Building types
Co-op and condo refinance, and CEMA
Refinancing an apartment: a condo refinance can use a CEMA to cut mortgage recording tax, a co-op refinance cannot, because there is no recorded mortgage.
What is different about refinancing a co-op or a condo?
Quick Answer
What is the property interest, legally?
- A CEMA assigns the existing mortgage rather than satisfying it, then consolidates and modifies it
- The existing lender has to agree to assign, and it is not obliged to
- Assignment fees, and the time the existing lender takes, are the practical limits on a CEMA
- A co-op refinance replaces the UCC filing and requires a new recognition agreement
- The recognition agreement is signed by the lender, the corporation and the borrower
How is a purchase of this type financed?
- A condo refinance is a recorded mortgage and follows ordinary mortgage underwriting
- A co-op refinance is a share loan, underwritten against the building as well as the borrower
- A CEMA needs to be requested early because the assignment package sets the timeline
- Where the existing lender will not assign, the refinance proceeds without the tax saving
Which taxes and building fees apply?
- Mortgage recording tax under Tax Law section 253 applies to new money on a condo refinance
- A CEMA limits the taxable amount to the new money rather than the whole new loan
- No mortgage recording tax on a co-op refinance, because nothing is recorded
- Transfer taxes do not apply to a refinance, because there is no conveyance
What does the approval path look like?
- Ask the existing lender for a CEMA and an assignment package as early as possible
- Confirm the assignment fee and the lender’s expected turnaround in writing
- For a co-op, obtain the corporation’s form of recognition agreement and the managing agent’s requirements
- Clear the lender’s conditions and schedule the closing
- For a condo, record the consolidation documents in ACRIS; for a co-op, file the new UCC
How much does a CEMA save?
It depends on the size of the existing principal balance being assigned, because the saving is the recording tax that would otherwise be charged on that balance. The offset is the assignment fee and the added lead time, so a CEMA is worth running when the assigned balance is substantial.
What replaces the CEMA step when a co-op refinances?
A new UCC-1 filing against the shares and a fresh assignment of the proprietary lease, in place of the outgoing lender’s filing. Nothing is recorded against real property, so there is no consolidation document and no mortgage recording tax line for the borrower to plan around.
Does a co-op refinance need a new recognition agreement?
Yes. The agreement runs to a named lender, so the incoming lender needs its own, executed by the corporation through the managing agent. Buildings differ on which form they will sign, which is why the request goes in with the refinance application rather than in the closing week.
What else should you read before closing?
In the glossary
- CEMA (Consolidation, Extension and Modification Agreement)An agreement in which an existing mortgage is assigned and consolidated with new financing rather than being satisfied and re-recorded. It requires...
- Mortgage recording taxThe New York tax due when a mortgage is recorded, computed on the new money secured. On a building with six or fewer apartments the lender pays 0.2...
- Satisfaction of mortgageThe instrument that releases a paid mortgage from the record. Until it is recorded, the old mortgage still appears as a lien against the property.
- Payoff letterA lender's statement of the amount required to satisfy and release a mortgage on a specific date, with a daily interest figure for any later date.
- ACRISNew York City's public index of recorded property documents for Manhattan, Brooklyn, Queens and the Bronx. Deeds, mortgages, satisfactions, easemen...
- UCC searchA search of UCC filings for security interests in personal property, run against the seller and, on entity deals, against the entity itself.
Questions this raises
- Can you do a CEMA on a condo refinance?A condo refinance can use a CEMA because the loan is a recorded mortgage. How the assignment works, what it saves, and which lenders decline to coo...
- Why is there no CEMA on a co-op?A co-op loan is secured by a UCC filing, not a recorded mortgage, so no mortgage recording tax applies and a CEMA has nothing to consolidate or save.
- How does a CEMA work at closing?A CEMA assigns the old mortgage instead of satisfying it, so New York mortgage recording tax is paid only on new money. The documents and the seque...
- When does the reissue rate apply?Producing a prior owner's or lender's policy within the reissue period lowers the New York premium. Where to find the old policy and what qualifies...
- What gets recorded after a NYC closing?Deed, mortgage, assignments and satisfactions record through ACRIS with the City Register, along with transfer tax returns. What is filed instead o...
Building types
- Standard condoA New York City condominium unit: real property conveyed by deed, recorded in ACRIS, with an undivided interest in the common elements.
- Standard co-opThe ordinary New York City cooperative: you buy shares in a corporation and receive a proprietary lease to occupy a specific apartment.
- CondopA building split into two condominium units, one commercial and one residential, where the residential unit is owned by a cooperative corporation.
- Investor and pied-a-terre condo purchaseA condominium bought to rent out or to keep as a second home, where sublet policy, entity ownership and non-resident tax questions drive the struct...
The statute itself
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Legal Disclaimer: This page is general information about New York practice. It is not legal advice, it does not account for the terms of any particular contract, building or transaction, and reading it does not create an attorney-client relationship. This is attorney advertising. Prior results do not guarantee similar outcomes.