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The Aztec Recognition Agreement

Q: What is an Aztec Recognition Agreement?

A: The Aztec Recognition Agreement (sometimes spelled Aztech) is a three-party contract between the borrower, lender, and coop. 

(Sample Recognition Agreement- Pg.1)
It is a form that must be signed by the borrower, lender, and the coop. (The form gets its name from the company that produces it)

It is the document that the bank draws up to give its lien the first priority over the co-op's lien in case the shareholder defaults. Also, the co-op corporation promises to notify the lender if the owner fails to pay maintenance or other fees to the co-op.

The co-op corporation is prohibited from permitting additional financing or canceling the shares/lease without the lender’s permission. This protects the security interest of the lender. The co-op, on the other hand, is given a superior lien on the equity. In the event of a default, a co-op’s lien is automatically prioritized over that of the lender. Only a few lenders will do Home Equity Loans (HELO's) in coops since they will be the third lien.

Procedures for the lender and co-op to take in the event of a default are also established. The co-op agrees to inform the lender if the borrower’s monthly maintenance payments fall into arrears (3 months). This functions as an early warning system of a borrower’s financial difficulty to the lender. In return, the lender agrees to make payments on behalf of the delinquent shareholder/borrower in order to prevent the co-op from foreclosing.

The lender also recognizes the co-op board’s right to review the transfer of shares in the event of a foreclosure.

The terms of the Recognition Agreement must be mutually agreed upon by the co-op and lender before a loan can close. Some co-ops require the use of their own recognition agreement and will not accept the lender’s version.

As part of this agreement, the mortgage holder will pay maintenance and repossess the apartment. If shareholders don't pay their maintenance, the mortgage lender will pay after a while.

A co-op foreclosure has to be initiated by the co-op board. Because co-op units are not considered real property, co-op foreclosures do not have to go through the court, and instead will go to auction.

The coop building is safe financially (as opposed to condos with owners in arrears) as long as shareholders/owners have a mortgage. The Aztech protects the coop. For this reason, many coops prefer purchaser's to have a mortgage (even a small mortgage) with assets left over rather than an all-cash purchase.


  1. In an HDFC does the lender pay the flip taxes if the sale is from a foreclosure or is this just a loss for the building?

  2. I am curious. You include both spellings - aztec and aztech for this standard form. When I search around I find references to both, but no citation to any specific authoritative source for the term and its spelling.

    Where does the term come from and which spelling is the original?



  3. The term comes from the company that makes the forms Aztech Document Systems aka and sometimes spelled Aztec document systems. The proper name of the document is Recognition agreement. Just like a standard lease is often called called Blumberg Lease because Blumberg makes the form.

  4. In an HDFC does the lender pay the flip taxes if the sale is from a foreclosure or is this just a loss for the building?

    I believe the lender is responsible to pay the coop. There are lenders that won't loan in buildings with (flip taxes) or other restrictive covenants.

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