Connecticut 2019 Regular Session

Connecticut House Bill HB07129 Compare Versions

Only one version of the bill is available at this time.
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55 General Assembly Raised Bill No. 7129
66 January Session, 2019
77 LCO No. 4033
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1010 Referred to Committee on JUDICIARY
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1313 Introduced by:
1414 (JUD)
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1919 AN ACT CONCERNING TH E FORECLOSURE OF CERTAIN
2020 COMMERCIAL MORTGAGES BY STATUTORY POWER O F SALE.
2121 Be it enacted by the Senate and House of Representatives in General
2222 Assembly convened:
2323
2424 Section 1. (NEW) (Effective January 1, 2020) (a) As used in this section 1
2525 and sections 2 to 9, inclusive, of this act, "statutory power of sale" 2
2626 means a clause in a mortgage deed or incorporated by reference in a 3
2727 mortgage deed granted by a corporation, partnership, including a 4
2828 limited partnership or a limited liability partnership, or limited 5
2929 liability company, that gives the mortgagee the power to foreclose a 6
3030 mortgage by a public sale and auction. If the statutory power of sale is 7
3131 incorporated by reference, the deed shall include notice to the 8
3232 mortgagor of such statutory power of sale. 9
3333 (b) The statutory power of sale shall not be used to foreclose: (1) A 10
3434 mortgage granted by a religious corporation organized under the 11
3535 provisions of section 33-264a of the general statutes, (2) a consumer 12
3636 mortgage, or (3) any mortgage that secures a principal indebtedness of 13
3737 less than fifty thousand dollars. If a mortgage deed contains a 14
3838 statement, at the time the mortgage deed is given, that the mortgagor 15 Raised Bill No. 7129
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4444 is not a religious corporation organized under the provisions of section 16
4545 33-264a of the general statutes, then such statement shall conclusively 17
4646 establish the facts contained in such deed. For the purposes of this 18
4747 subsection, (A) "consumer mortgage" means a mortgage that secures 19
4848 owner-occupied real estate and where the proceeds of the loan secured 20
4949 by the mortgage are primarily for personal, family or household 21
5050 purposes, and (B) "commercial mortgage" means a mortgage that 22
5151 secures real estate that is not owner-occupied and where the proceeds 23
5252 of the loan secured by the mortgage are not for personal, family or 24
5353 household purposes. A written statement by any party to the 25
5454 commercial mortgage indicating that such transaction is commercial 26
5555 for the purposes of this section shall be conclusive evidence of such 27
5656 status. If a mortgagor, or if the mortgagor is not a natural person, the 28
5757 principal of the mortgagor, is occupying the mortgaged property in 29
5858 violation of any mortgage covenant, it shall not affect the mortgage's 30
5959 status as a commercial mortgage. 31
6060 (c) The statutory power of sale in a mortgage deed may provide for 32
6161 the power to foreclose a mortgage nonjudicially in accordance with the 33
6262 provisions of this section and sections 2 to 9, inclusive, of this act. 34
6363 Upon any default in the performance or the observance of the 35
6464 conditions on or the requirements of the mortgage deed, promissory 36
6565 note or other written agreement made between the mortgagor and 37
6666 mortgagee with respect to the mortgage being foreclosed, including, 38
6767 but not limited to, any obligations to repay the debt that is secured by 39
6868 the mortgage deed, and the expiration of a cure or redemption period, 40
6969 if applicable, the mortgagee or the mortgagee's executors, 41
7070 administrators, successors or assigns, acting by and through a duly 42
7171 authorized attorney in his or her capacity as a commissioner of the 43
7272 Superior Court admitted to practice in the state, may sell, by way of a 44
7373 public sale, the mortgaged premises, or, in the event of any partial 45
7474 release of such mortgage deed, the portion of the mortgaged premises 46
7575 that remains subject to the mortgage deed, either as a whole or in 47
7676 parcels, together with any improvements to the mortgaged premises. 48
7777 Such public sale shall take place in front and within sight of the 49 Raised Bill No. 7129
