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General Assembly Raised Bill No. 7129
January Session, 2019
LCO No. 4033
Referred to Committee on JUDICIARY
Introduced by:
(JUD)
AN ACT CONCERNING TH E FORECLOSURE OF CERTAIN
COMMERCIAL MORTGAGES BY STATUTORY POWER O F SALE.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective January 1, 2020) (a) As used in this section 1
and sections 2 to 9, inclusive, of this act, "statutory power of sale" 2
means a clause in a mortgage deed or incorporated by reference in a 3
mortgage deed granted by a corporation, partnership, including a 4
limited partnership or a limited liability partnership, or limited 5
liability company, that gives the mortgagee the power to foreclose a 6
mortgage by a public sale and auction. If the statutory power of sale is 7
incorporated by reference, the deed shall include notice to the 8
mortgagor of such statutory power of sale. 9
(b) The statutory power of sale shall not be used to foreclose: (1) A 10
mortgage granted by a religious corporation organized under the 11
provisions of section 33-264a of the general statutes, (2) a consumer 12
mortgage, or (3) any mortgage that secures a principal indebtedness of 13
less than fifty thousand dollars. If a mortgage deed contains a 14
statement, at the time the mortgage deed is given, that the mortgagor 15 Raised Bill No. 7129
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is not a religious corporation organized under the provisions of section 16
33-264a of the general statutes, then such statement shall conclusively 17
establish the facts contained in such deed. For the purposes of this 18
subsection, (A) "consumer mortgage" means a mortgage that secures 19
owner-occupied real estate and where the proceeds of the loan secured 20
by the mortgage are primarily for personal, family or household 21
purposes, and (B) "commercial mortgage" means a mortgage that 22
secures real estate that is not owner-occupied and where the proceeds 23
of the loan secured by the mortgage are not for personal, family or 24
household purposes. A written statement by any party to the 25
commercial mortgage indicating that such transaction is commercial 26
for the purposes of this section shall be conclusive evidence of such 27
status. If a mortgagor, or if the mortgagor is not a natural person, the 28
principal of the mortgagor, is occupying the mortgaged property in 29
violation of any mortgage covenant, it shall not affect the mortgage's 30
status as a commercial mortgage. 31
(c) The statutory power of sale in a mortgage deed may provide for 32
the power to foreclose a mortgage nonjudicially in accordance with the 33
provisions of this section and sections 2 to 9, inclusive, of this act. 34
Upon any default in the performance or the observance of the 35
conditions on or the requirements of the mortgage deed, promissory 36
note or other written agreement made between the mortgagor and 37
mortgagee with respect to the mortgage being foreclosed, including, 38
but not limited to, any obligations to repay the debt that is secured by 39
the mortgage deed, and the expiration of a cure or redemption period, 40
if applicable, the mortgagee or the mortgagee's executors, 41
administrators, successors or assigns, acting by and through a duly 42
authorized attorney in his or her capacity as a commissioner of the 43
Superior Court admitted to practice in the state, may sell, by way of a 44
public sale, the mortgaged premises, or, in the event of any partial 45
release of such mortgage deed, the portion of the mortgaged premises 46
that remains subject to the mortgage deed, either as a whole or in 47
parcels, together with any improvements to the mortgaged premises. 48
Such public sale shall take place in front and within sight of the 49 Raised Bill No. 7129
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mortgaged premises. The mortgagee's attorney may convey the 50
mortgaged premises by proper deed or deeds to the purchaser or 51
purchasers in fee simple, as applicable, pursuant to section 4 of this act. 52
(d) Nothing in this section or sections 2 to 9, inclusive, of this act 53
shall prevent a mortgagee from foreclosing a mortgage deed by strict 54
foreclosure or foreclosure by sale through an action brought in 55
Superior Court or as otherwise provided by law. 56
(e) Foreclosure by a statutory power of sale of a mortgage junior in 57
priority to another mortgage or other encumbrance shall not be a bar 58
to foreclosure of any mortgage senior to the foreclosing mortgage by 59
statutory power of sale or as otherwise provided by law. 60
Sec. 2. (NEW) (Effective January 1, 2020) (a) A notice of intention to 61
foreclose pursuant to a statutory power of sale under subsection (c) of 62
section 1 of this act shall be: (1) In writing and contain the provisions 63
