§ 2-118. Termination of common interest community

(a) Except in the case of a taking of all the units by eminent domain or in the circumstances described in section 2-124 of this title, a common interest community may be terminated only by agreement of unit owners of units to which at least 80 percent of the votes in the association is allocated or any larger percentage the declaration specifies, and with any other approvals required by the declaration. The declaration may specify a smaller percentage only if all the units are restricted exclusively to nonresidential uses.

(b) An agreement to terminate shall be executed or ratified in the same manner as a deed by the requisite number of unit owners. The termination agreement shall specify a date after which the agreement is void unless it is recorded. A termination agreement and all ratifications of it shall be recorded in each town in which a portion of the common interest community is situated.

(c) In the case of a common interest community containing only units having horizontal boundaries described in the declaration, a termination agreement may provide that all the common elements and units of the common interest community shall 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 shall set forth the minimum terms of the sale.

(d) In the case of a common interest community containing any units not having horizontal boundaries described in the declaration, a termination agreement may provide for sale of the common elements, but may not require that the units be sold following termination, unless the declaration as originally recorded provided otherwise or unless all the unit owners consent to the sale.

(e) The association on behalf of the unit owners may contract for the sale of real estate in a common interest community, but the contract is not binding on the unit owners until approved pursuant to subsections (a) and (b) 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 powers necessary and appropriate to effect the sale. Until the sale has been concluded and the proceeds distributed, the association continues in existence with all powers it had before termination. Proceeds of the sale shall be distributed to unit owners and lienholders as their interests appear, in accordance with subsections (h), (i), and (j) of this section. Unless otherwise specified in the termination agreement, while the association holds title to the real estate, each unit owner and the unit owner's successors in interest have an exclusive right to occupy the portion of the real estate that formerly constituted his or her 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 title or the declaration.

(f) If the real estate constituting the common interest community is not to be sold following termination, title to the common elements and, in a common interest community containing only units having horizontal boundaries described in the declaration, title to all the real estate in the common interest community vests in the unit owners upon termination as tenants in common in proportion to their respective interests as provided in subsection (j) of this section 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 occupy the portion of the real estate that formerly constituted his or her unit.

(g) Following termination of the common interest community, the proceeds from the sale of real estate and 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.

(h) Following termination of the common interest community, creditors of the association holding liens on the units which were recorded pursuant to 12 V.S.A. § 2904 before termination may enforce those liens in the same manner as any lienholder. All other creditors of the association shall be treated as if they had perfected liens on the units immediately before termination.

(i) The respective interests of unit owners referred to in subsections (e), (f), (g), and (h) of this section are as follows:

(1) Except as otherwise provided in subdivision (2) of this subsection, the respective interests of unit owners are the fair market values of their units, allocated interests and any limited common elements immediately before the termination as determined by one or more independent appraisers selected by the association. The independent appraisals shall be distributed to the unit owners and become final unless the unit owners to whom 25 percent or more of the votes in the association are allocated disapprove the appraisal. A unit owner's interest is determined by dividing the fair market value of that unit owner's unit and its allocated interests by the total fair market value of all the units and their allocated interests.

(2) If any unit or any limited common element is destroyed to the extent that an appraisal of its fair market value before destruction cannot be made, the interests of all unit owners are:

(A) in a condominium, their respective common element interests immediately before the termination;

(B) in a planned community, their respective common expense liabilities immediately before the termination.

(j) Except as provided in subdivision (i)(1) of this section, foreclosure or enforcement of a lien or encumbrance against the entire common interest community does not terminate the common interest community, and 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, of itself, withdraw that real estate from the common interest community, but the person taking title to it has the right to request from the association an amendment excluding the real estate from the common interest community.

(k) 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 may, upon foreclosure, record an instrument excluding the real estate subject to that lien or encumbrance from the common interest community. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 21, eff. Jan. 1, 2012.)