Article 9 of the Uniform Commercial Code provides that a secured party whose collateral consists of a residential cooperative interest used by the debtor and whose security interest in such collateral secures an obligation incurred in connection with financing or refinancing of the acquisition of such cooperative interest (i.e., a lender holding a mortgage on a cooperative apartment) may, upon proper notice as required by statute, sell the shares of stock (the collateral) at public auction without having to bring a foreclosure action or obtain a court order for such sale. This is known as a “non-judicial sale.” Recent case law may impact upon the rights of the successful bidder (or its assignee) at a non-judicial sale of shares and proprietary lease appurtenant to a cooperative apartment to recover possession of the apartment.
Frequently, the lender is the successful bidder at the non-judicial sale. It may then assign its bid to entities such as Federal National Mortgage Association or Federal Home Loan Mortgage Association. The next step would be to obtain legal possession of the apartment, which may still be occupied by the shareholder or a sub-tenant. The successful bidder or its assignee would typically commence a summary proceeding in landlord/tenant court seeking to recover possession of the cooperative apartment.
