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I've seen multiple claims that if a co-op building lets the proprietary lease expire, then shares in the corporation become worthless (even if the corporation owns the building and land outright, without a mortgage). For example:

when the proprietary lease expires, the co-op corporation will cease to exist, and the shares in the corporation (i.e. the mortgage collateral) will have zero value

Why does the corporation not have value even if the shareholders cannot occupy the building? How can you just dissolve a corporation that owns a significant asset like a New York apartment building without first liquidating the asset to pay off creditors and shareholders? Who owns a building after the proprietary lease expires and what am I missing about co-op structures?

I know it's highly unlikely that a co-op would allow its proprietary lease to expire, since the lessor and lessee are literally the same people, but this question is not about the likelihood of that happening. I want to understand the consequences of a proprietary lease expiring as a proxy for my understanding what co-op shares truly represent.

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    My proprietary lease includes a paragraph requiring the tenant/shareholder to surrender the stock certificate on the expiration of the lease. So if the lease is not extended before the expiration date, the building will be owned by a corporation with no shareholders. I suppose it would be possible to relet the apartments under a new proprietary lease and to issue new shares to the same tenants, but surely that would be far more complicated than extending the existing lease.
    – phoog
    Nov 21, 2023 at 22:40
  • So the officers would remain in charge of the corporation but would no longer be answerable to shareholders? Or does the equity of a corporation revert to the government when there are no shareholders? Nov 21, 2023 at 22:44
  • Well the corporation is in the hands of the board of directors; the officers answer to the board (in practice the officers are nearly always members of the board but the bylaws of my co-op at least do not require it). But the directors are of course chosen by the shareholders so I guess with no shareholders they wouldn't be answerable to anyone but a judge.
    – phoog
    Nov 21, 2023 at 23:05

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