Are Coops and Condos Eligible for the PPP Loan?

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Are co-ops and condos eligible for the PPP loan? We’ll demystify this topic in the following video. My name is Chris at Hauseit. Hauseit is the largest assisted For Sale By Owner and buyer agent Commission rebate company in New York City, established 2014.

When the cares Act was signed by President Trump on March 27th 2020, we were hopeful that the condo and co-op corporations in the city would be able to take advantage of the PPP loan program to ensure that all donning management staff continued to get paid. Many management companies even went ahead and started filling out these loan applications and asking for board signatures. However, after a long week of consultations with banks and attorneys, we've been advised that co-operatives and condominiums do not qualify for the PPP loan.

Where does it say that co-ops and condos don't qualify? The SBA changed the application the night before the process opened and the following amended language was added to the program which we believe precludes co-operative and condominium corporations from applying for the PPP loan program. "Businesses that are primarily engaged in owning or purchasing real estate and leasing it for any purpose are not eligible, apartment buildings and mobile home parks are not eligible residential facilities that do not provide health care and/or Medicare services are not eligible, several prominent legal firms in NYC and several banks have officially stated that co-ops and condos are not eligible for the program." Some banks now said that they will not even process PPP loan program applications from condos and co-ops due to in eligibility for the amended qualifications of the program. Therefore, unless the law is amended or the SBA changes its terms for eligibility condos and co-op boards should not expect their buildings to qualify for the PPP loan program.

Can condos and co-ops so try and apply? Anyway, yes. Though we strongly advise against doing so until there's more clarity from the SBA or congress. They sell the interim final rules and the new app form the SBA release on April 2nd 2020 there is a conflict between what the SBA says and what the cares Act says. For example, the SBA states in the interim final rule is that in order to be eligible for a PPP loan the applicant must be a "small business concern as defined in Section 3 of the small business Act 15 USC 632 and subject SBA's affiliation rules enter 13 CCFR 121.301F unless specifically waived an act". Meanwhile, that cares act itself states that in addition to small business concerns any business concern shall be eligible. If you dig deeper, the SBA discusses an eligible borrower and the SBA standard operating procedure 50 10 sub-part B, chapter 2, on page 105, the SBA states that apartment buildings and mobile home parks are not eligible.

Is the SBA going too far against the intent of the Kerr's Act? Several prominent law firms have said that co-op and condo boards who are comfortable executing the application and related certification can do so if they wish after consulting of course with individual counsel and abilities accountant. Their argument is that the new SBA rules go too far and contradict the cares Act which expressly seeks to extend eligibility beyond traditional SBA eligibility requirements and the absence of further clarification from congress or the SBA we should respect the SBA's rule making authority.

What are the consequences of applying anyway? Board members will have to sign the loan application and the new loan application requires a signer to certify that the applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the Small Business Administration SBA implementing the paycheck protection program under division A title one of the coronavirus aid, relief and Economic Security Act or the cares Act and the paycheck protection program rule. As a result, any board member who signs the application could be subjected to criminal penalties for false certification of a federal loan application and will not be protected under typical directors and officers liability insurance policy.

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