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cupied character of a community, they
also may make it more difficult for an
owner to rent.
While the above differences are
important, perhaps the most signifi-
cant and financially impactful differ-
ences between condos and co-ops
relate to the priority between the
co-op and any lender providing a
share loan, and the nature and timing
of the collections process.
In a condo, with the exception of
the sixth month regular maintenance
limited condo lien priority created by
statute, the condo’s security interest
in the unit is subject to the interest
of a prior recorded mortgage (and
is always subject to a municipal
real estate tax lien). However, in a
co-op that permits shares to be pur-
chased with financing, the terms of
the governing documents generally
grant the co-op and interest in the
stock and apartment over that of the
lender. In addition, co-op permission
to finance is generally premised on
the lender’s execution of a “recogni-
tion agreement,” that, among other
things, establishes the aforementioned
priority and gives the lender the right
to cure arrears. In other words, in a
co-op “foreclosure,” the co-op usually
receives payment before the lender.
As a result, in some cases the lender
will step into the shoes of the share-
holder any pay arrears in order to pro-
tect its interest in the shares and unit.
The priority of the co-op interest in the
shares and apartment over that of oth-
ers with an interest generally means
that co-ops do not have to write off
CONDO/CO-OP...
from page 49.