Connecticut 2019 Regular Session

Connecticut House Bill HB07129 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2
3	3	LCO No. 4033 1 of 11
4	4
5	5	General Assembly Raised Bill No. 7129
6	6	January Session, 2019
7	7	LCO No. 4033
8	8
9	9
10	10	Referred to Committee on JUDICIARY
11	11
12	12
13	13	Introduced by:
14	14	(JUD)
15	15
16	16
17	17
18	18
19	19	AN ACT CONCERNING TH E FORECLOSURE OF CERTAIN
20	20	COMMERCIAL MORTGAGES BY STATUTORY POWER O F SALE.
21	21	Be it enacted by the Senate and House of Representatives in General
22	22	Assembly convened:
23	23
24	24	Section 1. (NEW) (Effective January 1, 2020) (a) As used in this section 1
25	25	and sections 2 to 9, inclusive, of this act, "statutory power of sale" 2
26	26	means a clause in a mortgage deed or incorporated by reference in a 3
27	27	mortgage deed granted by a corporation, partnership, including a 4
28	28	limited partnership or a limited liability partnership, or limited 5
29	29	liability company, that gives the mortgagee the power to foreclose a 6
30	30	mortgage by a public sale and auction. If the statutory power of sale is 7
31	31	incorporated by reference, the deed shall include notice to the 8
32	32	mortgagor of such statutory power of sale. 9
33	33	(b) The statutory power of sale shall not be used to foreclose: (1) A 10
34	34	mortgage granted by a religious corporation organized under the 11
35	35	provisions of section 33-264a of the general statutes, (2) a consumer 12
36	36	mortgage, or (3) any mortgage that secures a principal indebtedness of 13
37	37	less than fifty thousand dollars. If a mortgage deed contains a 14
38	38	statement, at the time the mortgage deed is given, that the mortgagor 15 Raised Bill No. 7129
39	39
40	40
41	41
42	42	LCO No. 4033 2 of 11
43	43
44	44	is not a religious corporation organized under the provisions of section 16
45	45	33-264a of the general statutes, then such statement shall conclusively 17
46	46	establish the facts contained in such deed. For the purposes of this 18
47	47	subsection, (A) "consumer mortgage" means a mortgage that secures 19
48	48	owner-occupied real estate and where the proceeds of the loan secured 20
49	49	by the mortgage are primarily for personal, family or household 21
50	50	purposes, and (B) "commercial mortgage" means a mortgage that 22
51	51	secures real estate that is not owner-occupied and where the proceeds 23
52	52	of the loan secured by the mortgage are not for personal, family or 24
53	53	household purposes. A written statement by any party to the 25
54	54	commercial mortgage indicating that such transaction is commercial 26
55	55	for the purposes of this section shall be conclusive evidence of such 27
56	56	status. If a mortgagor, or if the mortgagor is not a natural person, the 28
57	57	principal of the mortgagor, is occupying the mortgaged property in 29
58	58	violation of any mortgage covenant, it shall not affect the mortgage's 30
59	59	status as a commercial mortgage. 31
60	60	(c) The statutory power of sale in a mortgage deed may provide for 32
61	61	the power to foreclose a mortgage nonjudicially in accordance with the 33
62	62	provisions of this section and sections 2 to 9, inclusive, of this act. 34
63	63	Upon any default in the performance or the observance of the 35
64	64	conditions on or the requirements of the mortgage deed, promissory 36
65	65	note or other written agreement made between the mortgagor and 37
66	66	mortgagee with respect to the mortgage being foreclosed, including, 38
67	67	but not limited to, any obligations to repay the debt that is secured by 39
68	68	the mortgage deed, and the expiration of a cure or redemption period, 40
69	69	if applicable, the mortgagee or the mortgagee's executors, 41
70	70	administrators, successors or assigns, acting by and through a duly 42
71	71	authorized attorney in his or her capacity as a commissioner of the 43
72	72	Superior Court admitted to practice in the state, may sell, by way of a 44
73	73	public sale, the mortgaged premises, or, in the event of any partial 45
74	74	release of such mortgage deed, the portion of the mortgaged premises 46
75	75	that remains subject to the mortgage deed, either as a whole or in 47
76	76	parcels, together with any improvements to the mortgaged premises. 48
77	77	Such public sale shall take place in front and within sight of the 49 Raised Bill No. 7129
78	78
79	79
80	80
81	81	LCO No. 4033 3 of 11
82	82
83	83	mortgaged premises. The mortgagee's attorney may convey the 50
84	84	mortgaged premises by proper deed or deeds to the purchaser or 51
