(1) Except in the
case of a taking of all the units by eminent domain, or in the case of foreclosure
against an entire cooperative of a security interest that has priority over the
declaration, a common interest community may be terminated only by agreement of
unit owners of units to which at least sixty-seven percent of the votes in the
association are allocated or any larger percentage the declaration specifies. The
declaration may specify a smaller percentage only if all of the units in the common
interest community are restricted exclusively to nonresidential uses.
(1.5) No planned community that is required to exist pursuant to a
development or site plan shall be terminated by agreement of unit owners, unless a
copy of the termination agreement is sent by certified mail or hand delivered to the
governing body of every municipality in which a portion of the planned community is
situated or, if the planned community is situated in an unincorporated area, to the
board of county commissioners for every county in which a portion of the planned
community is situated.
(2) An agreement of unit owners to terminate must be evidenced by their
execution of a termination agreement or ratifications thereof in the same manner as
a deed, by the requisite number of unit owners. The termination agreement must
specify a date after which the agreement will be void unless it is recorded before
that date. A termination agreement and all ratifications thereof must be recorded in
every county in which a portion of the common interest community is situated and is
effective only upon recordation.
(3) In the case of a condominium or planned community containing only units
having horizontal boundaries described in the declaration, a termination agreement
may provide that all of the common elements and units of the common interest
community must be sold following termination. If, pursuant to the agreement, any
real estate in the common interest community is to be sold following termination,
the termination agreement must set forth the minimum terms of the sale.
(4) In the case of a condominium or planned community containing any units
not having horizontal boundaries described in the declaration, a termination
agreement may provide for sale of the common elements, but it may not require
that the units be sold following termination, unless the declaration as originally
recorded provided otherwise or all the unit owners consent to the sale.
(5) Subject to the provisions of a termination agreement described in
subsections (3) and (4) of this section, the association, on behalf of the unit owners,
may contract for the sale of real estate in a common interest community following
termination, but the contract is not binding on the unit owners until approved
pursuant to subsections (1) and (2) of this section. If any real estate is to be sold
following termination, title to that real estate, upon termination, vests in the
association as trustee for the holders of all interests in the units. Thereafter, the
association has all the powers necessary and appropriate to effect the sale. Until
the sale has been concluded and the proceeds thereof distributed, the association
continues in existence with all the powers it had before termination. Proceeds of
the sale must be distributed to unit owners and lienholders as their interests may
appear, in accordance with subsections (8), (9), and (10) of this section, taking into
account the value of property owned or distributed that is not sold so as to preserve
the proportionate interests of each unit owner with respect to all property
cumulatively. Unless otherwise specified in the termination agreement, as long as
the association holds title to the real estate, each unit owner and the unit owner's
successors in interest have an exclusive right to occupancy of the portion of the
real estate that formerly constituted the unit. During the period of that occupancy,
each unit owner and the unit owner's successors in interest remain liable for all
assessments and other obligations imposed on unit owners by this article or the
declaration.
(6) (a) In a planned community, if all or a portion of the common elements are
not to be sold following termination, title to the common elements not sold vests in
the unit owners upon termination as tenants in common in fractional interests that
maintain, after taking into account the fair market value of property owned and the
proceeds of property sold, their respective interests as provided in subsection (10)
of this section with respect to all property appraised under said subsection (10), and
liens on the units shift accordingly.
(b) In a common interest community, containing units having horizontal
boundaries described in the declaration, title to the units not to be sold following
termination vests in the unit owners upon termination as tenants in common in
fractional interests that maintain, after taking into account the fair market value of
property owned and the proceeds of property sold, their respective interests as
provided in subsection (10) of this section with respect to all property appraised
under said subsection (10), and liens on the units shift accordingly. While the
tenancy in common exists, each unit owner and the unit owner's successors in
interest have an exclusive right to occupancy of the portion of the real estate that
formerly constituted such unit.
(7) Following termination of the common interest community, the proceeds
of any sale of real estate, together with the assets of the association, are held by
the association as trustee for unit owners and holders of liens on the units as their
interests may appear.
