A Guide to the Coop UCC Financing Statement in NYC
A UCC filing is necessary if you are buying a coop in NYC. A UCC filing is a substitute for recording a mortgage because co op apartments are not considered to be real property, and mortgages are only applicable for real property. As a result, banks lending against co-op shares need to rely on the Uniform Commercial Code (UCC).
Original Article: https://www.hauseit.com/ucc-financing-statement-coop-nyc/
Personal Property as Collateral
Under state Uniform Commercial Code laws and statutes, a UCC-1 statement is filed when personal property is used as collateral. Personal property can include equipment, inventory, co op shares and other assets of a business.
A UCC Filing creates a lien on the property so that the borrower cannot sell the property without first paying off the loan, or acquire additional indebtedness without the notification and approval of the lender. As a result, a UCC filing on a coop will allow the bank to extend a secured loan vs an unsecured loan.
What Is a UCC Financing Statement?
A UCC Financing Statement is used by lenders to “perfect” their security interest in the property. We use the term security interest vs lien because a lien is more commonly used for real property vs personal property.
A UCC Financing Statement gives public notice to third parties of the lender’s security interest in the property. If a lender does not “perfect” their interest in the property, the lender may have serious issues enforcing their claim to the collateral against third parties and other creditors who also claim a security interest in the collateral.
A UCC Financing Statement is a simple form that details the legal names of all parties, including the debtor and the lender. There will also be a section called “this Financing Statement covers the following collateral.” We’ve included sample language for a UCC Financing Statement for a co op corporation’s loan:
The assets and personal property, including fixtures, more particularly described on Schedule A attached hereto and made a part hereof, including those assets, personal property and fixtures which relate to the real property more particularly described in Exhibit A hereto and made a part hereof.
When a UCC Filing is made against a co op corporation, it is typically classified as a fixture filing even though the building may be secured against the loan (assuming the building does not have a land lease). In the section that asks for a description of real estate, our hypothetical coop corporation may write something like the following:
555 East 5th Avenue, New York, NY 10350 and as more particularly described on Exhibit A attached hereto and made a part hereof. Block 983 and Lot 74 of the Tax Map of New York County, New York.
UCC Financing Statement for a Co op Apartment Loan
When a UCC Financing Statement is filed for a loan against a specific co op apartment, the debtor’s exact full legal name is used instead of the cooperative corporation. The secured party’s name is the name of whichever bank is providing the shareholder loan.
Here is sample language for the section called “This Financing Statement covers the following collateral.”
Shares as Collateral
Debtor’s interest in 150 shares of stock for apartment number 15B and the proprietary lease with NYC Cooperative Corporation and any replacement or additional stock and any lease amendments or replacement.
This cooperative property financing statement shall be effective until a termination statement is filed.
Full Address: 555 Fifth Avenue, Apartment 15B, New York, NY 10384
County: New York Block: 950 Lot: 5
Note that a UCC Financing Statement Cooperative Addendum is also typically filed. It is a one page form that accompanies a UCC Financing Statement and covers one or more cooperative interests. The form will detail the exact address and names of all parties. In the section called “Specify Other Unit Uses” you will write Cooperative Apartment.
An important note that is included with a UCC Financing Statement Cooperative Addendum is the following:
This Cooperative Addendum is for use when the collateral includes a Cooperative Interest. Only as to collateral which is a Cooperative Interest, but not as to other collateral, the initial Financing Statement to which this Cooperative Addendum relates shall be effective for 50 years from the date of filing the initial Financing Statement.
Pro Tip: Banks require the co op corporation to sign a three way agreement between the bank, the co op corporation, and the shareholder called an Aztech Recognition Agreement.
Original Article: https://www.hauseit.com/ucc-financing-statement-coop-nyc/
Disclosure: Hauseit and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).