85	85	purchasers in fee simple, as applicable, pursuant to section 4 of this act. 52
86	86	(d) Nothing in this section or sections 2 to 9, inclusive, of this act 53
87	87	shall prevent a mortgagee from foreclosing a mortgage deed by strict 54
88	88	foreclosure or foreclosure by sale through an action brought in 55
89	89	Superior Court or as otherwise provided by law. 56
90	90	(e) Foreclosure by a statutory power of sale of a mortgage junior in 57
91	91	priority to another mortgage or other encumbrance shall not be a bar 58
92	92	to foreclosure of any mortgage senior to the foreclosing mortgage by 59
93	93	statutory power of sale or as otherwise provided by law. 60
94	94	Sec. 2. (NEW) (Effective January 1, 2020) (a) A notice of intention to 61
95	95	foreclose pursuant to a statutory power of sale under subsection (c) of 62
96	96	section 1 of this act shall be: (1) In writing and contain the provisions 63
97	97	required under subsection (b) of this section; (2) sent by the 64
98	98	commissioner of the Superior Court conducting the foreclosure and 65
99	99	mailed by certified mail, return receipt requested, and include a 66
100	100	certification of service in the same form as required of a commissioner 67
101	101	of the Superior Court when sending pleadings under the rules of 68
102	102	practice; and (3) recorded in the land records of the town or towns in 69
103	103	which the real property subject to foreclosure by a statutory power of 70
104	104	sale is located. 71
105	105	(b) A notice of intention to foreclose pursuant to a statutory power 72
106	106	of sale shall state: (1) The address and legal description of the property 73
107	107	encumbered by the mortgage deed to be foreclosed by a statutory 74
108	108	power of sale; (2) the default or defaults that have occurred; (3) the 75
109	109	action required to cure the default or defaults, or if redemption will 76
110	110	only be available; (4) a date for the sale of the property, not less than 77
111	111	ninety days from the date of the notice of intention to foreclose; (5) a 78
112	112	copy of a full appraisal of the property by a Connecticut licensed 79
113	113	appraiser; (6) a list of junior encumbrances to the foreclosing mortgage, 80
114	114	and their priority as determined by the commissioner of the Superior 81 Raised Bill No. 7129
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116	116
117	117
118	118	LCO No. 4033 4 of 11
119	119
120	120	Court conducting the sale; (7) a list of senior encumbrances to the 82
121	121	foreclosing mortgage; and (8) a demand for an affidavit of debt from 83
122	122	the junior encumbrancers, as of the date of the sale, to enable the 84
123	123	commissioner of the Superior Court to make distributions of surplus, if 85
124	124	any. 86
125	125	(c) Notice of the intention to foreclose pursuant to a statutory power 87
126	126	of sale shall be served on: 88
127	127	(1) The mortgagor or a representative in interest of the mortgagor as 89
128	128	designated in writing pursuant to the mortgage deed. Such notice shall 90
129	129	be sent in accordance with the procedure set forth in section 4 of this 91
130	130	act. 92
131	131	(2) Any tenant of the property if the mortgagee knows or should 93
132	132	know by exercise of due diligence that the property is occupied as a 94
133	133	rental unit. Upon request from a mortgagee, the mortgagor or the 95
134	134	mortgagor's representative in interest shall provide the name, address 96
135	135	and other contact information for any tenant. Notice to a tenant shall 97
136	136	be served on the tenant by (A) marshal, (B) first class mail sent to the 98
137	137	tenant's last-known address, or (C) posting it conspicuously at each 99
138	138	entrance to the mortgaged premises. 100
139	139	(3) All other parties in interest, including all junior and senior 101
140	140	encumbrancers. The notice shall be sent by certified mail, return 102
141	141	receipt requested to the address, if any, listed in the instrument 103
142	142	evidencing the interest, and, if none is listed, to the registered agent for 104
143	143	the party in interest or to any other address that may be readily 105
144	144	available to the mortgagee. 106
145	145	(4) Failure to notify any party in interest, other than the mortgagor, 107
146	146	does not invalidate the foreclosure as to other parties in interest to 108
147	147	whom notice was given. 109
148	148	Sec. 3. (NEW) (Effective January 1, 2020) At any time up to the time of 110
149	149	the sale under a foreclosure pursuant to a statutory power of sale, the 111