required under subsection (b) of this section; (2) sent by the 64
commissioner of the Superior Court conducting the foreclosure and 65
mailed by certified mail, return receipt requested, and include a 66
certification of service in the same form as required of a commissioner 67
of the Superior Court when sending pleadings under the rules of 68
practice; and (3) recorded in the land records of the town or towns in 69
which the real property subject to foreclosure by a statutory power of 70
sale is located. 71
(b) A notice of intention to foreclose pursuant to a statutory power 72
of sale shall state: (1) The address and legal description of the property 73
encumbered by the mortgage deed to be foreclosed by a statutory 74
power of sale; (2) the default or defaults that have occurred; (3) the 75
action required to cure the default or defaults, or if redemption will 76
only be available; (4) a date for the sale of the property, not less than 77
ninety days from the date of the notice of intention to foreclose; (5) a 78
copy of a full appraisal of the property by a Connecticut licensed 79
appraiser; (6) a list of junior encumbrances to the foreclosing mortgage, 80
and their priority as determined by the commissioner of the Superior 81 Raised Bill No. 7129
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Court conducting the sale; (7) a list of senior encumbrances to the 82
foreclosing mortgage; and (8) a demand for an affidavit of debt from 83
the junior encumbrancers, as of the date of the sale, to enable the 84
commissioner of the Superior Court to make distributions of surplus, if 85
any. 86
(c) Notice of the intention to foreclose pursuant to a statutory power 87
of sale shall be served on: 88
(1) The mortgagor or a representative in interest of the mortgagor as 89
designated in writing pursuant to the mortgage deed. Such notice shall 90
be sent in accordance with the procedure set forth in section 4 of this 91
act. 92
(2) Any tenant of the property if the mortgagee knows or should 93
know by exercise of due diligence that the property is occupied as a 94
rental unit. Upon request from a mortgagee, the mortgagor or the 95
mortgagor's representative in interest shall provide the name, address 96
and other contact information for any tenant. Notice to a tenant shall 97
be served on the tenant by (A) marshal, (B) first class mail sent to the 98
tenant's last-known address, or (C) posting it conspicuously at each 99
entrance to the mortgaged premises. 100
(3) All other parties in interest, including all junior and senior 101
encumbrancers. The notice shall be sent by certified mail, return 102
receipt requested to the address, if any, listed in the instrument 103
evidencing the interest, and, if none is listed, to the registered agent for 104
the party in interest or to any other address that may be readily 105
available to the mortgagee. 106
(4) Failure to notify any party in interest, other than the mortgagor, 107
does not invalidate the foreclosure as to other parties in interest to 108
whom notice was given. 109
Sec. 3. (NEW) (Effective January 1, 2020) At any time up to the time of 110
the sale under a foreclosure pursuant to a statutory power of sale, the 111
mortgagor may redeem the real property from the mortgage deed 112 Raised Bill No. 7129
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being foreclosed pursuant to a statutory power of sale by paying the 113
entire indebtedness and any other sums due under the mortgage deed 114
and all costs reasonably incurred in connection with the proceeding to 115
foreclose, including reasonable attorney's fees of the mortgagee 116
pursuant to an itemized affidavit of debt provided by the mortgagee 117
upon request. If the mortgagee provides a cure after default, the 118
mortgagor may cure any default in the performance of the conditions 119
or requirements of a mortgage deed, avoid the operation of any 120
acceleration clause in the mortgage deed, prevent the foreclosure 121
pursuant to a statutory power of sale or other disposition of the 122
mortgaged premises and reinstate the mortgage deed by tendering the 123
payment or performance due under the mortgage deed by: (1) Paying 124
all sums that would have been due at the time of payment in the 125
absence of any acceleration clause; (2) performing any other obligation 126
the mortgagor would have been bound to perform in the absence of 127
any acceleration clause; and (3) paying the costs of the proceeding to 128
foreclose that are reasonably incurred by the mortgagee, including, but 129
not limited to, reasonable attorney's fees of the mortgagee. 130
Sec. 4. (NEW) (Effective January 1, 2020) (a) The mortgagee, after the 131
mortgagor's default and upon compliance with the provisions of 132
sections 1 to 9, inclusive, of this act, may sell all or any part of the 133
