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Connecticut: New Foreclosure Legislation

Posted By USFN, Thursday, August 01, 2013
Updated: Monday, November 30, 2015

August 1, 2013

 

by Richard M. Leibert
Hunt Leibert
USFN Member (Connecticut)

The regular session of Connecticut’s Legislature for 2013 ended at midnight June 5, 2013. It was a very active session with many proposed bills. The following addresses some bills that will have an effect on servicing defaulted loans. Note, however, that the new legislation regarding mediation is addressed separately in a feature in the USFN Report (Summer Ed. 2013).

Public Act 13-156 — Revisions to the Common Interest Ownership and Condominium Act. The super lien that a homeowners association had was 6 months, which effective upon passage, was increased to 9 months. Further, as of October 1, 2013, if an association makes a demand for payment it must provide a copy of the notice it provides to the unit holder to the holders of any mortgages secured by the condo unit. If the association decides to foreclose, it must provide not less than 60 days’ notice by first-class mail to the holders of all liens secured by the unit with an ability to cure. The notice need only be sent to the last recorded holder of the security interest unless there is a foreclosure pending, which in that case the notice must be sent to the attorney for the foreclosing lienholder. The penalty for failing to provide the notice is that the court shall not include any attorneys’ fees or costs as part of the association’s priority lien.

Public Act 13-174 — Abatement of a Public Nuisance, effective October 1, 2013. This bill broadens the circumstances in which the nuisance law applies. It adds certain municipal ordinance violations to these statutes and makes a corresponding change by allowing the state to file nuisance abatement suits when three or more citations for such violations are issued at a property within a year. By law, courts may not issue a public nuisance abatement order against a financial institution that owns the property or claims an interest of record in it (under a mortgage, assignment of lease or rent, lien, or security interest) and is not found to be a principal or accomplice to the conduct constituting the nuisance. The bill requires the state to prove by a preponderance of the evidence, rather than by the stricter clear and convincing evidentiary standard, that a financial institution claiming an interest of record in the property as specified above was a principal or accomplice to the alleged conduct. It specifies that they can offer the same affirmative defenses as other defendants (i.e., that they have taken reasonable steps to abate the nuisance but were unable to do so).

Public Act 13-136 — Homeowner Protection Rights
, effective July 15, 2013, with a provision for unoccupied property. This permits, under certain circumstances, the filing of a motion for judgment of foreclosure simultaneously with a motion for default for failure to appear. Current law prohibits the filing of a motion for default for failure to appear until 15 days following the return date (Conn. Practice Book Section 17-20) and a motion for judgment of foreclosure until 30 days following the return date (Conn. Practice Book Section 17-33A). Under the new law for unoccupied properties, both the motion for judgment of foreclosure and a motion for default for failure to appear can be filed together. Thus, there is a gain of 15 days. In order to take advantage of this new process for unoccupied real property, a mortgagee must prove (by clear and convincing evidence and the use of a proper affidavit) that the real property that is the subject of the foreclosure action is not occupied by a mortgagor, tenant, or other occupant and not less than three of the following conditions exist: (1) Statements of neighbors, delivery persons, or government employees indicating that the property is vacant and abandoned; (2) Windows or entrances to the property that are boarded up or closed off or multiple window panes that are damaged, broken, or unrepaired; (3) Doors to the property are smashed through, broken off, unhinged, or continuously unlocked; (4) Risk to the health, safety, or welfare of the public or any adjoining or adjacent property owners that exists due to acts of vandalism, loitering, criminal conduct, or the physical destruction of the property; (5) An order by municipal authorities declaring the property to be unfit for occupancy and to remain vacant and unoccupied; (6) The mortgagee secured or winterized the property due to the property being deemed vacant and unprotected or in danger of freezing; or (7) A written statement issued by any mortgagor or tenant expressing the clear intent of all occupants to abandon the property.

A foreclosure action shall not proceed under the expedited procedures if there is on the property: (1) an unoccupied building undergoing construction, renovation, or rehabilitation that is (A) proceeding diligently toward completion, and (B) in compliance with all applicable ordinances, codes, regulations, and statutes; (2) a secure building occupied on a seasonal basis; or (3) a secure building that is the subject of a probate action to quiet title or other ownership dispute.

Public Act 13-87 — Requires Inclusion of the Grantee’s Mailing Address in Document Conveying Land, effective October 1, 2013 (P.A. 13-87 repealed C.G.S. § 47-5). In Section 1 Subsection (b), the new law requires that a document conveying land shall also include the mailing address of the grantee. Interestingly, the new law in Section 2 Subsection (b) (9) provides that failing to include the current grantee’s mailing address does not make the instrument invalid.

Public Act 13-184 — Expenditures and Revenue, effective July 15, 2013. This amended Connecticut’s statutory recording fees, increasing the amount a nominee of a mortgage must pay to record any document, including deeds, mortgages, mortgage assignments, and releases. In any document where MERS is a nominee the new recording fees apply. With these fee increases, the basic recording fees for “MERS” documents are: For the first page of the document (except mortgage assignments in which a nominee appears as the assignor), $159 (representing $116 for the first page, and $43 for recording surcharges), and $5 for each additional page. For an assignment of mortgage in which the nominee of a mortgagee appears as assignor, and for a release of mortgage by a nominee of a mortgagee, $159 for the entire assignment or release, regardless of the number of pages. (MERS has filed a complaint in the Superior Court of Connecticut, Judicial District of Hartford, challenging the constitutionality of §§ 97 and 98 of Public Act 13-184 and §§ 81 and 82 of Public Act 13-247. On July 11, 2013, MERS was denied a temporary restraining order in its lawsuit.)

House Bill 6160 — Smoke And Carbon Monoxide Detectors. This bill, with exceptions, requires a seller, before transferring title on a one- or two-family dwelling for which a new occupancy building permit was issued before October 1, 2005, to give the buyer an affidavit certifying that the: (1) permit was issued on or after October 1, 1985; or (2) dwelling is equipped with smoke detection and warning equipment (smoke detectors) complying with the bill. The affidavit must also certify that the building: (1) is equipped with carbon monoxide (CO) detection and warning equipment (CO detector) complying with the bill; or (2) does not pose a risk of CO poisoning because the building does not have a fuel-burning appliance, fireplace, or attached garage. A transferor who fails to provide the affidavit must credit the transferee with $250 at closing. A list of exemptions from affidavit requirements can be found in the bill and include the following:

Exemptions from the affidavit requirement and penalty provision transfers: (1) from one co-owner to another; (2) to the transferor’s spouse, mother, father, brother, sister, child, grandparent, or grandchild where no consideration is paid; (3) under a court order; (4) by the federal government or any of its political subdivisions; (5) by deed instead of foreclosure; (6) when an existing debt secured by a mortgage is refinanced; (7) by mortgage deed or other instrument to secure a debt where the transferor’s title to the real property being transferred is subject to a preexisting debt secured by a mortgage; and (8) by executors, administrators, trustees, or conservators.

©Copyright 2013 USFN. All rights reserved.
Summer USFN Report.

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