150	150	mortgagor may redeem the real property from the mortgage deed 112 Raised Bill No. 7129
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152	152
153	153
154	154	LCO No. 4033 5 of 11
155	155
156	156	being foreclosed pursuant to a statutory power of sale by paying the 113
157	157	entire indebtedness and any other sums due under the mortgage deed 114
158	158	and all costs reasonably incurred in connection with the proceeding to 115
159	159	foreclose, including reasonable attorney's fees of the mortgagee 116
160	160	pursuant to an itemized affidavit of debt provided by the mortgagee 117
161	161	upon request. If the mortgagee provides a cure after default, the 118
162	162	mortgagor may cure any default in the performance of the conditions 119
163	163	or requirements of a mortgage deed, avoid the operation of any 120
164	164	acceleration clause in the mortgage deed, prevent the foreclosure 121
165	165	pursuant to a statutory power of sale or other disposition of the 122
166	166	mortgaged premises and reinstate the mortgage deed by tendering the 123
167	167	payment or performance due under the mortgage deed by: (1) Paying 124
168	168	all sums that would have been due at the time of payment in the 125
169	169	absence of any acceleration clause; (2) performing any other obligation 126
170	170	the mortgagor would have been bound to perform in the absence of 127
171	171	any acceleration clause; and (3) paying the costs of the proceeding to 128
172	172	foreclose that are reasonably incurred by the mortgagee, including, but 129
173	173	not limited to, reasonable attorney's fees of the mortgagee. 130
174	174	Sec. 4. (NEW) (Effective January 1, 2020) (a) The mortgagee, after the 131
175	175	mortgagor's default and upon compliance with the provisions of 132
176	176	sections 1 to 9, inclusive, of this act, may sell all or any part of the 133
177	177	mortgaged premises that is subject to the mortgage deed. A sale under 134
178	178	a foreclosure pursuant to a statutory power of sale shall convey title to 135
179	179	the property subject to all other parties in interest who have superior 136
180	180	priority to the foreclosing mortgagee. The sale may be by public 137
181	181	auction, as a whole or in parcels, at any time after ninety days from the 138
182	182	date of sending notice of intention to foreclose, including, but not 139
183	183	limited to, sale on credit. The sale shall be conducted by a 140
184	184	commissioner of the Superior Court admitted to practice in the state of 141
185	185	Connecticut who is in good standing with the state-wide grievance 142
186	186	committee, and who maintains and operates an interest earned on 143
187	187	lawyers' clients fund account under section 51-81c of the general 144
188	188	statutes. The commissioner of the Superior Court shall be selected by 145
189	189	the mortgagee. Every aspect of the sale, including the method, 146 Raised Bill No. 7129
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191	191
192	192
193	193	LCO No. 4033 6 of 11
194	194
195	195	advertising, time, place, deposit and terms of sale, such as buyer's 147
196	196	mortgage contingency, shall be commercially reasonable, provided 148
197	197	there shall be a rebuttable presumption that a sale that complies with 149
198	198	the requirements of subsection (c) of this section is commercially 150
199	199	reasonable. 151
200	200	(b) At the time of acceptance of a bid at a public sale under this 152
201	201	section, the successful bidder, other than the foreclosing mortgagee, 153
202	202	shall pay the required deposit to the commissioner of the Superior 154
203	203	Court conducting the sale and execute and deliver to such 155
204	204	commissioner a contract to purchase the real property, which may be a 156
205	205	bond for deed. If the highest bidder fails to perform on the purchase 157
206	206	and sale agreement, the commissioner of the Superior Court 158
207	207	conducting the sale may execute a purchase and sale agreement with 159
208	208	the next highest bidder not later than thirty days after the sale and the 160
209	209	deposit of the highest bidder may be retained or recovered as 161
210	210	liquidated damages. If the foreclosing mortgagee is the highest bidder 162
211	211	or becomes the highest bidder by failure of another bidder to perform 163
212	212	a purchase and sale agreement, a purchase and sale agreement need 164
213	213	not be executed for the foreclosing mortgagee. Any sums retained or 165
214	214	recovered by the foreclosing mortgagee under this subsection shall be 166
215	215	applied to the payment of the debt secured by the mortgage deed in 167
