Title issues
Unreleased co-op UCC lien
A co-op loan is secured by a UCC filing, not a mortgage. When an old filing was never terminated, the share transfer stalls. How it is found and cleared.
What happens when an old co-op loan was never terminated?
Quick Answer
Lien · Blocks the closing until it is resolved
How is it found?
- The UCC search returns a financing statement against the seller and the unit that was never terminated
- The managing agent’s records show an old recognition agreement with a lender the seller says was paid off years ago
- A prior refinance paid off the original share loan but the termination statement was never filed
- The original lender was acquired or wound down and the successor never filed the termination
- A co-op lien search returns unpaid maintenance, assessments or a flip tax owed to the corporation itself
How is it cured?
- Run both searches, because the UCC filings and the corporation’s own lien for unpaid maintenance are different records with different holders
- Request a termination statement from the current secured party, tracing the loan through any acquisitions of the original lender
- Where the loan is live, obtain a payoff letter and have the lender deliver the original stock certificate, the lease and the termination at the closing
- Where the lender is defunct, an affidavit and an indemnity supported by proof of payoff is the usual path
- Clear the corporation’s side separately by paying the arrears the managing agent’s lien search reports
- Confirm the new lender’s recognition agreement is executed by the corporation, because the transfer does not fund without it
What does clearing it cost?
A termination from a cooperative lender costs the time to request and track it, which is why it is requested at contract rather than at the closing. Tracing a defunct lender is where the time goes. The corporation’s arrears are a payoff rather than a professional cost, and the managing agent typically charges its own transfer-related costs.
Who pays for it?
The seller, who is obligated to deliver the shares and the lease free of security interests. The corporation’s arrears come out of the seller’s proceeds at the table, and the seller’s lender delivers the terminated filing and the original stock certificate in exchange for its payoff.
Why is a co-op loan not a mortgage?
Because a co-op purchaser owns shares in a corporation and a proprietary lease, which are personal property rather than real property. A lender takes a security interest in that personal property under the Uniform Commercial Code and perfects it by filing, so the record to search is the filing index rather than ACRIS.
What is a recognition agreement and why does it matter?
It is the three-party agreement among the borrower, the lender and the cooperative corporation in which the corporation acknowledges the lender’s security interest and agrees how notices and defaults will be handled. No lender funds a co-op loan without one, so an unsigned recognition agreement stops a closing as reliably as an unreleased lien.
Does the corporation itself have a lien?
The proprietary lease gives the corporation rights against a shareholder who owes maintenance, assessments or a flip tax, and the managing agent reports those in the lien search it prepares for the transfer. Those amounts are settled at closing alongside any lender payoff, and the transfer is not recognized until they are.
What else should you read before closing?
In the glossary
- UCC searchA search of UCC filings for security interests in personal property, run against the seller and, on entity deals, against the entity itself.
- Co-op lien searchThe search performed on a co-op purchase covering UCC filings, judgments, liens and unpaid building charges tied to the shares and to the selling s...
- Aztech recognition agreementThe agreement in which a co-op corporation acknowledges a lender's security interest in a shareholder's shares and proprietary lease. The Aztech fo...
- Stock certificate (co-op)The certificate evidencing the shares allocated to a co-op apartment. Shares and the proprietary lease travel together and cannot be sold separatel...
- Proprietary leaseThe occupancy lease a co-op corporation grants a shareholder for a specific unit. It is assigned at closing together with the stock certificate for...
- Flip taxA transfer fee charged by a co-op or, less often, a condominium when a unit changes hands. It is a creature of the building's governing documents, ...
- Maintenance (co-op)The monthly charge a co-op levies on each shareholder, covering building operations plus that shareholder's share of real estate taxes and the unde...
Questions this raises
- What is title insurance?Title insurance covers defects in a property's past: old liens, recording errors, forged deeds, undisclosed heirs. How the coverage works in New York.
- What happens if the title search finds a problem before closing?Schedule B-I requirements are the punch list, not a dead deal. How New York closings clear old liens, missing satisfactions and name hits before th...
- What documents do I sign at closing?Note, mortgage, title affidavit, settlement statement and transfer tax returns for buyers; deed and releases for sellers. What each document actual...
Title issues
- Unsatisfied mortgage of recordA paid-off mortgage with no recorded satisfaction still reads as a live lien in ACRIS. Here is how it is found, how it is cleared, and who pays for...
- Judgment lien against the sellerA docketed money judgment attaches to New York real property the seller owns in that county. Here is how it surfaces, how it clears, and who pays it.
- Name variance and identity discrepancyThe deed in reads one name and the deed out reads another. How a New York title search treats a name variance, how it clears, and what it costs to ...
Building types
- Standard co-opThe ordinary New York City cooperative: you buy shares in a corporation and receive a proprietary lease to occupy a specific apartment.
- HDFC co-opAn affordable cooperative formed under Article XI of the Private Housing Finance Law, with income caps on purchasers and usually a restricted resal...
- Land-lease co-opA cooperative that owns its building but leases the ground beneath it from a separate landowner, on a lease with a reset schedule and an expiry date.
- Mitchell-Lama co-opA limited-equity cooperative in the State and City Mitchell-Lama program, sold from a waiting list at a formula price rather than on the open market.
- CondopA building split into two condominium units, one commercial and one residential, where the residential unit is owned by a cooperative corporation.
- Sponsor co-op unitAn unsold share allocation still held by the building’s original sponsor, sold under the offering plan rather than through the ordinary board process.
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