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8383 mortgaged premises. The mortgagee's attorney may convey the 50
8484 mortgaged premises by proper deed or deeds to the purchaser or 51
8585 purchasers in fee simple, as applicable, pursuant to section 4 of this act. 52
8686 (d) Nothing in this section or sections 2 to 9, inclusive, of this act 53
8787 shall prevent a mortgagee from foreclosing a mortgage deed by strict 54
8888 foreclosure or foreclosure by sale through an action brought in 55
8989 Superior Court or as otherwise provided by law. 56
9090 (e) Foreclosure by a statutory power of sale of a mortgage junior in 57
9191 priority to another mortgage or other encumbrance shall not be a bar 58
9292 to foreclosure of any mortgage senior to the foreclosing mortgage by 59
9393 statutory power of sale or as otherwise provided by law. 60
9494 Sec. 2. (NEW) (Effective January 1, 2020) (a) A notice of intention to 61
9595 foreclose pursuant to a statutory power of sale under subsection (c) of 62
9696 section 1 of this act shall be: (1) In writing and contain the provisions 63
9797 required under subsection (b) of this section; (2) sent by the 64
9898 commissioner of the Superior Court conducting the foreclosure and 65
9999 mailed by certified mail, return receipt requested, and include a 66
100100 certification of service in the same form as required of a commissioner 67
101101 of the Superior Court when sending pleadings under the rules of 68
102102 practice; and (3) recorded in the land records of the town or towns in 69
103103 which the real property subject to foreclosure by a statutory power of 70
104104 sale is located. 71
105105 (b) A notice of intention to foreclose pursuant to a statutory power 72
106106 of sale shall state: (1) The address and legal description of the property 73
107107 encumbered by the mortgage deed to be foreclosed by a statutory 74
108108 power of sale; (2) the default or defaults that have occurred; (3) the 75
109109 action required to cure the default or defaults, or if redemption will 76
110110 only be available; (4) a date for the sale of the property, not less than 77
111111 ninety days from the date of the notice of intention to foreclose; (5) a 78
112112 copy of a full appraisal of the property by a Connecticut licensed 79
113113 appraiser; (6) a list of junior encumbrances to the foreclosing mortgage, 80
114114 and their priority as determined by the commissioner of the Superior 81 Raised Bill No. 7129
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120120 Court conducting the sale; (7) a list of senior encumbrances to the 82
121121 foreclosing mortgage; and (8) a demand for an affidavit of debt from 83
122122 the junior encumbrancers, as of the date of the sale, to enable the 84
123123 commissioner of the Superior Court to make distributions of surplus, if 85
124124 any. 86
125125 (c) Notice of the intention to foreclose pursuant to a statutory power 87
126126 of sale shall be served on: 88
127127 (1) The mortgagor or a representative in interest of the mortgagor as 89
128128 designated in writing pursuant to the mortgage deed. Such notice shall 90
129129 be sent in accordance with the procedure set forth in section 4 of this 91
130130 act. 92
131131 (2) Any tenant of the property if the mortgagee knows or should 93
132132 know by exercise of due diligence that the property is occupied as a 94
133133 rental unit. Upon request from a mortgagee, the mortgagor or the 95
134134 mortgagor's representative in interest shall provide the name, address 96
135135 and other contact information for any tenant. Notice to a tenant shall 97
136136 be served on the tenant by (A) marshal, (B) first class mail sent to the 98
137137 tenant's last-known address, or (C) posting it conspicuously at each 99
138138 entrance to the mortgaged premises. 100
139139 (3) All other parties in interest, including all junior and senior 101
140140 encumbrancers. The notice shall be sent by certified mail, return 102
141141 receipt requested to the address, if any, listed in the instrument 103
142142 evidencing the interest, and, if none is listed, to the registered agent for 104
143143 the party in interest or to any other address that may be readily 105
144144 available to the mortgagee. 106
145145 (4) Failure to notify any party in interest, other than the mortgagor, 107
146146 does not invalidate the foreclosure as to other parties in interest to 108
147147 whom notice was given. 109