216	216	the same manner as the proceeds of a completed sale. 168
217	217	(c) There shall be a rebuttable presumption that a sale under this 169
218	218	section is commercially reasonable if: (1) The commissioner of the 170
219	219	Superior Court chosen to conduct the sale complies with all applicable 171
220	220	requirements for notice and sale as provided in sections 1 to 7, 172
221	221	inclusive, of this act; (2) notice of the sale, including the address of the 173
222	222	real property to be sold, the date, place and time of the sale, the 174
223	223	amount of the deposit required at the sale and the name and telephone 175
224	224	number of the commissioner of the Superior Court conducting the sale, 176
225	225	is posted at the location of the real property not less than sixty days 177
226	226	before the date of the sale; and (3) the sale is advertised in a newspaper 178
227	227	of general circulation in the town or towns where the real property is 179
228	228	located, at least once each week for three successive weeks before the 180 Raised Bill No. 7129
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230	230
231	231
232	232	LCO No. 4033 7 of 11
233	233
234	234	sale, in substantially the form customarily used for notices of judicial 181
235	235	sale of real property, and includes the address of the real property to 182
236	236	be sold, the date, place and time of the sale, the amount of the deposit 183
237	237	required at the sale and the name and telephone number of the 184
238	238	commissioner of the Superior Court conducting the sale. The 185
239	239	commissioner of the Superior Court, after serving a notice of intention 186
240	240	to foreclose by a statutory power of sale under section 2 of this act, is 187
241	241	authorized to enter upon the real property for the purpose of posting 188
242	242	the notice of sale required under this subsection. 189
243	243	(d) The commissioner of the Superior Court shall convey title by a 190
244	244	Mortgagee Statutory Power of Sale Deed, or other applicable method 191
245	245	as provided in the applicable contract for sale and as provided in 192
246	246	section 7 of this act. 193
247	247	(e) Before the recording of the deed conveyed pursuant to 194
248	248	subsection (d) of this section, the commissioner of the Superior Court 195
249	249	appointed to sell the real property in accordance with this section shall 196
250	250	cause to be recorded on the land records of the town in which the real 197
251	251	property subject to foreclosure by a statutory power of sale is located a 198
252	252	certificate of foreclosure of mortgage pursuant to a statutory power of 199
253	253	sale containing: (1) The name of the foreclosing mortgagee by whom 200
254	254	such commissioner was appointed, the names of the original 201
255	255	mortgagor and mortgagee as stated in the mortgage deed being 202
256	256	foreclosed pursuant to the statutory power of sale, the volume and 203
257	257	page of the land records where such mortgage deed is recorded and, if 204
258	258	applicable, the parties and recording information of any modification 205
259	259	or assignment of such mortgage deed to the foreclosing mortgagee; 206
260	260	and (2) a statement that such commissioner has complied with all 207
261	261	applicable requirements for the sale of the real property. 208
262	262	Sec. 5. (NEW) (Effective January 1, 2020) (a) A mortgagor, or any 209
263	263	other person entitled to notice of intention to foreclose pursuant to a 210
264	264	statutory power of sale under subsection (c) of section 2 of this act, 211
265	265	may apply to the Superior Court for a protective order seeking to stay, 212
266	266	enjoin or condition the terms of the sale. Such applicant shall pay to 213 Raised Bill No. 7129
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268	268
269	269
270	270	LCO No. 4033 8 of 11
271	271
272	272	the clerk of the Superior Court a fee for the entry of a civil action as set 214
273	273	forth in section 52-259 of the general statutes. An application made 215
274	274	under this subsection shall be scheduled for a hearing by the Superior 216
275	275	Court. The Superior Court shall order reasonable notice of the date and 217
276	276	time of the hearing to be given to all interested persons not less than 218
277	277	twelve days before the date of the hearing. Service of process specific 219
278	278	to an application pursuant to this section shall be by certified mail, 220
279	279	return receipt requested, accompanied by a certification of service by 221
