April 2, 2020

Paycheck Protection Program Eligibility


We have received a number of inquiries whether residential cooperative corporations and condominium associations are eligible for SBA loans under the Paycheck Protection Program (PPP) included in the CARES Act.
The PPP provides cash-flow assistance through 100% federally guaranteed loans to applicants who maintain their payroll during this emergency. Applicants may borrow up to an amount equal to 250% of their average monthly payroll cost (up to $10 million), however, payroll costs are capped at $100,000 on an annualized basis for each employee. The loans would be forgiven for qualifying expenses (including payroll, health care costs, interest on mortgage payments, rent obligations and utility payments) if payroll is maintained at current levels. For any amount not forgiven, loan payments may be deferred up to six months, and the loan would have a maturity of 2 years at an interest rate of 0.5%. An applicant does not have to demonstrate any credit worthiness or provide any guaranties or collateral to obtain this loan.


It appears that residential cooperatives and condominium associations generally will be eligible for PPP loans. Among other restrictions, the program is limited to “business concerns,” which the SBA regulations define as a business entity organized for profit. Most residential cooperative corporations and condominium associations are organized or elect to be treated as business corporations for tax purposes and have the potential for profit. While the SBA has not yet taken a position whether residential cooperatives and condominium associations are eligible for the program, they appear to qualify for the PPP as a for-profit entity.

A primary requirement is also the size of the business, with a small business threshold of no more than 500 employees. An applicant would start with the participating lender’s short form application – a sample application is available HERE.

The application contains a series of certifications that must be made in good faith. The only certification that may be an issue is the one that requires the applicant to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” That is a question that each applicant needs to consider for itself. We believe that the current economic uncertainty gives rise to legitimate concerns as to whether residents will continue to pay maintenance or common charges, whether operating costs may increase and whether the budget continues to reflect the new economic realities, which would enable most cooperatives and condominium associations to be able to make the certification.

Cooperative/Condominium Approvals:

In the event you intend to apply for the PPP, the by-laws of your cooperative or condominium would need to be reviewed to determine any restrictions on the board’s authority to proceed with a PPP loan. A board vote approving submission of the application would certainly be required. Additionally, shareholder or unit owner approval may be required under the terms of your entity’s by-laws, which would require notice and some form of meeting or collection of votes/consents. A review of any borrowing restrictions in any existing loan obligations should also be performed. We are able to assist with the review of the governing documents, existing loan documents, the publication of notice and the collection of the necessary approvals.

We recommend that our cooperative and condominium clients consider their need for a PPP loan and, if a board determines that such a need exists, they should proceed with the preparation and submission of a PPP loan application.

During this difficult time please know that we are always available to assist you. Above all, stay healthy and treasure this time with your loved ones.


Jeffrey M. Schwartz – jschwartz@ssrga.com, 914-450-6280
Steven D. Sladkus – ssladkus@ssrga.com, 212-721-8900
Jeffrey S. Reich – jreich@ssrga.com, 917-864-0121