Share Loans and Recognition Agreements: What a Cooperative Board Should and Should Not Agree To

Jason Hamilton Mikes, JD, MBA
Founder & Managing Shareholder

• Published September 25, 2026
• Reviewed by Jason Hamilton Mikes, JD, MBA, September 26, 2026
• Florida Statutes as of July 1, 2026
• Applies to: Cooperatives

When a buyer finances a Florida cooperative purchase, the lender will send the association a recognition agreement and ask an officer to sign it. Chapter 719 says nothing about share loans, recognition agreements, or how a lender takes security in cooperative shares. The association's position is therefore exactly what that agreement says it is, and most forms are drafted by the lender for the lender. This is a document for counsel to read before anyone signs it.

What a lender is actually lending against

A cooperative buyer is not buying real estate in the ordinary sense and is not getting a deed. The buyer is acquiring a cooperative parcel: the shares or other evidence of ownership in the association, together with the lease or other muniment of title or possession to the unit. § 719.103(14). Both legs are required to be a unit owner. § 719.103(27). Our guide to what a Florida cooperative association is sets out the structure.

A lender securing that package has to take security in both the shares and the lease, and has to be able to realize on them. Realizing on them means selling the parcel to somebody the association will approve. That is why the association ends up at the table: the lender's collateral is worth what it is worth only because the association will recognize a transfer.

Florida adds two wrinkles that most national lender forms were not written for. Section 719.105(1)(a) requires that the evidence of membership or shares include a legal description of each dwelling unit and be recorded in the office of the clerk of the circuit court as required by § 201.02(3), which is the documentary stamp tax provision. And § 719.103(26) provides that an interest in a unit is an interest in real property.

Article 9 or mortgage: an unsettled question

In New York and most states with a substantial cooperative market, a share loan is a personal property transaction. The lender perfects a security interest in the shares and the proprietary lease under UCC Article 9 by filing a financing statement and usually taking possession of the stock certificate. That is the model most lender forms assume.

Florida's statute does not fit that model cleanly. Article 9 as enacted in Florida excludes from its scope the creation or transfer of an interest in or lien on real property, § 679.1091(4), and Chapter 679 nowhere addresses cooperative interests. Section 719.103(26) then says in terms that an interest in a cooperative unit is an interest in real property. Read together, they point away from a pure Article 9 personal property treatment and toward mortgage treatment, with the recording and documentary stamp consequences that follow.

We are not aware of Florida appellate authority resolving this, and practitioners do not agree on it. Many Florida share loans are documented belt and suspenders: a security agreement and UCC-1 filing, plus a recorded instrument, plus a pledge of the certificate. That is a sensible response to an unsettled question, and it is the lender's problem rather than the association's.

Why the board should care at all: the association is asked in the recognition agreement to acknowledge the lender's interest, and sometimes to characterize it. Do not characterize it. The association can acknowledge that the lender holds a security interest asserted under its loan documents without conceding its nature, its perfection, or its priority.

Priority: what Chapter 719 does and does not give the lender

This is where cooperative practice diverges most sharply from condominium practice, and it is worth stating precisely because lenders and title agents often assume otherwise.

The absence of a safe harbor is the most consequential item on that list. A lender that forecloses a share loan and takes the parcel is, on the face of § 719.108(1), liable for what comes due while it is in exclusive possession, with no statutory cap of the kind that applies to a condominium first mortgagee. This is a significant point and one an attorney should confirm before the association relies on it in a negotiation, but it is what the section says.

The practical implication for the board is simple. The association's statutory position on a co-op delinquency is stronger than it would be on a condominium unit, and a recognition agreement is precisely the document in which that advantage gets bargained away by accident. See cooperative liens and remedies for how the lien itself works.

What the association should agree to

A recognition agreement is not inherently adverse. Financing makes units saleable, and a saleable unit is a unit that pays assessments. There is a version of this document the association should sign.