280	280	the attorney or pro se party effectuating such service, in such form as is 222
281	281	required by the rules of practice. After such hearing, the Superior 223
282	282	Court may order that a sale of real property under a foreclosure 224
283	283	pursuant to a statutory power of sale, or the disposition of the 225
284	284	proceeds from such sale, shall continue as planned, with or without a 226
285	285	revised sale date, or be restrained or carried out in accordance with 227
286	286	such terms and conditions as the Superior Court may determine if it is 228
287	287	established that: (1) The underlying obligation that is secured by the 229
288	288	mortgage deed to be foreclosed pursuant to a statutory power of sale is 230
289	289	invalid; (2) the mortgagor is not in default or has cured the default; (3) 231
290	290	the order of priorities of junior encumbrances requires adjustment; (4) 232
291	291	the fair market value of the mortgaged property as established by the 233
292	292	mortgagee's appraisal is incorrect, invalid or in need of adjustment; or 234
293	293	(5) the mortgagee or other person exercising a statutory power of sale 235
294	294	under section 4 of this act has not complied with the provisions of 236
295	295	sections 1 to 7, inclusive, of this act, or that there exists in law any other 237
296	296	claim or defense that can be made in a foreclosure action. 238
297	297	(b) A mortgagee may apply to the Superior Court for an order in aid 239
298	298	of the mortgagee's rights under sections 1 to 9, inclusive, of this act, or 240
299	299	its mortgage, promissory note or other contract with the mortgagor, 241
300	300	including, but not limited to, an order allowing the mortgagee and 242
301	301	other interested persons reasonable access to the real property subject 243
302	302	to foreclosure pursuant to a statutory power of sale for purposes of 244
303	303	rehabilitation, preparation for sale, repair, maintenance, inspection, 245
304	304	posting of notice or conducting the sale. 246
305	305	(c) An application before the Superior Court shall be made not later 247 Raised Bill No. 7129
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307	307
308	308
309	309	LCO No. 4033 9 of 11
310	310
311	311	than thirty days prior to the sale date, and in the event the court does 248
312	312	not resolve the case within twenty-one days prior to the sale date, the 249
313	313	sale date shall be reset by the court to a date not later than thirty days 250
314	314	from the date of the order. The sale shall be considered final and all 251
315	315	disputes shall be resolved prior to the sale. The Superior Court shall 252
316	316	order the applicant to pay the reasonable costs and attorney's fees of 253
317	317	the other parties to the claim in the event the applicant's claims are 254
318	318	ruled against or are otherwise unsuccessful. 255
319	319	(d) The judges of the Supreme Court, Appellate Court and Superior 256
320	320	Court shall adopt and may, from time to time, modify or repeal rules 257
321	321	and forms regulating pleading, practice and procedure in judicial 258
322	322	proceedings administered by the courts for the purpose of simplifying 259
323	323	proceedings applied for in the Superior Court pursuant to this section, 260
324	324	and promoting the speedy and efficient determination of such 261
325	325	proceedings. Such rules shall: (1) Provide for an accelerated 262
326	326	adjudication process; (2) address hearing procedures, discovery and 263
327	327	motions; and (3) require that a decision on a dispositive motion or 264
328	328	hearing be rendered not later than ten days after the date on which 265
329	329	such motion was heard or hearing held. Such rules shall not abridge, 266
330	330	enlarge or modify the jurisdiction of any court. Such rules shall 267
331	331	become effective on such date as the judges specify, but not in any 268
332	332	event until sixty days after the promulgation of such rules. 269
333	333	Sec. 6. (NEW) (Effective January 1, 2020) (a) The proceeds from a sale 270
334	334	of real property under a foreclosure pursuant to a statutory power of 271
335	335	sale under sections 1 to 9, inclusive, of this act, shall be held by the 272
336	336	commissioner of the Superior Court conducting the sale as a trustee for 273
337	337	the benefit of the foreclosing mortgagee and all persons who may 274
338	338	claim an interest in such proceeds. Such proceeds shall be distributed 275
339	339	by such commissioner in the following order: 276
340	340	(1) The reasonable expenses of sale; 277
