Recognition Agreement Aztech Forms Explained: Your Comprehensive Guide

Recognition Agreement Aztech Form: What is it?

An Aztech Recognition Agreement, commonly referred to as an "Aztech" in the industry, is an agreement that is entered into by a co-op Board, a purchaser and a lender. It is used when the co-op will be providing a first mortgage on a residential cooperative unit (which is not to be confused with a first mortgage on a luxury condominium) . The agreement is essentially utilized to "recognize" the existence of the lender’s mortgage and permit the lender to step into the shoes of the purchaser and/or a unit owner subsequent to the default by the purchaser noted in the Aztech. Alternatively, it is used to recognize the lender’s right to take over the unexpired lease, in conjunction with a first mortgage, in the context of a purchaser’s buying a purchase in a bank foreclosure or similar action recently completed by the co-op.

Essential Features of an Aztech Form

The key elements of an Aztech form are a detailed covenants section and a form of consent signed by a lender (if any), the co-op and the borrower. The detailed covenants section typically includes the following: Sets forth the obligation of the tenant to pay the maintenance and a provision that any failure to do so will be a lease violation. The provision should require the co-op board to give the tenant a 10 day notice of default and an opportunity to cure prior to commencing a proceeding to terminate the lease. The tenant is also required to pay any special assessments and comply with the proprietary lease. Lists the title to be taken by the tenant in the event of a sale or refinance, usually a Tenants-in-Common tenancy (unless directed otherwise by the board). Identifies all parties to the transaction and provides that the lender, if any, will loan funds only in accordance with instructions that they receive under the Aztech form. Provides that the Lender, landlord, if any, and the purchaser are all authorized to sign on behalf of the tenant in the event of a conveying the cooperative apartment mortgage. Terminates the proprietary lease for the cooperative apartment and sets forth provisions for the mortgage and further rights, obligations and limitations on the transfer of the apartment.

How to Obtain an Aztech Recognition Agreement

Aztech Recognition Agreements are generally obtained shortly after the co-op has formally approved the sale or transfer of the shares. The process requires a request from the selling party to obtain the written consent of the co-op board to the market under certain conditions. In so doing, the buyer’s broker can deliver a recognition agreement to the co-op board for execution. The basic steps to this process are set forth below:

• The subject deal is ratified at a meeting of the co-op board and a signed contract of sale is provided.
• The buyer, his agent, and/or the seller requests that the co-op grant its consent to the sale, transfer, or lease of the subject apartment through a recognition agreement.
• Upon completion of the board’s review of the buyer’s application for the purchase of the subject apartment, the sale is approved, and an Aztech Recognition Agreement is prepared for execution by the co-op board.
• The Aztech Recognition Agreement is prepared on behalf of the purchaser and submitted along with a request for consent to the subject sale. The form must be executed by the seller after the contract of sale has been fully executed.
• The Aztech Recognition Agreement is signed by the co-op board and returned to the buyer to further process the sale following the filing of the subject apartment’s proprietary lease and other closing documents with the County Clerk’s office.
• After the successful closing of the sale, the buyer’s stock certificate and proprietary lease are delivered to the buyer and filed with the subject co-op’s books and records by the managing agent.

Co-op boards may require the buyer to execute the Aztech Recognition Agreement conditioned on the buyer obtaining financing and only after the loan documents are in place.

