Lost Can Cost
How Much is That Fee?
I recently had a closing where the seller, who had owned her co-op for many years and had no mortgage, could not find the stock certificate and proprietary lease associated with her apartment. In today’s a la carte world, when that happens, it can get expensive. In the old days, if someone could not find the stock certificate or proprietary lease, the managing agent charged a reasonable fee (let’ say $300.00), to prepare a “lost stock and lease affidavit”. That was in a universe a long time ago and far, far away.
Managing Agents are Addicted to Fees
In this case, the managing agent charged $1,000.00 to prepare the one page affidavit. No additional searches were run to insure that there were no liens attached to the shares. There was just a whopper of a fee. As it turns out, sometimes the managing agent charges the same fee if someone loses either the stock or the lease and sometimes a double fee if both documents can’t be located. Several managing agents insist that the seller obtain leasehold title insurance (known as an “Eagle 9” policy), in addition to the fee for the lost stock and lease affidavit. Depending upon the purchase price for the apartment, that can add several thousands of dollars to the seller’s closing costs.
Why the Concern?
There is always the very unlikely but possible scenario, when a seller claims that the stock and lease are lost, that the seller ‘s shares are encumbered by a lien and the stock and lease are being held by a third party as collateral. If the managing agent issued a new stock certificate to the buyer, the lien holder would try to assert a claim against the new owner of the shares on the theory that the shares were transferred subject to the lien. If you didn’t follow the last sentence, let me boil it down to one word: litigation. So managing agents should be cautious when someone claims that he or she can’t find the documents necessary for closing. But charging $1,000?
Lenders are Losers
Banks often lose the stock and lease. When that happens, the seller usually advances the fee for preparation of the affidavit and is reimbursed by the bank that lost the documents. Let me translate. After the closing, the seller or the seller’s attorney (that would be me), will hound the dysfunctional back office of the lending institution in question until the fee is finally reimbursed. Think of it as trying to find your way out of a corn maze in Iowa, which is where the banks keep the collateral documents these days.
Residential Reality: Be Cautious with Your Co-op Ownership Documents
At the closing, when your attorney drones on about keeping the stock and lease in a safe place, you actually should. That’s what a safe deposit box is for. Getting dinged at closing for another pointless fee is never fun, no matter how large the sale. So hold on to your ownership docs. You can do it, I know you can.