A condominium is a building or a complex in which units of property are owned by individuals. In a condominium, common parts of the property are owned jointly by the unit owners. A condominium is terminated by: acquisition, voluntary agreement, sale, destruction, or merger and consolidation. The rules regarding termination and destruction of condominiums are provided in the Uniform Common Interest Ownership Act (Act).
Eminent domain can acquire a unit or part of a unit of a condominium. When a unit owner is left with a remainder after acquisition, the remainder need not practically or lawfully be used for any other purpose. The remainder is a common element and is automatically reallocated to the remaining units in proportion to the respective allocated interests of those units before acquisition. In the absence of such an allocation, the concerned association of the condominium must promptly prepare, execute, and record an amendment to the declaration reflecting reallocations on such acquisition. An acquisition must award compensation to a unit owner for that unit and its allocated interests. On acquisition by eminent domain:
- the award must compensate each unit owner for the reduction in value of the unit and its interest in the common elements[i].
- when a part of a common element is acquired by eminent domain, the portion of award attributable to the common element taken must be paid to the association[ii].
- any portion of the award attributable to the acquisition of a limited common element must be equally divided among the owners of the units to which that limited common element was allocated at the time of acquisition[iii].
- a court decree must be recorded in every county in which any portion of the common interest community is located[iv].
According to the Act, a voluntary termination can be effected by an agreement between unit owners. Such an agreement must be followed by a declaration by the unit owners. For voluntary termination, at least eighty percent of the votes in the association must be received. A termination agreement may provide that all the common parts and units of the condominium shall be sold following termination. In case of sale of real property, the termination agreement must set forth the minimum terms of the sale. The execution or ratification by a requisite number of unit owners evidences an agreement of termination. Ratification is to be made in the same way a deed is ratified. A termination agreement must specify a date after which the agreement will be void unless it is recorded before that date. The agreement shall contain a description of the manner in which the creditors of an association are paid. Both the termination agreement and ratification are made effective by their recording in each county where a portion of the common interest is situated[v].
Sale by the association is yet another method by which a condominium may be terminated. An association, on behalf of its unit owners, can contract for the sale of real property in a condominium. When a condominium contains only units of horizontal boundaries, a termination agreement must provide that all the common parts and units of the common interest community are in termination[vi]. However, a termination agreement for a condominium other than horizontal need not require the sale of units following termination but must provide for sale of common units. A contract entered into by an association on behalf of the unit owners for the sale of real estate in a common interest community is not binding on the unit owners unless it is approved. The title to real property, upon termination, vests with the association as trustee for the holders of all interests in the units. Thereafter, an association holds all 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 powers it had before termination. Proceeds of the sale must be distributed to unit owners.
A condominium may also be terminated when there is partial or total destruction of property. In such cases, a condominium may be sold and the property can be partitioned. Conditions for partition sale are:
- The condominium must be damaged or destroyed at least three years before the filing of the action to partition by sale.
- Damage must be such as rendering the property unfit for its prior use.
- The condominium should not be have been rebuilt or repaired to its earlier state prior to the damage or destruction.
- Three-fourths or more of the project is destroyed or substantially damaged.
- More than fifty percent unit owners oppose the repair or restoration of the condominium.
According to the Act, any two or more common interest communities of the same form of ownership can be merged or consolidated into a single common interest community by an agreement of the unit owners. The resulting common interest community in case of merger is the legal successor for all purposes. All of the pre-existing common interest communities, and the operations and activities of all associations of the pre-existing common interest communities are merged or consolidated into a single association. The new association holds all powers, rights, obligations, assets, and liabilities of all pre-existing associations[vii]. An agreement of two or more common interest communities to merge or consolidate must be evidenced by an agreement. An agreement to merge must be prepared, executed, recorded, and certified by the president of the association of each of the pre-existing common interest communities. Additionally, the agreement must be approved by the owners of units[viii]. The reallocation of the allocated interests in the new association among the units of the resulting common interest community must be in the merger or consolidation agreement[ix].
[i] Uniform Common Interest Ownership Act § 1-107(a)
[ii] Uniform Common Interest Ownership Act § 1-107(b)
[iii] Uniform Common Interest Ownership Act § 1-107(c)
[iv] Uniform Common Interest Ownership Act § 1-107(d)
[v] Uniform Common Interest Ownership Act § 2-118(b)
[vi] Uniform Common Interest Ownership Act § 2-118(c)
[vii] Uniform Common Interest Ownership Act § 2-121(a)
[viii] Uniform Common Interest Ownership Act § 2-121(a)
[ix] Uniform Common Interest Ownership Act § 2-121(a), (b)