Manhattan Real Estate: Q&A: What is an Aztec Recognition Agreement?

By
Real Estate Broker with The Corcoran Group
http://actvra.in/Rjm

A: The Aztec Recognition Agreement (sometimes spelled Aztech) is a three-party contract between the borrower, lender, and coop. It is a form that must be signed by the borrower, lender and the coop.

(The form gets its name from the company that produces it)

It is the document that the bank draws up to give its lien the first priority over the co-op's lien in case the shareholder defaults. Also, the co-op corporation promises to notify the lender if the owner fails to pay maintenance or other fees to the co-op.

The co-op corporation is prohibited from permitting additional financing or canceling the shares/lease without the lender’s permission. This protects the security interest of the lender. The co-op, on the other hand, is given a superior lien on the equity. In the event of a default, a co-op’s lien is automatically prioritized over that of the lender. Only a few lenders will do HELO's in coops since they will be third lien.

Procedures for the lender and co-op to take in the event of a default are also established. The co-op agrees to inform the lender if the shareholders monthly maintenance payments fall into arrears (3 months). This functions as an early warning system of a borrower’s financial difficulty to the lender. In return, the lender agrees to make payments on behalf of the delinquent shareholder/borrower in order to prevent the co-op from foreclosing.

The lender also recognizes the co-op board’s right to review the transfer of shares in the event of a foreclosure.

The terms of the Recognition Agreement must be mutually agreed upon by the co-op and lender before a loan can close. Some co-ops require the use of their own recognition agreement and will not accept the lender’s version.

As part of this agreement the mortgage holder will pay maintenance and repossess the apartment. If shareholders don't pay their maintenance, the mortgage lender will pay after a while.

A co-op foreclosure has to be initiated by the co-op board. Because co-op units are not considered real property, co-op foreclosures do not have to go through the court, and instead will go to auction.

The coop building is safe financially (as opposed to condos with owners in arrears) as long as shareholder/owners have a mortgage. The Aztech protects the coop. For this reason many coops prefer purchaser's to have a mortgage (even a small mortgage) with assets left over rather than an all cash purchase.

 

courtesy of:

Mitchell Hall, Associate Broker, The Corcoran Group

close

Re-Bloggged 1 time:

Re-Blogged By Re-Blogged At
  1. Gail Robinson 01/27/2011 10:49 AM
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the key to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Topic:
Mortgage / Finance
Location:
New York New York County Manhattan
Groups:
Posts to Localism
LuxuryRealEstate.com Network For ActiveRain Members
Local Expert
I Love NY
Hyper-Local
Tags:
liens
lender
coop
aztech recognition agreement
aztec

Comments 13 New Comment

Rainmaker
793,261
Gail Robinson
REALTOR, GRI, e-PRO, Fairfield County, CT
William Raveis Real Estate

Mitchell, Saw your comment on Lenn's blog and thought I'd take a look at your post.  Thank you for this clear explanation of the Aztech agreement.  We have one co-op complex in my market area.  I'll reblog this.

January 27, 2011 10:45 AM
Rainmaker
499,618
Mitchell J Hall
Lic Associate RE Broker - Manhattan, NYC
The Corcoran Group

Hi Gail, Thanks for stopping by and for the re-blog. Coops are a unique form of home ownership.

January 27, 2011 06:24 PM
Rainmaker
565,876
David Popoff
Realtor & Property Manager, Fairfield County, Ct.
DMK Real Estate & Property Mgmt

See that, you do learn something new everyday, esp. on ActiveRain. ~ Thanks

April 16, 2011 12:27 PM
Rainer
40,035
Daniel Zettler, Esq. - Barnstable Mortgage Grp
Barnstable Mortgage Group NMLS 49104

great info. thanks!

February 27, 2013 09:57 AM
Rainmaker
144,621
Property Management Broward County
Florida Management and Consulting Group, Inc.

Very informative. It seems like co-ops are very popular in the NYC area.

February 20, 2014 02:22 PM
Rainmaker
499,618

Mitchell J Hall

Lic Associate RE Broker - Manhattan, NYC
How Can I Help You ?
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the envelope to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Additional Information

Google

Trulia MVP Century Award Winner