Common Problems with an Aztech Form

Many common issues can arise when dealing with Recognition Agreement Aztech forms. One of the most frequent problems that occur are Aztech forms potential conflicts of interests, which can implicate all of the parties involved. When these forms were created, the idea was that the legal costs of the transaction would thus be cut in half (or more), and therefore, it was decided that even if the signature was missing or not properly dated, it was a minor error, nothing to worry about. Here you’ll find some common issues, and how to deal with them.
In many cases an unknown party or "zombie" when there should be a party on the Aztech Form that is not there. These "zombie" parties are simply the tenant signing the form if they fall under "Class A" and the landlord and/or mortgager if they fall under class B tenancies. If any of the parties sign the form, they must be made aware of it, and may not want to sign.
Additionally , a common issue may be that parties may have signed the Aztech forms at the same time even though one part of the sale is still conditional.
The next common issue may be what happens if the date is off. Many real estate lawyers have standard contracts that they fill out when doing their legal work. If any of these are off, the deal can become void entirely. Before closing, the lawyer does a complete search to make sure all of the signature dates on the Aztech forms are correct. They match the closing date, and all parties are made aware of the date beforehand in order to rectify issues before they become possibly problematic.
One of the more common problems with the Aztech form is simply when the form is missing, and all of the parties are not present for signature. The most important thing to do in this case is to get in contact with the party in which you are dealing, in order to request their signature. If the deal seems ever possible to go forward, the most logical solution may often be to close the deal and then sue for specifically your damages, which is often reasonable from a cost standpoint.
Although problems with Recognition Agreement Aztech forms can be frustrating, there are solutions to all of the above problems.

Legal Significance of an Aztech Agreement

From a legal perspective, the Court of Appeal in Technology Resources Industries Berhad v Pertiwi Nikmat Sdn Bhd (A Firm) [2006] 1 CLJ 817 (Technology Resources) and the crux of our argument in Technology Resources remain valid even after the Supreme Court decision in Loo Tak Ming (Loo). Technology Resources held that any suit based on a contract of guarantee would be within the jurisdiction of the Sessions Court, even if not all of the guarantees were for a sum certain. This serves as an important reminder that the monetary value of the subject matter of the suit must still be looked at with regard to the specific guarantees subject to the claim. The Court in Technology Resources also went on to examine the impact of the Recognition Agreement on the "matter related to the mortgage" vis-à-vis the right of foreclosure in the event of default under the Mortgage. Limitation periods and the statutory duties of the Parties under the Duties of Parties to a Recognition Agreement must also be looked at when drafting or reading an Aztech Recognition Agreement.
As a matter of the current law, the rights of the mortgagee under a mortgage do not extinguish with the recognition of an account of the loan account between borrower and lender as evidenced by an Aztech Recognition Agreement. It follows that the remedy of a mortgagee to foreclose on the security will still be available even if the Aztech Recognition Agreement has been entered into. Further, such a right will also link back to any limitation periods that might have lapsed prior to the parties entering into such an agreement.
Where the parties to a recognition agreement subsequently enter into a mortgage or parties already bound by a mortgage enter into a recognition agreement, the other party (but only that other party) may not commence an action against the other party unless there is an express contrary provision in the recognition agreement suspending the limitation period and extending it until the recognition agreement is determined. Such a suspension clause is normally incorporated in the recognition agreement.

Advice for Buyers and Lenders Using an Aztech Form

For the lender, make sure that there is also a full signature board on the first page of the Recognition Agreement itself. If you have an Aztech Recognition Agreement that incorporates your standard lender form for the backside of your recognition agreement, when your borrower executes it, you will want to ensure that they sign the front of the Aztech Recognition Agreement.
It is also critical to have the lender’s stamp on all of the pages of the Aztech Recognition Agreement and the Recognition Agreement incorporating the lender’s form. If the Recognition Agreement was produced by the lender’s counsel, the document should not be returned until all of the blanks are filled in .
From the purchaser’s perspective, it is really critical upfront for the purchaser to ask their lawyer whether this will be an Aztech Form transaction. Even if it’s not a true Aztech Form transaction, it really should be treated as an Aztech Form transaction because the purchaser will be relying on the existing surveys and relying on the Aztech Forms alone (without a further survey).
The purchaser needs to understand upfront what their obligations are under the Aztech form and what rights the vendor will reserve under the Aztech form. The purchaser simply cannot just accept the Aztech recognition as given if the transaction is not structured as an Aztech Form transaction. It is recommended that purchasers have a schedule of any arrangements they will need from an Aztech Form context in the deal.