148148 Sec. 3. (NEW) (Effective January 1, 2020) At any time up to the time of 110
149149 the sale under a foreclosure pursuant to a statutory power of sale, the 111
150150 mortgagor may redeem the real property from the mortgage deed 112 Raised Bill No. 7129
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156156 being foreclosed pursuant to a statutory power of sale by paying the 113
157157 entire indebtedness and any other sums due under the mortgage deed 114
158158 and all costs reasonably incurred in connection with the proceeding to 115
159159 foreclose, including reasonable attorney's fees of the mortgagee 116
160160 pursuant to an itemized affidavit of debt provided by the mortgagee 117
161161 upon request. If the mortgagee provides a cure after default, the 118
162162 mortgagor may cure any default in the performance of the conditions 119
163163 or requirements of a mortgage deed, avoid the operation of any 120
164164 acceleration clause in the mortgage deed, prevent the foreclosure 121
165165 pursuant to a statutory power of sale or other disposition of the 122
166166 mortgaged premises and reinstate the mortgage deed by tendering the 123
167167 payment or performance due under the mortgage deed by: (1) Paying 124
168168 all sums that would have been due at the time of payment in the 125
169169 absence of any acceleration clause; (2) performing any other obligation 126
170170 the mortgagor would have been bound to perform in the absence of 127
171171 any acceleration clause; and (3) paying the costs of the proceeding to 128
172172 foreclose that are reasonably incurred by the mortgagee, including, but 129
173173 not limited to, reasonable attorney's fees of the mortgagee. 130
174174 Sec. 4. (NEW) (Effective January 1, 2020) (a) The mortgagee, after the 131
175175 mortgagor's default and upon compliance with the provisions of 132
176176 sections 1 to 9, inclusive, of this act, may sell all or any part of the 133
177177 mortgaged premises that is subject to the mortgage deed. A sale under 134
178178 a foreclosure pursuant to a statutory power of sale shall convey title to 135
179179 the property subject to all other parties in interest who have superior 136
180180 priority to the foreclosing mortgagee. The sale may be by public 137
181181 auction, as a whole or in parcels, at any time after ninety days from the 138
182182 date of sending notice of intention to foreclose, including, but not 139
183183 limited to, sale on credit. The sale shall be conducted by a 140
184184 commissioner of the Superior Court admitted to practice in the state of 141
185185 Connecticut who is in good standing with the state-wide grievance 142
186186 committee, and who maintains and operates an interest earned on 143
187187 lawyers' clients fund account under section 51-81c of the general 144
188188 statutes. The commissioner of the Superior Court shall be selected by 145
189189 the mortgagee. Every aspect of the sale, including the method, 146 Raised Bill No. 7129
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195195 advertising, time, place, deposit and terms of sale, such as buyer's 147
196196 mortgage contingency, shall be commercially reasonable, provided 148
197197 there shall be a rebuttable presumption that a sale that complies with 149
198198 the requirements of subsection (c) of this section is commercially 150
199199 reasonable. 151
200200 (b) At the time of acceptance of a bid at a public sale under this 152
201201 section, the successful bidder, other than the foreclosing mortgagee, 153
202202 shall pay the required deposit to the commissioner of the Superior 154
203203 Court conducting the sale and execute and deliver to such 155
204204 commissioner a contract to purchase the real property, which may be a 156
205205 bond for deed. If the highest bidder fails to perform on the purchase 157
206206 and sale agreement, the commissioner of the Superior Court 158
207207 conducting the sale may execute a purchase and sale agreement with 159
208208 the next highest bidder not later than thirty days after the sale and the 160
209209 deposit of the highest bidder may be retained or recovered as 161
210210 liquidated damages. If the foreclosing mortgagee is the highest bidder 162
211211 or becomes the highest bidder by failure of another bidder to perform 163
212212 a purchase and sale agreement, a purchase and sale agreement need 164
213213 not be executed for the foreclosing mortgagee. Any sums retained or 165
