Lending on a Co-Op Condo Building in FL

[Dillon Rachman]

A client of mine is purchasing a unit in a building that is NOT a Condo, rather a Co-Op. I want to give him a loan, but am not sure of how the dynamics work for securing a lien on the property. Has anyone received a hard money loan, or given a hard money loan to a borrower purchasing a Co-Op unit in a building? If so, I would appreciate any help.

[Don Konipol]

@Dillon Rachman

Co op owners do not own real property, so a loan secured by real property is out of the question. In fact, the only loan secured by real estate in a co op situation would be a loan secured by the entire co op project, also known as an underlying loan.

What the co op “owner” does possess is shares of stock representing percentage ownership in the cooperative corporation that owns the property, and a priority lease on their unit. So, a loan to an individual co op “ owner”, can only be secured by a pledge of the shares of stock and the priority lease.

Any lender making this loan would insist on the cooperative corporation waiving some of its rights if the lender needed to repossess the borrowers equity interest in the co op. Gets extremely complicated and tricky, hence in New York, and perhaps San Francisco, attorneys specialize in co op law.