341	341	(2) The reasonable expenses of securing possession before sale and 278
342	342	holding, maintaining and preparing the real property for sale, 279 Raised Bill No. 7129
343	343
344	344
345	345
346	346	LCO No. 4033 10 of 11
347	347
348	348	including, but not limited to, premiums on hazard and liability 280
349	349	insurance, and, to the extent provided for in the mortgage deed and 281
350	350	not prohibited by law, reasonable attorney's fees and other legal 282
351	351	expenses incurred by the mortgagee; 283
352	352	(3) Satisfaction of the indebtedness secured by the mortgage deed 284
353	353	being foreclosed pursuant to a statutory power of sale; 285
354	354	(4) Satisfaction in the order of priority of any subordinate interest of 286
355	355	record entitled to notice under subdivision (3) of subsection (c) of 287
356	356	section 2 of this act; and 288
357	357	(5) Remittance of any excess to the mortgagor. 289
358	358	Sec. 7. (NEW) (Effective January 1, 2020) The commissioner of the 290
359	359	Superior Court conducting a sale of real property under sections 1 to 9, 291
360	360	inclusive, of this act shall execute a deed to the purchaser of such real 292
361	361	property that is sufficient to convey title and that: (1) Identifies the 293
362	362	mortgage deed foreclosed by the statutory power of sale and the 294
363	363	parties to the mortgage deed; (2) indicates the volume and page of the 295
364	364	land records where such mortgage deed is recorded; and (3) recites 296
365	365	that the deed is executed by the commissioner of the Superior Court 297
366	366	conducting the sale after a default and sale under sections 1 to 9, 298
367	367	inclusive, of this act and pursuant to the commissioner's authority to 299
368	368	conduct the sale. In the event the mortgagee is the successful bidder 300
369	369	for the property at the sale, title to the property shall automatically 301
370	370	vest in the mortgagee as of the date of such sale, and the evidence of 302
371	371	title shall only be by certificate of foreclosure filed by the commissioner 303
372	372	of the Superior Court conducting the sale. The signature and title or 304
373	373	authority of such commissioner signing the deed as grantor, together 305
374	374	with the certificate required by subsection (e) of section 4 of this act, 306
375	375	are sufficient proof of the facts recited in the deed and of the signer's 307
376	376	authority to sign the deed. 308
377	377	Sec. 8. (NEW) (Effective January 1, 2020) In the event the value of the 309
378	378	property, as determined by the appraisal, if title to the property vests 310
379	379	in the mortgagee, or if the proceeds of the sale are not enough to pay 311 Raised Bill No. 7129
380	380
381	381
382	382
383	383	LCO No. 4033 11 of 11
384	384
385	385	off the debt of the mortgage, then the mortgagee may apply to the 312
386	386	Superior Court for a deficiency judgment. The mortgagee may use the 313
387	387	original appraisal in its application if the application date occurred not 314
388	388	later than one hundred twenty days after the date of issuance of the 315
389	389	appraisal. If the application occurs more than one hundred twenty 316
390	390	days after the date of issuance of the appraisal, then the mortgagee 317
391	391	shall obtain a new appraisal. The costs of the second appraisal may be 318
392	392	added to the debt and deficiency judgment. 319
393	393	Sec. 9. (NEW) (Effective January 1, 2020) Immediate possession of 320
394	394	property obtained by a sale under a foreclosure pursuant to a statutory 321
395	395	power of sale under sections 1 to 8, inclusive, of this act shall be 322
396	396	enforceable by ejectment pursuant to section 49-22 of the general 323
397	397	statutes. 324
398	398	This act shall take effect as follows and shall amend the following
399	399	sections:
400	400
401	401	Section 1 January 1, 2020 New section
402	402	Sec. 2 January 1, 2020 New section
403	403	Sec. 3 January 1, 2020 New section
404	404	Sec. 4 January 1, 2020 New section
405	405	Sec. 5 January 1, 2020 New section
406	406	Sec. 6 January 1, 2020 New section
407	407	Sec. 7 January 1, 2020 New section
408	408	Sec. 8 January 1, 2020 New section
409	409	Sec. 9 January 1, 2020 New section
410	410
411	411	Statement of Purpose:
412	412	To authorize the foreclosure of certain commercial mortgages by
413	413	statutory power of sale.
414	414	[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline,
415	415	except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is
416	416	not underlined.]
417	417