What's a nonjudicial foreclosure in New York?

When you own a condo and run into problems paying your mortgage, you're protected from a hasty foreclosure by a complicated set of judicial processes. That's not true, however, for those who live in co-ops.

What's the difference? Essentially, it comes down to the fact that condos are real property that are used to secure conventional mortgages. The owner of an apartment in a cooperative, however, doesn't actually own real property. Instead, they own shares in the cooperative itself. What they may call their "mortgage," is actually a loan under the Universal Commercial Code (UCC). The cooperative, which is a type of business entity, actually owns the property. Residents in the co-op are actually tenants.

What does that mean for you? Well, anybody who falls behind in their condo payments knows that they have a lot of time to decide how to handle the issue. It isn't quick or easy to get a foreclosure through the court system in New York. A "best case scenario" (from the point of view of the lender) means that the condo owner can expect to have up to 18 months before the foreclosure is final and they have to vacate the property. Realistically, it's more likely to four or five years before the judicial foreclosure is complete.

Since cooperatives aren't real property, they don't fall under the same rules. The co-op can move forward with a nonjudicial foreclosure under UCC rules, which are much simpler and quicker. You can generally only expect about six months to pass before the foreclosure is final, and you have to be out.

If you're having trouble meeting your financial obligation to your cooperative, find out more about your legal options as soon as you can. You really don't have the time to wait. A real estate attorney can help you determine the best thing to do next.