• Notice of the member's default to the association, and of the association's default notices to the lender. A lender who learns about a three-month delinquency early will usually cure it. Set a concrete address and a concrete method, and put both in the association's records.
• A defined cure period. The lender gets a stated number of days after written notice to cure the member's monetary default. Make it a real number, not "a reasonable time," and make it run from delivery rather than from discovery.
• Acknowledgment that the lender may, on default, cause the parcel to be sold. This is the lender's core need and the association can concede it, provided the next bullet stands.
• Preservation of the approval right. Any purchaser at or after a lender sale remains subject to the association's approval process under the documents. If the association will accept the lender itself as a temporary holder without approval, say so, and say for how long.
• Preservation of the association's lien and all statutory remedies. Say it in terms: nothing in the agreement subordinates, waives or limits the association's lien or its rights under § 719.108 and § 719.303.
• A cap on the association's obligations. The association's duty is to give notice, nothing more. It is not an escrow agent, a guarantor, or a source of underwriting information beyond an estoppel certificate.

Handle the mechanics too. Assign responsibility for maintaining the lender contact list, because notice provisions fail when the servicer changes and nobody updates the file. And confirm the estoppel process: under § 719.108(6) a mortgagee or its designee may request an estoppel certificate and the association must issue it within 10 business days, with a statutory fee cap.

What the association should refuse

1. Subordination of the association's lien. Any acknowledgment of the lender's priority, express or by implication. There is no statutory priority for the lender to rely on, and the association should not create one by contract.
2. Waiver of the approval right. An agreement that the lender or its assignee may transfer the parcel free of the association's approval process removes the association's principal protection against who ends up in the building.
3. A no-amendment covenant. Promises that the association will not amend its documents, or will not adopt rules affecting the unit, without the lender's consent. The association cannot bind its members that way and should not try.
4. Financial warranties. Representations about the association's financial condition, reserve adequacy, insurance coverage, pending litigation or pending special assessments. An estoppel certificate under § 719.108(6) is the right vehicle and it carries its own limits.
5. Open-ended indemnification. Forms that make the association indemnify the lender for losses arising out of the association's own governance decisions.
6. Obligations that outlive the loan. Provisions that continue to bind the association after the loan is paid, or that automatically extend to the lender's successors without notice to the association.
7. Signature by one officer without board authority. Treat the agreement as a contract, approve it at a board meeting, and record the approval.

A last operational point. Associations frequently receive lender forms for units where the association itself has an approval application pending. Do not sign the recognition agreement before the transfer is approved. Approving the financing before approving the buyer inverts the order and makes a denial look like bad faith. Our guide to transfer and purchaser approval covers the sequencing.

What happens on default

There are two defaults that matter, and they can run at the same time: default to the lender, and delinquency to the association.

Where the member defaults on the loan, the lender proceeds under its documents and under whatever the recognition agreement provides. Its objective is to get the parcel sold to a qualified buyer. The association's role is to give the notices it agreed to give, to process the eventual application on its ordinary criteria, and to keep its own lien position intact.

Where the member is delinquent to the association, the association's own sequence runs regardless of the loan: the notice of late assessment giving 30 days before attorney fees may be charged under § 719.108(3), the notice of intent to file a lien and the 45-day wait under § 719.108(4), and then foreclosure of the lien in like manner as a foreclosure of a mortgage on real property under § 719.108(5), where the association may seek appointment of a receiver to collect rent and may bid at the sale unless the documents prohibit it. Section 719.108(7) preserves other remedies provided by the documents. Where the unit is tenant-occupied, § 719.108(10) allows a written demand that the tenant pay subsequent rent directly to the association.

Give the lender notice at each step, whether or not the agreement requires it. A lender that cures is faster and cheaper than a foreclosure, and a lender that was never told cannot cure. Keep the correspondence, and see maintenance fee collection for the full sequence.

If the member has died and a share loan is outstanding, the notice obligations and the probate administration run together and need coordinating; see succession and estates. And if your proprietary lease or bylaws contain their own lender provisions, those control the association's baseline before any recognition agreement is negotiated; see cooperative governing documents.

Contact Hamilton Mikes

Hamilton Mikes reviews and negotiates recognition agreements for cooperative boards, advises on lender notice and cure provisions, and protects the association's lien position in Lee, Collier and Charlotte Counties. Call 239-594-7227 or visit our Contract Management page.