                                 CODE OF VIRGINIA

TERMINATION OF COOPERATIVE OWNERSHIP (§ 55.1-2128)

A. Except in the case of a taking of all the units by eminent domain, or in the
case of foreclosure of a security interest against the entire cooperative that
has priority over the declaration, cooperative ownership may be terminated only
by agreement of proprietary lessees of cooperative interests to which at least
four-fifths 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 cooperative are restricted
exclusively to nonresidential uses.

B. An agreement to terminate must be evidenced by the execution of a termination
agreement or ratification of such agreement in the same manner as a deed by the
requisite number of proprietary lessees. 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 such ratifications must be recorded in
every county or city in which a portion of the cooperative is situated and is
effective only upon recordation.

C. The association, on behalf of the proprietary lessees, may contract for the
sale of real estate in the cooperative, but the contract is not binding until
approved pursuant to subsections A and B. After such approval, the association
has all powers necessary and appropriate to effect the sale. Until the sale has
been concluded, and the proceeds of such sale are distributed, the association
continues in existence with all powers it had before termination. Except to the
extent that any provisions in the declaration limit the amount that may be
received by a proprietary lessee upon termination, as set forth in subdivision A
12 of &#xA7; 55.1-2116, proceeds of the sale must be distributed to holders of
liens against the association and against the cooperative interests and to
proprietary lessees, all as their interests may appear, in accordance with
subsections D and E. Unless otherwise specified in the termination agreement, as
long as the association holds title to the real estate, each proprietary lessee
and his successors in interest have an exclusive right to occupancy of the
portion of the real estate that formerly constituted his unit. During the period
of such occupancy, each proprietary lessee and his successors in interest remain
liable for all assessments and other obligations imposed on proprietary lessees
by this chapter or the declaration.

D. Following termination of the cooperative, the proceeds of any sale of real
estate, together with the assets of the association, are held by the association
as trustee for proprietary lessees and holders of liens against the association
and the cooperative interests, as their interests may appear. The declaration
may provide that all creditors of the association have priority over any
interests of proprietary lessees and creditors of proprietary lessees. Where the
declaration provides such a priority, following termination, creditors of the
association holding liens on the cooperative that were recorded or docketed
before termination may enforce their liens in the same manner as any lienholder,
and all other creditors of the association are to be treated as if they had
perfected liens against the cooperative immediately before termination. Unless
the declaration provides that all creditors of the association have such
priority:

   1. The lien of each creditor of the association that was perfected against the
   association before termination becomes a lien against each cooperative
   interest upon termination as of the date the lien was perfected;

   2. All other creditors of the association are to be treated as if they had
   perfected liens against the cooperative interests immediately before
   termination;

   3. The amounts of the liens of the association&#8217;s creditors described in
   subdivisions 1 and 2 against each of the cooperative interests must be
   proportionate to the ratio that that cooperative interest&#8217;s common
   expense liability bears to the common expense liability of all the cooperative
   interests;

   4. The lien of each creditor of each proprietary lessee that was perfected
   before termination continues as a lien against that proprietary lessee&#8217;s
   cooperative interest as of the date the lien was perfected; and

   5. The assets of the association shall be distributed to all proprietary
   lessees and all lienholders against their cooperative interests as their
   interests may appear in the order described in subdivisions 1 through 4, and
   creditors of the association are not entitled to payment from any proprietary
   lessee in excess of the amount of the creditor&#8217;s lien against that
   proprietary lessee&#8217;s cooperative interest.

E. The respective interests of proprietary lessees referred to in subsections C
and D are as follows:

   1. Except as provided in subdivision 2, the respective interests of
   proprietary lessees are the fair market values of their cooperative interests
   immediately before the termination, as determined by one or more independent
   appraisers selected by the association. Appraisers selected shall hold a
   designation awarded by a major, nationwide testing or certifying professional
   appraisal society or association. The decision of the independent appraisers
   shall be distributed to the proprietary lessees and becomes final unless
   disapproved within 30 days after distribution by proprietary lessees of
   cooperative interests to which 25 percent of the votes in the association are
   allocated. The proportion of any proprietary lessee&#8217;s interest to that
   of all proprietary lessees is determined by dividing the fair market value of
   that proprietary lessee&#8217;s cooperative interest by the total fair market
   values of all the cooperative interests.

   2. If any unit or any limited common element is destroyed to the extent that
   an appraisal of the fair market value of the unit or limited common element
   before destruction cannot be made, the interests of all proprietary lessees
   are their respective ownership interests in the association immediately before
   the termination.

HISTORY: 1982, c. 277, § 55-454; 1983, c. 96; 2019, c. 712.