mortgaged premises that is subject to the mortgage deed. A sale under 134
a foreclosure pursuant to a statutory power of sale shall convey title to 135
the property subject to all other parties in interest who have superior 136
priority to the foreclosing mortgagee. The sale may be by public 137
auction, as a whole or in parcels, at any time after ninety days from the 138
date of sending notice of intention to foreclose, including, but not 139
limited to, sale on credit. The sale shall be conducted by a 140
commissioner of the Superior Court admitted to practice in the state of 141
Connecticut who is in good standing with the state-wide grievance 142
committee, and who maintains and operates an interest earned on 143
lawyers' clients fund account under section 51-81c of the general 144
statutes. The commissioner of the Superior Court shall be selected by 145
the mortgagee. Every aspect of the sale, including the method, 146 Raised Bill No. 7129
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advertising, time, place, deposit and terms of sale, such as buyer's 147
mortgage contingency, shall be commercially reasonable, provided 148
there shall be a rebuttable presumption that a sale that complies with 149
the requirements of subsection (c) of this section is commercially 150
reasonable. 151
(b) At the time of acceptance of a bid at a public sale under this 152
section, the successful bidder, other than the foreclosing mortgagee, 153
shall pay the required deposit to the commissioner of the Superior 154
Court conducting the sale and execute and deliver to such 155
commissioner a contract to purchase the real property, which may be a 156
bond for deed. If the highest bidder fails to perform on the purchase 157
and sale agreement, the commissioner of the Superior Court 158
conducting the sale may execute a purchase and sale agreement with 159
the next highest bidder not later than thirty days after the sale and the 160
deposit of the highest bidder may be retained or recovered as 161
liquidated damages. If the foreclosing mortgagee is the highest bidder 162
or becomes the highest bidder by failure of another bidder to perform 163
a purchase and sale agreement, a purchase and sale agreement need 164
not be executed for the foreclosing mortgagee. Any sums retained or 165
recovered by the foreclosing mortgagee under this subsection shall be 166
applied to the payment of the debt secured by the mortgage deed in 167
the same manner as the proceeds of a completed sale. 168
(c) There shall be a rebuttable presumption that a sale under this 169
section is commercially reasonable if: (1) The commissioner of the 170
Superior Court chosen to conduct the sale complies with all applicable 171
requirements for notice and sale as provided in sections 1 to 7, 172
inclusive, of this act; (2) notice of the sale, including the address of the 173
real property to be sold, the date, place and time of the sale, the 174
amount of the deposit required at the sale and the name and telephone 175
number of the commissioner of the Superior Court conducting the sale, 176
is posted at the location of the real property not less than sixty days 177
before the date of the sale; and (3) the sale is advertised in a newspaper 178
of general circulation in the town or towns where the real property is 179
located, at least once each week for three successive weeks before the 180 Raised Bill No. 7129
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sale, in substantially the form customarily used for notices of judicial 181
sale of real property, and includes the address of the real property to 182
be sold, the date, place and time of the sale, the amount of the deposit 183
required at the sale and the name and telephone number of the 184
commissioner of the Superior Court conducting the sale. The 185
commissioner of the Superior Court, after serving a notice of intention 186
to foreclose by a statutory power of sale under section 2 of this act, is 187
authorized to enter upon the real property for the purpose of posting 188
the notice of sale required under this subsection. 189
(d) The commissioner of the Superior Court shall convey title by a 190
Mortgagee Statutory Power of Sale Deed, or other applicable method 191
as provided in the applicable contract for sale and as provided in 192
section 7 of this act. 193
(e) Before the recording of the deed conveyed pursuant to 194
subsection (d) of this section, the commissioner of the Superior Court 195
appointed to sell the real property in accordance with this section shall 196
cause to be recorded on the land records of the town in which the real 197
property subject to foreclosure by a statutory power of sale is located a 198
certificate of foreclosure of mortgage pursuant to a statutory power of 199
sale containing: (1) The name of the foreclosing mortgagee by whom 200
