Bill Morris in COVID-19 on February 18, 2021
Two days after Christmas, then-President Donald Trump reluctantly signed a stimulus bill that delighted residents of housing cooperatives nationwide. After a vigorous lobbying push by New York advocates, including U.S. Sen. Chuck Schumer, the bill made residential co-ops eligible for $284 billion worth of forgivable loans under the Paycheck Protection Program. It was a major breakthrough.
Now, with the Small Business Administration (SBA) loan program nearing its March 31 application deadline, some co-op boards are balking because the application form sets out strict conditions – and stiff penalties, including fines and prison time, for applicants who fail to meet those conditions.
“I have a number of co-op clients who qualify for the loan but won’t submit the application,” says Dan Wollman, chief executive officer at the management company Gumley Haft. “Board presidents are saying they won’t sign on behalf of all shareholders. Some of our clients have gone ahead and applied, but if I was a co-op president, I wouldn’t sign it.”
Wollman’s wariness stems from four questions on the application form – and the penalties for failing to answer them accurately. The form states that any applicant who answers yes to any of the questions will be disqualified from receiving a loan. With apologies to students of English grammar, here are the questions, verbatim, as they appear on the application form:
The form also requires applicants to agree to the following: “I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law...by imprisonment of not more than five years and/or a fine of up to $250,000.”
Wollman speculates that the reference in the third question to “any individual owning 20% or more of the equity” refers to a sponsor of a co-op. There is confusion if the other three questions are directed only at sponsors or at all shareholders in the corporation.
“We don’t know if they are or aren’t,” Wollman says. “I think this is a lost opportunity for people who rightly qualify. It’s a shame.”
Jay Hack, a partner at the law firm Gallet Dreyer & Berkey, agrees that there is confusion if the 20% of ownership rule applies only to the question about criminal history, or to all questions on the application. Nevertheless, he urges his co-op clients with legitimate needs to apply for the forgivable loans – while taking precautions. “I can understand an officer of the corporation being unwilling to sign the application form,” he says. “The managing agent should sign the application with board approval, because the agent maintains the financial records.” Hack advises his clients to apply for the loans for a simple reason: “It’s free money.”
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