentionally wasn’t something we wanted to enshrine in our legal agreement, since those mechanisms will likely evolve over time while we hope the LLC agreement lasts without substantial modification for decades.

• If we could start again we would probably spend a few months up front mapping out all these open questions and explicitly working to resolve the key points of these prior to pulling the trigger on buying a property or trying to lock down the LLC operating agreement contract.

In conclusion, building stable foundations for long-running communities can take huge effort, but can hopefully contribute community longevity. While the contract we’ve shared above only scratches the surface of the documentation and effort that it has taken to run our community over the past eight years, we hope that it is still valuable and helps other communities pursue their own pathways in the future and leads to the great outcomes that we all seek from coliving arrangements.

Best of luck on your own journeys, and please let us know if there are any other Dreamship systems that we've alluded to here that you think would further benefit the broader coliving ecosystem. Happy to address in the comments.

- Brayden (and Dreamship)