such commissioner was appointed, the names of the original 201
mortgagor and mortgagee as stated in the mortgage deed being 202
foreclosed pursuant to the statutory power of sale, the volume and 203
page of the land records where such mortgage deed is recorded and, if 204
applicable, the parties and recording information of any modification 205
or assignment of such mortgage deed to the foreclosing mortgagee; 206
and (2) a statement that such commissioner has complied with all 207
applicable requirements for the sale of the real property. 208
Sec. 5. (NEW) (Effective January 1, 2020) (a) A mortgagor, or any 209
other person entitled to notice of intention to foreclose pursuant to a 210
statutory power of sale under subsection (c) of section 2 of this act, 211
may apply to the Superior Court for a protective order seeking to stay, 212
enjoin or condition the terms of the sale. Such applicant shall pay to 213 Raised Bill No. 7129
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the clerk of the Superior Court a fee for the entry of a civil action as set 214
forth in section 52-259 of the general statutes. An application made 215
under this subsection shall be scheduled for a hearing by the Superior 216
Court. The Superior Court shall order reasonable notice of the date and 217
time of the hearing to be given to all interested persons not less than 218
twelve days before the date of the hearing. Service of process specific 219
to an application pursuant to this section shall be by certified mail, 220
return receipt requested, accompanied by a certification of service by 221
the attorney or pro se party effectuating such service, in such form as is 222
required by the rules of practice. After such hearing, the Superior 223
Court may order that a sale of real property under a foreclosure 224
pursuant to a statutory power of sale, or the disposition of the 225
proceeds from such sale, shall continue as planned, with or without a 226
revised sale date, or be restrained or carried out in accordance with 227
such terms and conditions as the Superior Court may determine if it is 228
established that: (1) The underlying obligation that is secured by the 229
mortgage deed to be foreclosed pursuant to a statutory power of sale is 230
invalid; (2) the mortgagor is not in default or has cured the default; (3) 231
the order of priorities of junior encumbrances requires adjustment; (4) 232
the fair market value of the mortgaged property as established by the 233
mortgagee's appraisal is incorrect, invalid or in need of adjustment; or 234
(5) the mortgagee or other person exercising a statutory power of sale 235
under section 4 of this act has not complied with the provisions of 236
sections 1 to 7, inclusive, of this act, or that there exists in law any other 237
claim or defense that can be made in a foreclosure action. 238
(b) A mortgagee may apply to the Superior Court for an order in aid 239
of the mortgagee's rights under sections 1 to 9, inclusive, of this act, or 240
its mortgage, promissory note or other contract with the mortgagor, 241
including, but not limited to, an order allowing the mortgagee and 242
other interested persons reasonable access to the real property subject 243
to foreclosure pursuant to a statutory power of sale for purposes of 244
rehabilitation, preparation for sale, repair, maintenance, inspection, 245
posting of notice or conducting the sale. 246
(c) An application before the Superior Court shall be made not later 247 Raised Bill No. 7129
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than thirty days prior to the sale date, and in the event the court does 248
not resolve the case within twenty-one days prior to the sale date, the 249
sale date shall be reset by the court to a date not later than thirty days 250
from the date of the order. The sale shall be considered final and all 251
disputes shall be resolved prior to the sale. The Superior Court shall 252
order the applicant to pay the reasonable costs and attorney's fees of 253
the other parties to the claim in the event the applicant's claims are 254
ruled against or are otherwise unsuccessful. 255
(d) The judges of the Supreme Court, Appellate Court and Superior 256
Court shall adopt and may, from time to time, modify or repeal rules 257
and forms regulating pleading, practice and procedure in judicial 258
proceedings administered by the courts for the purpose of simplifying 259
proceedings applied for in the Superior Court pursuant to this section, 260
and promoting the speedy and efficient determination of such 261
proceedings. Such rules shall: (1) Provide for an accelerated 262
adjudication process; (2) address hearing procedures, discovery and 263
motions; and (3) require that a decision on a dispositive motion or 264
hearing be rendered not later than ten days after the date on which 265
