A recognition agreement is a three-party contract between a NYC co-op corporation, a shareholder, and the shareholder’s lender that allows co-op shares and the proprietary lease to serve as collateral for a loan. Because co-op shares are personal property under the Uniform Commercial Code rather than real estate, lenders cannot record a traditional mortgage. The recognition agreement is what makes co-op financing possible.
Under the agreement, the co-op recognizes the lender’s security interest and agrees to notify the lender if the shareholder defaults on maintenance, faces eviction proceedings, transfers shares, or surrenders the apartment. The lender agrees to honor the co-op’s house rules, by-laws, and lien priority for unpaid maintenance. Two standardized forms dominate NYC: the Aztech recognition agreement and the Blumberg recognition agreement. Most co-ops accept one or both. Closings cannot proceed without a signed and delivered recognition agreement, and banks typically require it three to five days before closing.
Closings stalled because of paperwork issues? MD Squared processes recognition agreements, share transfers, and lender coordination for every co-op transaction we manage. It is a standard part of our Condo-Coop Property Management service, and our team works directly with banks, attorneys, and brokers to keep closings on track. Contact us today and let us handle the closing logistics for your building.
