What Is an Aztech Recognition Agreement?

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What is an Aztech Recognition Agreement? We'll demystify this topic in the following video. I'm Nick at Hauseit, visit our website www.hauseit.com to learn about ways to save money when buying or selling real estate here in New York City. So, let's get started.

An Aztech Recognition Agreement is a trilateral contract between the buyer of the co-op, the buyers bank and the co-op corporation. The agreement is required if the buyer wishes to purchase a co-op apartment and finance the deal. The Aztech Recognition Agreement creates the following understanding between all parties. The co-op acknowledges that the lender has a lien against the co-op unit shares and proprietary lease as collateral. The co-op agrees not to allow the unit owner shares and proprietary lease to be encumbered with any additional debt. The co-op agrees to notify the lender if the homeowner stops paying their monthly co-op maintenance. The co-op agrees to accept payment from the lender on behalf of a delinquent shareholder. The lender agrees it has no power to transfer the proprietary lease or shares to anyone else without the co-op’s approval.

It is important to note that a co-op corporation always has a first lien on shares and leases. This means in any shareholder default, the co-op will be paid first on any sums owed before a bank. If there is anything left after the co-op and bank's loan are repaid in full the remaining amounts will go to the shareholder. Interestingly enough the Aztech Recognition Agreement also states that the bank will indemnify the co-op against any liability incurred by any claim that shareholder makes as a result of the co-ops actions under the Aztech Recognition Agreement. Signed original copies of the Aztech Recognition Agreement must be submitted along with the co-op board application.

Why is an Aztech Recognition Agreement needed? Well, it's important to realize that the language of co-op proprietary leases can vary regarding the ability to get a loan backed by the shareholders lease and shares as collateral. Some proprietary leases allow for it, some require prior consent of the co-op and others are completely silent regarding this matter. Therefore, the Aztech Recognition Agreement confirms consent by the co-op corporation to the lender extending a loan to the shareholder in exchange for a lien on the shareholders lease and shares as security. In summary the key benefit to a co-op of an Aztech Recognition Agreement is that it allows a lender to feel comfortable in making a loan to a prospective purchaser given the unique ownership structure of the co-op apartments.

Furthermore, the notification provisions which permit the bank to monitor the shareholders a timeliness of payments combined with the ability of the bank to directly pay the co-op on behalf of a delinquent shareholder effectively make the bank a guarantor of a shareholder's maintenance payments and this is very good for the co-op. Prior to the development and mainstream usage of today's Aztech Recognition Agreement, lenders would negotiate directly with developers and co-op converters to create custom documents that would allow for financing for individual shareholders.

As conversions became more common in the late 20th century a standardized document was first developed by Aztech document systems which mollified banks fears about the ability to enforce their collateral while retaining the rights of a co-op to approve shareholders if the bank tried to foreclose on a shareholder.

So, there you have it. We hope you found this video helpful I'm Nick at Hauseit, check out our website www.hauseit.com to save money when buying or selling real estate here in New York City. And if you like this video give us a favor hit like, subscribe, leave us a comment we greatly appreciate it and we hope to see you on the next one!

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