214214 recovered by the foreclosing mortgagee under this subsection shall be 166
215215 applied to the payment of the debt secured by the mortgage deed in 167
216216 the same manner as the proceeds of a completed sale. 168
217217 (c) There shall be a rebuttable presumption that a sale under this 169
218218 section is commercially reasonable if: (1) The commissioner of the 170
219219 Superior Court chosen to conduct the sale complies with all applicable 171
220220 requirements for notice and sale as provided in sections 1 to 7, 172
221221 inclusive, of this act; (2) notice of the sale, including the address of the 173
222222 real property to be sold, the date, place and time of the sale, the 174
223223 amount of the deposit required at the sale and the name and telephone 175
224224 number of the commissioner of the Superior Court conducting the sale, 176
225225 is posted at the location of the real property not less than sixty days 177
226226 before the date of the sale; and (3) the sale is advertised in a newspaper 178
227227 of general circulation in the town or towns where the real property is 179
228228 located, at least once each week for three successive weeks before the 180 Raised Bill No. 7129
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234234 sale, in substantially the form customarily used for notices of judicial 181
235235 sale of real property, and includes the address of the real property to 182
236236 be sold, the date, place and time of the sale, the amount of the deposit 183
237237 required at the sale and the name and telephone number of the 184
238238 commissioner of the Superior Court conducting the sale. The 185
239239 commissioner of the Superior Court, after serving a notice of intention 186
240240 to foreclose by a statutory power of sale under section 2 of this act, is 187
241241 authorized to enter upon the real property for the purpose of posting 188
242242 the notice of sale required under this subsection. 189
243243 (d) The commissioner of the Superior Court shall convey title by a 190
244244 Mortgagee Statutory Power of Sale Deed, or other applicable method 191
245245 as provided in the applicable contract for sale and as provided in 192
246246 section 7 of this act. 193
247247 (e) Before the recording of the deed conveyed pursuant to 194
248248 subsection (d) of this section, the commissioner of the Superior Court 195
249249 appointed to sell the real property in accordance with this section shall 196
250250 cause to be recorded on the land records of the town in which the real 197
251251 property subject to foreclosure by a statutory power of sale is located a 198
252252 certificate of foreclosure of mortgage pursuant to a statutory power of 199
253253 sale containing: (1) The name of the foreclosing mortgagee by whom 200
254254 such commissioner was appointed, the names of the original 201
255255 mortgagor and mortgagee as stated in the mortgage deed being 202
256256 foreclosed pursuant to the statutory power of sale, the volume and 203
257257 page of the land records where such mortgage deed is recorded and, if 204
258258 applicable, the parties and recording information of any modification 205
259259 or assignment of such mortgage deed to the foreclosing mortgagee; 206
260260 and (2) a statement that such commissioner has complied with all 207
261261 applicable requirements for the sale of the real property. 208
262262 Sec. 5. (NEW) (Effective January 1, 2020) (a) A mortgagor, or any 209
263263 other person entitled to notice of intention to foreclose pursuant to a 210
264264 statutory power of sale under subsection (c) of section 2 of this act, 211
265265 may apply to the Superior Court for a protective order seeking to stay, 212
266266 enjoin or condition the terms of the sale. Such applicant shall pay to 213 Raised Bill No. 7129
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272272 the clerk of the Superior Court a fee for the entry of a civil action as set 214
273273 forth in section 52-259 of the general statutes. An application made 215
274274 under this subsection shall be scheduled for a hearing by the Superior 216
275275 Court. The Superior Court shall order reasonable notice of the date and 217
276276 time of the hearing to be given to all interested persons not less than 218
277277 twelve days before the date of the hearing. Service of process specific 219
278278 to an application pursuant to this section shall be by certified mail, 220
279279 return receipt requested, accompanied by a certification of service by 221
