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All About Co-op Foreclosures

Overview

Foreclosure for Unpaid Co-op Maintenance occurs when the owner of a co-op unit fails to pay the monthly maintenance owed for their unit. This accumulated unpaid maintenance then becomes a lien against the co-op unit.

The Board of Directors of the co-operative initiates a foreclosure action against the unit owner for the unpaid maintenance. If the unit owner does not pay the outstanding maintenance, the Board of Directors can initiate a foreclosure proceeding.

Co-op foreclosures are not handled through the court like other types of foreclosure actions because co-op units are not real property. Only real property foreclosures go through the court. Therefore, investors will not have any notification that a foreclosure proceeding has been commenced against a co-op unit because no lis pendens will be filed. The only notification of a foreclosure action against a co-op is when the auction is scheduled to take place.

Investors need to be aware that unpaid maintenance can be subject to any open mortgages that may be held against the co-op unit. The successful bidder at an auction for the foreclosure of unpaid maintenance will be responsible for paying off any open mortgages that may be held against the unit.

Successful bidders at co-op auctions also need to know that many co-op’s by-laws require board approval, and you will be subject to their approval process. If you are not approved, the board will not issue a proprietary lease for the unit, If this happens, you may have to sell the unit.

 

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