Before you begin shopping for a new loan, your board of
directors should assemble, review, and verify the following information. You will greatly
improve your chances of getting the loan you want if you are knowledgeable about your
property and able to provide complete and accurate documentation to support your
application. First impressions are very important.
Always be honest and straightforward
when dealing with a loan officer. It is better to reveal a problem up front and describe
the steps you are taking to solve it rather than attempt to hide or disguise it. The truth
always comes out.
1. A complete Offering Plan (the
Prospectus or "Black Book").
Your offering plan describes the creation of your cooperative. It also contains lots of
important information that will help a loan officer evaluate your property. If you do not
have an offering plan because your cooperative self-converted or was built originally as a
co-op, you should prepare a complete description of your property and its history.
2. A complete set of Amendments, if
any; the latest Sponsor
Disclosure filing is most
Amendments describe changes in the financial, legal, structural, or other aspects of
your cooperative that occurred after the initial offering of shares. The most important
amendments are the annual statements which every sponsor must file with the Attorney
General until their ownership drops below 10%. Those "Sponsor Disclosure
Statements" are requested by most lenders.
3. Copies of your Corporate
All lenders will require copies of your apartment corporations Articles of
Incorporation, ByLaws, and Proprietary Lease. You also will be asked to provide a
Certificate of Good Standing from the Secretary of State, which shows that your apartment
corporation is still valid and that it has paid its state franchise taxes, and a valid
Certificate of Occupancy, which shows that your building complies with local codes and
4. Copies of Board Meeting Minutes
for the previous 12 months.
Most lenders want to assure themselves that your cooperative is operating in a prudent
fashion. They are especially interested in any issues which might effect your collateral
or credit worthiness. Included in these minutes should be a board resolution authorizing
the financing you are currently seeking and empowering the apartment corporations
officers to execute all necessary documents.
5. Financial Statements for the most
recent 3 years.
Financial statements give a picture of the fiscal health of your cooperative. By
comparing results over several years, a loan officer can evaluate whether your
co-ops health is improving, stable, or deteriorating. It is highly recommended that
your annual financial statements be audited. Audited statements have been reviewed and
verified by a certified public accountant for completeness and accuracy.
6. Federal Tax Returns (IRS
Form1120) for the most recent 3 years.
Prior to closing, most lenders will request the apartment corporations federal
tax returns and then compare them to the financial statements.
7. The current Reserve Fund balance.
Most accountants recommend that a co-op maintain unallocated reserves equal to 2-4
months of the cooperatives operating expenditures (including debt service). This
account should function as the co-ops contingency fund for unforeseen problems. The
co-op should have additional reserves for any known repairs or planned capital
Be prepared with copies of the most recent statements for all checking, savings, money
market, reserve, and investment accounts.
8. A Budget for the current year.
Your cooperative is a business, and you should run it like one. Therefore, you should
have a financial plan that shows the effect of the new loan on your operations. Lenders
are afraid of co-op boards who have not prepared a budget to guide their operations and
expenditures. Likewise, most lenders expect that a board would have developed a budget for
the new year by November of the current year.
9. A Year-to-Date Operating
If you are looking for a new loan during the middle of a calendar year, most lenders
will request the most recent operating statement from your managing agent. They will
compare this operating statement to your budget and to the most recent audited financial
statement to make sure that your co-op is still financially sound. If your managing agent
does not prepare monthly operating reports, you should consider changing to one that does.
10. A recent Maintenance Roll.
The maintenance roll should show each apartment, its type (e.g., 2BR/2 Bath, loft,
etc.), its size or square footage, number of shares, monthly maintenance charge, and the
name of its shareholder. The superintendents apartment also should be identified.
11. A list of Arrears.
Arrears or past-due maintenance charges should be shown by shareholder or apartment,
along with an explanation of any large arrears, any legal action taken against the
shareholder, and expected results.
12. A list of all Sublets.
This list should indicate the rent collected, the subtenants name, and lease
It is very important to know the rent being charged in each sublet, if for no other
reason then to substantiate the rental value of your apartments. To most loan officers,
sublets suggest that apartments cannot be sold -- especially if the percentage of sublets
is more than 10%. Therefore, the board should be prepared to identify all sublets and
describe its sublet policy.
Most lenders qualify a sublet as any apartment which was occupied initially by its
shareholder but now is rented to someone else. An apartment which never was occupied by
its shareholder is an investor apartment, not a sublet.
13. A list of all Sponsor
This list should indicate the rent collected, the tenants name, lease expiration
date, and which units are subject to rent-control, rent-stabilization, or open-market
rents. It is absolutely essential that you know the rents being charged in each sponsor
apartment. Every loan officer will want to know whether the rent collected from these
units exceeds the respective maintenance. It is also very important to know whether the
sponsor has pledged any of the unsold shares as collateral for other financing.
14. A list of all Investor
This list should show the rent collected, the tenants name, lease expiration
date, and which units are subject to rent-control , rent-stabilization, or open-market
rents. An investor apartment was purchased as an investment, not as a home; its
shareholder never occupied the unit.
15. A summary of any Commercial
If your co-op has commercial space, you should prepare a schedule showing each
tenants name, type of business, square footage, annual rent, expense pass-throughs
and/or escalations (if any), renewal options (if any), and lease expiration date.