280280 the attorney or pro se party effectuating such service, in such form as is 222
281281 required by the rules of practice. After such hearing, the Superior 223
282282 Court may order that a sale of real property under a foreclosure 224
283283 pursuant to a statutory power of sale, or the disposition of the 225
284284 proceeds from such sale, shall continue as planned, with or without a 226
285285 revised sale date, or be restrained or carried out in accordance with 227
286286 such terms and conditions as the Superior Court may determine if it is 228
287287 established that: (1) The underlying obligation that is secured by the 229
288288 mortgage deed to be foreclosed pursuant to a statutory power of sale is 230
289289 invalid; (2) the mortgagor is not in default or has cured the default; (3) 231
290290 the order of priorities of junior encumbrances requires adjustment; (4) 232
291291 the fair market value of the mortgaged property as established by the 233
292292 mortgagee's appraisal is incorrect, invalid or in need of adjustment; or 234
293293 (5) the mortgagee or other person exercising a statutory power of sale 235
294294 under section 4 of this act has not complied with the provisions of 236
295295 sections 1 to 7, inclusive, of this act, or that there exists in law any other 237
296296 claim or defense that can be made in a foreclosure action. 238
297297 (b) A mortgagee may apply to the Superior Court for an order in aid 239
298298 of the mortgagee's rights under sections 1 to 9, inclusive, of this act, or 240
299299 its mortgage, promissory note or other contract with the mortgagor, 241
300300 including, but not limited to, an order allowing the mortgagee and 242
301301 other interested persons reasonable access to the real property subject 243
302302 to foreclosure pursuant to a statutory power of sale for purposes of 244
303303 rehabilitation, preparation for sale, repair, maintenance, inspection, 245
304304 posting of notice or conducting the sale. 246
305305 (c) An application before the Superior Court shall be made not later 247 Raised Bill No. 7129
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311311 than thirty days prior to the sale date, and in the event the court does 248
312312 not resolve the case within twenty-one days prior to the sale date, the 249
313313 sale date shall be reset by the court to a date not later than thirty days 250
314314 from the date of the order. The sale shall be considered final and all 251
315315 disputes shall be resolved prior to the sale. The Superior Court shall 252
316316 order the applicant to pay the reasonable costs and attorney's fees of 253
317317 the other parties to the claim in the event the applicant's claims are 254
318318 ruled against or are otherwise unsuccessful. 255
319319 (d) The judges of the Supreme Court, Appellate Court and Superior 256
320320 Court shall adopt and may, from time to time, modify or repeal rules 257
321321 and forms regulating pleading, practice and procedure in judicial 258
322322 proceedings administered by the courts for the purpose of simplifying 259
323323 proceedings applied for in the Superior Court pursuant to this section, 260
324324 and promoting the speedy and efficient determination of such 261
325325 proceedings. Such rules shall: (1) Provide for an accelerated 262
326326 adjudication process; (2) address hearing procedures, discovery and 263
327327 motions; and (3) require that a decision on a dispositive motion or 264
328328 hearing be rendered not later than ten days after the date on which 265
329329 such motion was heard or hearing held. Such rules shall not abridge, 266
330330 enlarge or modify the jurisdiction of any court. Such rules shall 267
331331 become effective on such date as the judges specify, but not in any 268
332332 event until sixty days after the promulgation of such rules. 269
333333 Sec. 6. (NEW) (Effective January 1, 2020) (a) The proceeds from a sale 270
334334 of real property under a foreclosure pursuant to a statutory power of 271
335335 sale under sections 1 to 9, inclusive, of this act, shall be held by the 272
336336 commissioner of the Superior Court conducting the sale as a trustee for 273
337337 the benefit of the foreclosing mortgagee and all persons who may 274
338338 claim an interest in such proceeds. Such proceeds shall be distributed 275
339339 by such commissioner in the following order: 276
340340 (1) The reasonable expenses of sale; 277
