Settlement takes place when the Flynn Company has all of the verifications and supporting documents in hand including the Lender’s loan approval and the Co-op’s approval. A settlement statement is prepared which follows in principle the standard HUD-1 form for all real estate closings.

At settlement, the seller will assign his/her right, title and interest in the Ownership Documents to the purchaser. The purchaser accepts the assignment, signs the various loan documents and pays the balance of the purchase monies to complete the sale.

Loans made to purchasers or owners of co-operative units are secured by a pledge and assignment of the unit owner’s Ownership Documents. The lender holds the Borrower’s original Ownership Documents as collateral security for the loan. The lender’s security interest in the Ownership Documents is further perfected by recording a Uniform Commercial Code Financing Statement (UCC-1) with the Recorder of Deeds in the Chattel Records which evidences the borrower’s debt on the public records.

In transferring an interest in real property there is no need for the seller to bring his/her deed to settlement since a title search would have confirmed the seller’s ownership interest in the property. It is imperative, however, that the seller of a co-op unit bring his/her original Ownership Documents to settlement since these documents are not recorded. If the seller is unable to locate his/her Ownership Documents, the co-op will issue substitute Ownership Documents provided that the seller completes one of the following requirements as dictated by Co-op Policy: (1) provide an affidavit of loss and indemnification agreement, (2) the seller purchases a surety bond in favor of the co-op to indemnify it and the buyer against loss, or (3) initiate a suit for Quiet Title. Both the bond and the suit for Quiet Title are costly measures. The purpose of these actions is to ensure that the seller’s ownership interest has not been conveyed or pledged to an unknown third party.

If the Ownership Documents have been pledged by the seller as collateral security for a loan, the lender will release the ownership documents to the Flynn Company after payoff.

Following settlement, the settlement office must arrange for the President and Secretary of the co-operative to sign and seal the buyer’s new Ownership Documents and, if there is a loan involved in the transaction, the Recognition Agreement must be signed as well. This is usually coordinated through the co-operative’s Transfer Agent.

DC Cooperatives: The DC Bill 18-203 was amended on October 1, 2009 and enforced retroactively. A DC Recordation Tax must be collected at settlement. The calculation for the DC recordation tax is 2.2% of the sales price under $400,000 or 2.9% of the sales price equal to or above $400,000. The sellers and buyers will be executing an Economic Interest Deed and a Transfer of Economic Interest Tax Return. The Economic Interest Deed must be recorded with the DC Recorder of Deeds for all changes in ownership of a Cooperative Unit (apartment, townhouse, garage/parking space). These forms will be prepared by our office to be signed at settlement.

Copyright © 2010 The Edmund J. Flynn Company. All Rights Reserved.