16. A copy of the Ground Lease, if
Some cooperatives do not own the land under their building but instead rent it from the
sponsor or some other entity. If your cooperative has a leasehold, you should be able to
provide a copy of the Ground Lease and a detailed description of its terms and conditions.
17. A list of apartment Resales
during the previous 3 years.
This schedule should show each apartment sold, its sales price, number of shares, and
Apartment resales are one of the most important barometers of your co-ops
financial health. In fact, a history of regular and strong resales usually can off-set
some of the less desirable aspects of your cooperatives profile. Therefore, it is
very important to maintain an accurate record of the transfer of every apartment. It also
is important to explain the circumstances surrounding any discount or sub-market sale to
prevent a loan officer from undervaluing your cooperative.
18. A recent MAI appraisal, if
As part of their underwriting process, most lenders will require a third-party
appraisal from a Member of the Appraisal Institute. If your
cooperative happens to have a recent MAI appraisal, you might be able to save some time
and cost during your refinancing.
An MIA appraisal will estimate the value of your property using three methods:
reconstruction cost, comparable sales, and estimated rental income. The rental income
approach usually is given the most weight in determining the final value of your property.
19. An Engineering and Environmental
Most lenders will require that your property be inspected by a licensed professional
engineer for both physical and environmental problems, (e.g., old windows, leaky roofs,
faulty boiler, asbestos, lead paint, or buried oil storage tanks).
Copies of recent reports regarding the presence or removal of asbestos, the testing or
decommissioning of underground oil storage tanks, or Local Law 10 compliance would help
the lenders engineer complete this task more quickly.
20. A current Title Report.
In most cases, the cooperatives attorney will not request a title report until
after a new loan commitment has been issued. However, it is recommended that your attorney
do a preliminary search of your title to make sure that it is free of Building Department
violations, mechanics liens, or other encumbrances. Some of these items can take months to
remove. Therefore, it is better to uncover (and solve) them early rather than be surprised
by them two weeks before closing.
21. A copy of your Survey.
A survey is a plot plan of your property, showing its exact dimensions as well as the
location of all buildings and other improvements. Most lenders will accept an updated and
re-certified survey, but some insist upon a completely new one.
22. The cooperatives Managing
Be sure to include the contact person, address, and phone and fax numbers.
23. A copy of your current
24. A list of building Personnel.
Please include their wage rates and a description of their duties and hours. The
superintendents phone number also would be helpful.
25. Information regarding your
Existing Mortgage Loan(s).
Please include the amount(s) outstanding, monthly payment(s), maturity date(s),
prepayment provisions, loan number(s), and a record of mortgage payments for the
previous12 months. Copies of the existing Note and Mortgage should be sent to the
26. A list of recent Capital
Please include all work completed within the previous 3 years. You should be able to
tell a loan officer what you did, why, and the approximate cost of each item. This will
indicate that you are maintaining your property in a prudent manner.
27. A schedule showing the intended
Uses of Loan Proceeds.
This will include, for example, repaying the existing loan, paying refinancing costs,
making capital improvements (list major projects and their estimated cost), replenishing
the reserve fund, etc. It is recommended that every co-op have a five year-plan of major
repairs and capital improvements. Your annual budget should include an allocation toward
this five-year plan plus a contribution to the general reserve fund.
28. Your propertys Block and
29. Your propertys Lot
30. Your propertys Assessed
Valuation for the current tax year.
31. The status of any Tax Abatements
(e.g. J-51, etc.).
Most lenders will underwrite your property without its current abatement or exemption
to see whether it can support a full tax burden. You will receive credit for the
abatement, but the terms of your new loan may be adjusted to provide for full taxes when
your abatement expires.
32. Recent Photographs.
A picture really is better than a thousand words. The more pretty pictures you can
provide of your property, the better. Be sure to include shots of the front of the
building, several apartment interiors, as well as any significant amenities such as a
swimming pool, tennis court, or clubhouse.
33. The cooperatives Attorney.
Please include the firm name, address, and phone and fax numbers.
34. The cooperatives
Please include the firm name, address, and phone and fax numbers.
35. A list of all Corporate Officers
and Board Members.
Please indicate one main contact for all refinancing issues.
36. Copies of your Insurance
Please include the name, phone and fax numbers of your insurance agent. Every loan
officer will be interested in the amount of insurance protecting your property. This
includes not only coverage against the obvious hazards such as fire and natural disasters
but also liability coverage against suits from shareholders and other individuals. Most
lenders also will require boiler insurance, rent and/or business interruption coverage,
and directors errors and omissions policies.
37. If your cooperative has Ten or
If you live in a small co-op, you also should be ready to provide a list of each
shareholders social security number, place of employment or profession, approximate
balance of any apartment mortgage, and its approximate monthly payment. In certain rare
cases, it may be necessary to provide tax returns for every shareholder. This additional
information usually is required from small co-ops because each shareholder carries a much
larger portion of the total financial burden of the property. Therefore, in small co-ops,
lenders are just as concerned about the financial health of each shareholder as they are
about the finances of the cooperative itself.