What Is an Aztech Recognition Agreement in NYC Real Estate? (2019) | Hauseit®


Anyone who has purchased a co-op apartment in New York City has heard of the Aztech Recognition Agreement. The Aztech form is a bank requirement in order for a buyer to obtain a loan on a co-op apartment in NYC However, most co-op owners do not know what the Aztec Recognition Agreement actually does. So, What is an Aztech Recognition Agreement? An Aztec form is an agreement between three parties: the bank, the co-op and the co-op apartment shareholder. It confirms consent by the co-op corporation to the lender extending a loan to the shareholder in exchange for a lien on the shareholder’s lease and shares as security. Why is an Aztech Recognition Agreement needed? Aztechs are required for co-op loans because of the unique ownership structure of co-ops. Whereas with a condo or house the buyer has fee-simple ownership and a deed to the property, for a co-op the buyer purchases shares in a corporation. When someone buys a co-op, he or she receives a stock certificate as well as a Proprietary Lease which entitles the buyer to reside in the specific apartment he or she purchased. The Aztech Recognition Agreement was developed as a systematic way to address the inconsistencies between the language in co-op proprietary leases regarding the ability to get a loan backed by the shareholder’s lease and shares as collateral. 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 Aztec Document Systems. What are the key benefits of the Aztech Recognition Agreement? Aside from facilitating loans for co-op apartments in NYC, another key benefit of the Aztech Recognition Agreement is the notification provisions which permit the bank to monitor the shareholder’s timeliness of maintenance payments. This feature, coupled with the ability of the bank to directly pay the co-op on behalf of a delinquent shareholder, effectively makes the bank a guarantor of a shareholder’s maintenance payments. The Aztech also confirms that the shareholder is the owner of the shares and holder of the proprietary lease. Furthermore, it prevents the co-op corporation from consenting to any further encumbrances of the collateral without the lender’s approval. This means no further loans, subletting, termination or surrendering of the proprietary lease without the lender’s consent. An additional benefit for co-op boards is their shareholders will generally be much more timely on their maintenance payments. If a shareholder is being difficult or in actual default, all it often takes is sending a copy of a notice to cure to the shareholder’s bank. This works wonders as most shareholders are more afraid of being in default on their loan than being late on their maintenance payments. 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, a co-op corporation will be paid first on any sums owed to it before a bank. Thinking of buying or selling in New York City? Save money with Hauseit, New York City’s largest and most trusted For Sale by Owner and Buyer Closing Credit Company. Hauseit has saved New Yorkers millions of dollars in commission since 2014, and we’d love to help you too. Subscribe to our channel and check us out at www.hauseit.com

One comment on “What Is an Aztech Recognition Agreement in NYC Real Estate? (2019) | Hauseit®”

  1. Ellen Arfin says:

    OMG. Always wanted to know more about what this so called Aztec Agreement, or Aztec Recognition Agreement was. Thanks for explaining it. Sometimes it's just easier to watch a quick video than read an entire article you know? Thanks guys

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