(8) Upon termination of a condominium or planned community, creditors of
the association who obtain a lien and duly record it in every county in which any
portion of the common interest community is located are to be treated as if they
had perfected liens on the units immediately before termination or when the lien is
obtained and recorded, whichever is later.
(9) In a cooperative, the declaration may provide that all creditors of the
association have priority over any interests of unit owners and creditors of unit
owners. In that event, upon termination, creditors of the association who obtain a
lien and duly record it in every county in which any portion of the cooperative is
located are to be treated as if they had perfected liens against the cooperative
immediately before termination or when the lien is obtained and recorded,
whichever is later. Unless the declaration provides that all creditors of the
association have that priority:
(a) The lien of each creditor of the association which was perfected against
the association before termination becomes, upon termination, a lien against each
unit owner's interest in the unit as of the date the lien was perfected;
(b) Any other creditor of the association who obtains a lien and duly records
it in every county in which any portion of the cooperative is located is to be treated
upon termination as if the creditor had perfected a lien against each unit owner's
interest immediately before termination or when the lien is obtained and recorded,
whichever is later;
(c) The amount of the lien of an association's creditor described in
paragraphs (a) and (b) of this subsection (9) against each unit owner's interest must
be proportionate to the ratio which each unit's common expense liability bears to
the common expense liability of all of the units;
(d) The lien of each creditor of each unit owner which was perfected before
termination continues as a lien against that unit owner's unit as of the date the lien
was perfected; and
(e) The assets of the association must be distributed to all unit owners and
all lienholders as their interests may appear in the order described above. Creditors
of the association are not entitled to payment from any unit owner in excess of the
amount of the creditor's lien against that unit owner's interest.
(10) The respective interests of unit owners referred to in subsections (5) to
(9) of this section are as follows:
(a) Except as provided in paragraph (b) of this subsection (10), the respective
interests of unit owners are the combined fair market values of their units,
allocated interests, any limited common elements, and, in the case of a planned
community, any tenant in common interest, immediately before the termination, as
determined by one or more independent appraisers selected by the association. The
decision of the independent appraisers shall be distributed to the unit owners and
becomes final unless disapproved within thirty days after distribution by unit
owners of units to which twenty-five percent of the votes in the association are
allocated. The proportion of any unit owner's interest to that of all unit owners is
determined by dividing the fair market value of that unit owner's unit and its
allocated interests by the total fair market values of all the units and their allocated
interests.
(b) If any unit or any limited common element is destroyed to the extent that
an appraisal of the fair market value thereof prior to destruction cannot be made,
the interests of all unit owners are:
(I) In a condominium, their respective common element interests immediately
before the termination;
(II) In a cooperative, their respective ownership interests immediately before
the termination; and
(III) In a planned community, their respective common expense liabilities
immediately before the termination.
(11) In a condominium or planned community, except as provided in
subsection (12) of this section, foreclosure or enforcement of a lien or encumbrance
against the entire common interest community does not terminate, of itself, the
common interest community. Foreclosure or enforcement of a lien or encumbrance
against a portion of the common interest community other than withdrawable real
estate does not withdraw that portion from the common interest community.
Foreclosure or enforcement of a lien or encumbrance against withdrawable real
estate does not withdraw, of itself, that real estate from the common interest
community, but the person taking title thereto may require from the association,
upon request, an amendment to the declaration excluding the real estate from the
common interest community prepared, executed, and recorded by the association.
(12) In a condominium or planned community, if a lien or encumbrance
against a portion of the real estate comprising the common interest community has
priority over the declaration and the lien or encumbrance has not been partially
released, the parties foreclosing the lien or encumbrance, upon foreclosure, may
record an instrument excluding the real estate subject to that lien or encumbrance
from the common interest community. The board of directors shall reallocate
interests as if the foreclosed section were taken by eminent domain by an
amendment to the declaration prepared, executed, and recorded by the association.