341341 (2) The reasonable expenses of securing possession before sale and 278
342342 holding, maintaining and preparing the real property for sale, 279 Raised Bill No. 7129
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348348 including, but not limited to, premiums on hazard and liability 280
349349 insurance, and, to the extent provided for in the mortgage deed and 281
350350 not prohibited by law, reasonable attorney's fees and other legal 282
351351 expenses incurred by the mortgagee; 283
352352 (3) Satisfaction of the indebtedness secured by the mortgage deed 284
353353 being foreclosed pursuant to a statutory power of sale; 285
354354 (4) Satisfaction in the order of priority of any subordinate interest of 286
355355 record entitled to notice under subdivision (3) of subsection (c) of 287
356356 section 2 of this act; and 288
357357 (5) Remittance of any excess to the mortgagor. 289
358358 Sec. 7. (NEW) (Effective January 1, 2020) The commissioner of the 290
359359 Superior Court conducting a sale of real property under sections 1 to 9, 291
360360 inclusive, of this act shall execute a deed to the purchaser of such real 292
361361 property that is sufficient to convey title and that: (1) Identifies the 293
362362 mortgage deed foreclosed by the statutory power of sale and the 294
363363 parties to the mortgage deed; (2) indicates the volume and page of the 295
364364 land records where such mortgage deed is recorded; and (3) recites 296
365365 that the deed is executed by the commissioner of the Superior Court 297
366366 conducting the sale after a default and sale under sections 1 to 9, 298
367367 inclusive, of this act and pursuant to the commissioner's authority to 299
368368 conduct the sale. In the event the mortgagee is the successful bidder 300
369369 for the property at the sale, title to the property shall automatically 301
370370 vest in the mortgagee as of the date of such sale, and the evidence of 302
371371 title shall only be by certificate of foreclosure filed by the commissioner 303
372372 of the Superior Court conducting the sale. The signature and title or 304
373373 authority of such commissioner signing the deed as grantor, together 305
374374 with the certificate required by subsection (e) of section 4 of this act, 306
375375 are sufficient proof of the facts recited in the deed and of the signer's 307
376376 authority to sign the deed. 308
377377 Sec. 8. (NEW) (Effective January 1, 2020) In the event the value of the 309
378378 property, as determined by the appraisal, if title to the property vests 310
379379 in the mortgagee, or if the proceeds of the sale are not enough to pay 311 Raised Bill No. 7129
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385385 off the debt of the mortgage, then the mortgagee may apply to the 312
386386 Superior Court for a deficiency judgment. The mortgagee may use the 313
387387 original appraisal in its application if the application date occurred not 314
388388 later than one hundred twenty days after the date of issuance of the 315
389389 appraisal. If the application occurs more than one hundred twenty 316
390390 days after the date of issuance of the appraisal, then the mortgagee 317
391391 shall obtain a new appraisal. The costs of the second appraisal may be 318
392392 added to the debt and deficiency judgment. 319
393393 Sec. 9. (NEW) (Effective January 1, 2020) Immediate possession of 320
394394 property obtained by a sale under a foreclosure pursuant to a statutory 321
395395 power of sale under sections 1 to 8, inclusive, of this act shall be 322
396396 enforceable by ejectment pursuant to section 49-22 of the general 323
397397 statutes. 324
398398 This act shall take effect as follows and shall amend the following
399399 sections:
400400
401401 Section 1 January 1, 2020 New section
402402 Sec. 2 January 1, 2020 New section
403403 Sec. 3 January 1, 2020 New section
404404 Sec. 4 January 1, 2020 New section
405405 Sec. 5 January 1, 2020 New section
406406 Sec. 6 January 1, 2020 New section
407407 Sec. 7 January 1, 2020 New section
408408 Sec. 8 January 1, 2020 New section
409409 Sec. 9 January 1, 2020 New section
410410
411411 Statement of Purpose:
412412 To authorize the foreclosure of certain commercial mortgages by
413413 statutory power of sale.
414414 [Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline,
415415 except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is
416416 not underlined.]
417417