such motion was heard or hearing held. Such rules shall not abridge, 266
enlarge or modify the jurisdiction of any court. Such rules shall 267
become effective on such date as the judges specify, but not in any 268
event until sixty days after the promulgation of such rules. 269
Sec. 6. (NEW) (Effective January 1, 2020) (a) The proceeds from a sale 270
of real property under a foreclosure pursuant to a statutory power of 271
sale under sections 1 to 9, inclusive, of this act, shall be held by the 272
commissioner of the Superior Court conducting the sale as a trustee for 273
the benefit of the foreclosing mortgagee and all persons who may 274
claim an interest in such proceeds. Such proceeds shall be distributed 275
by such commissioner in the following order: 276
(1) The reasonable expenses of sale; 277
(2) The reasonable expenses of securing possession before sale and 278
holding, maintaining and preparing the real property for sale, 279 Raised Bill No. 7129
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including, but not limited to, premiums on hazard and liability 280
insurance, and, to the extent provided for in the mortgage deed and 281
not prohibited by law, reasonable attorney's fees and other legal 282
expenses incurred by the mortgagee; 283
(3) Satisfaction of the indebtedness secured by the mortgage deed 284
being foreclosed pursuant to a statutory power of sale; 285
(4) Satisfaction in the order of priority of any subordinate interest of 286
record entitled to notice under subdivision (3) of subsection (c) of 287
section 2 of this act; and 288
(5) Remittance of any excess to the mortgagor. 289
Sec. 7. (NEW) (Effective January 1, 2020) The commissioner of the 290
Superior Court conducting a sale of real property under sections 1 to 9, 291
inclusive, of this act shall execute a deed to the purchaser of such real 292
property that is sufficient to convey title and that: (1) Identifies the 293
mortgage deed foreclosed by the statutory power of sale and the 294
parties to the mortgage deed; (2) indicates the volume and page of the 295
land records where such mortgage deed is recorded; and (3) recites 296
that the deed is executed by the commissioner of the Superior Court 297
conducting the sale after a default and sale under sections 1 to 9, 298
inclusive, of this act and pursuant to the commissioner's authority to 299
conduct the sale. In the event the mortgagee is the successful bidder 300
for the property at the sale, title to the property shall automatically 301
vest in the mortgagee as of the date of such sale, and the evidence of 302
title shall only be by certificate of foreclosure filed by the commissioner 303
of the Superior Court conducting the sale. The signature and title or 304
authority of such commissioner signing the deed as grantor, together 305
with the certificate required by subsection (e) of section 4 of this act, 306
are sufficient proof of the facts recited in the deed and of the signer's 307
authority to sign the deed. 308
Sec. 8. (NEW) (Effective January 1, 2020) In the event the value of the 309
property, as determined by the appraisal, if title to the property vests 310
in the mortgagee, or if the proceeds of the sale are not enough to pay 311 Raised Bill No. 7129
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off the debt of the mortgage, then the mortgagee may apply to the 312
Superior Court for a deficiency judgment. The mortgagee may use the 313
original appraisal in its application if the application date occurred not 314
later than one hundred twenty days after the date of issuance of the 315
appraisal. If the application occurs more than one hundred twenty 316
days after the date of issuance of the appraisal, then the mortgagee 317
shall obtain a new appraisal. The costs of the second appraisal may be 318
added to the debt and deficiency judgment. 319
Sec. 9. (NEW) (Effective January 1, 2020) Immediate possession of 320
property obtained by a sale under a foreclosure pursuant to a statutory 321
power of sale under sections 1 to 8, inclusive, of this act shall be 322
enforceable by ejectment pursuant to section 49-22 of the general 323
statutes. 324
This act shall take effect as follows and shall amend the following
sections:
Section 1 January 1, 2020 New section
Sec. 2 January 1, 2020 New section
Sec. 3 January 1, 2020 New section
Sec. 4 January 1, 2020 New section
Sec. 5 January 1, 2020 New section
Sec. 6 January 1, 2020 New section
Sec. 7 January 1, 2020 New section
Sec. 8 January 1, 2020 New section
Sec. 9 January 1, 2020 New section
Statement of Purpose:
To authorize the foreclosure of certain commercial mortgages by
statutory power of sale.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline,
except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is
not underlined.]