55-454 - Termination of cooperative ownership.
§ 55-454. Termination of cooperative ownership.
A. Except in the case of a taking of all the units by eminent domain or inthe case of foreclosure of a security interest against the entire cooperativewhich has priority over the declaration, cooperative ownership may beterminated only by agreement of proprietary lessees of cooperative intereststo which at least four-fifths of the votes in the association are allocatedor any larger percentage the declaration specifies. The declaration mayspecify a smaller percentage only if all of the units in the cooperative arerestricted exclusively to nonresidential uses.
B. An agreement to terminate must be evidenced by the execution of atermination agreement or ratification thereof in the same manner as a deed bythe requisite number of proprietary lessees. The termination agreement mustspecify a date after which the agreement will be void unless it is recordedbefore that date. A termination agreement and all ratifications thereof mustbe recorded in every city or county in which a portion of the cooperative issituated and is effective only upon recordation.
C. The association, on behalf of the proprietary lessees, may contract forthe sale of real estate in the cooperative, but the contract is not bindinguntil approved pursuant to subsections A and B. Thereafter, the associationhas all powers necessary and appropriate to effect the sale. Until the salehas been concluded and the proceeds thereof distributed, the associationcontinues in existence with all powers it had before termination. Except tothe extent that any provisions in the declaration limit the amount that maybe received by a proprietary lessee upon termination, as set forth insubdivision A 12 of § 55-442, proceeds of the sale must be distributed toholders of liens against the association and, against the cooperativeinterests and to proprietary lessees, all as their interests may appear, inaccordance with subsections D and E. Unless otherwise specified in thetermination agreement, as long as the association holds title to the realestate, each proprietary lessee and his successors in interest have anexclusive right to occupancy of the portion of the real estate that formerlyconstituted his unit. During the period of that occupancy, each proprietarylessee and his successors in interest remain liable for all assessments andother obligations imposed on proprietary lessees by this chapter or thedeclaration.
D. Following termination of the cooperative, the proceeds of any sale of realestate, together with the assets of the association, are held by theassociation as trustee for proprietary lessees and holders of liens againstthe association and the cooperative interests, as their interests may appear.The declaration may provide that all creditors of the association havepriority over any interests of proprietary lessees and creditors ofproprietary lessees. In that event, following termination, creditors of theassociation holding liens on the cooperative which were recorded or docketedbefore termination may enforce their liens in the same manner as anylienholder, and all other creditors of the association are to be treated asif they had perfected liens against the cooperative immediately beforetermination. Unless the declaration provides that all creditors of theassociation have such priority:
1. The lien of each creditor of the association, which was perfected againstthe association before termination, becomes a lien against each cooperativeinterest upon termination as of the date the lien was perfected;
2. All other creditors of the association are to be treated as if they hadperfected liens against the cooperative interests immediately beforetermination;
3. The amounts of the liens of the association's creditors described inparagraphs 1 and 2 above against each of the cooperative interests must beproportionate to the ratio which that cooperative interest's common expenseliability bears to the common expense liability of all the cooperativeinterests;
4. The lien of each creditor of each proprietary lessee which was perfectedbefore termination continues as a lien against that proprietary lessee'scooperative interest as of the date the lien was perfected; and
5. The assets of the association shall be distributed to all proprietarylessees and all lienholders against their cooperative interests as theirinterests may appear in the order described above, and creditors of theassociation are not entitled to payment from any proprietary lessee in excessof the amount of the creditor's lien against that proprietary lessee'scooperative interest.
E. The respective interests of proprietary lessees referred to in subsectionsC and D are as follows:
1. Except as provided in paragraph 2, the respective interests of proprietarylessees are the fair market values of their cooperative interests immediatelybefore the termination, as determined by one or more independent appraisersselected by the association. Appraisers selected shall hold a designationawarded by a major, nation-wide testing or certifying professional appraisalsociety or association. The decision of the independent appraisers shall bedistributed to the proprietary lessees and becomes final unless disapprovedwithin thirty days after distribution by proprietary lessees of cooperativeinterests to which twenty-five percent of the votes in the association areallocated. The proportion of any proprietary lessee's interest to that of allproprietary lessees is determined by dividing the fair market value of thatproprietary lessee's cooperative interest by the total fair market values ofall the cooperative interests.
2. If any unit or any limited common element is destroyed to the extent thatan appraisal of the fair market value thereof before destruction cannot bemade, the interests of all proprietary lessees are their respective ownershipinterests in the association immediately before the termination.
(1982, c. 277; 1983, c. 96.)