The coop Aztec agreement confirms that the shareholder is indeed the owner of the shares and proprietary lease being contemplated as collateral for the loan. More importantly, it confirms that the co-op corporation consents to the bank having a lien on the stock certificate and proprietary lease as collateral for the loan.
The Aztec agreement also protects the bank by preventing the co-op corporation from further encumbering the collateral without the lender’s consent. This means that the co-op corporation agrees not to sublet the apartment, not to approve any further loans, and won’t surrender or cancel the proprietary lease without the bank’s approval.
Interestingly enough, this Aztec form also permits the bank to pay the co-op corporation directly on behalf of a delinquent shareholder. This effectively means that the lender will be guaranteeing the shareholder’s maintenance payments on a going forward basis.
The lender also agrees in the Aztec recognition contract to not transfer the proprietary lease or shares to anyone else without the co-op’s consent. This is an interesting clause which protects the co-op against surprise new residents if a shareholder is foreclosed upon.