The single document that is absolutely unique to co-op unit financing is the Recognition Agreement. This pre-approved form is signed by the borrower, an officer of the co-op association and an officer of the lender at the time of settlement.

Some Cooperatives require the use of their form of recognition agreement and will not accept the lender’s version.

Simply stated, a Recognition Agreement is a legal document wherein the co-operative association recognizes the lender as having a security interest in the borrower’s unit. It also establishes the steps that either the lender or the co-op will take in the event the member/borrower defaults to the lender or to the association. The terms of the Recognition Agreement must be mutually agreed upon by the co-op association and the lender before any loan closing.

A co-operative association may require some monies be paid by the borrower at settlement to be held by the co-op in connection with a Recognition Agreement. This escrow is applied to the loss of any monthly assessment payment in case of default by borrower/member.

Click here for a sample of the standard “Recognition Agreement”




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