On January 1, 2015, Connecticut adopted an additional method of foreclosure known as foreclosure by market sale. This method permits an owner-occupant of a 1-4 family residential property who is in default of the first mortgage to obtain the lender’s consent to market and sell the property in order to avoid a judicial foreclosure.

Under the current statute, prior to commencing a foreclosure action, the lender is required to provide notice of the foreclosure by market sale option to the owner by registered or certified mail at the address of the residential real property secured by the mortgage.  After receiving this notice, the owner has sixty (60) days to contact the lender to discuss whether it will consent to a foreclosure by market sale. If the owner fails to contact the lender within the sixty (60) day period, or if the parties are unable to reach mutually agreeable terms, or other circumstances exist which prevent the parties from proceeding with a foreclosure by market sale, then the lender may proceed with a traditional foreclosure.  The lender is required, however, to file an affidavit with the court stating it complied with the notice requirement and the reason the parties are not proceeding with a foreclosure by market sale.

Effective October 1, 2016, however, a lender is no longer required to provide notice of the foreclosure by market sale option to the owner or file an affidavit with the court prior to commencing a foreclosure action.

Rather, the statute was recently amended to provide that the owner and lender may agree to pursue foreclosure by market sale and the failure of either party to consent to a foreclosure by market sale for any reason shall not be the basis for a claim of bad faith.

Despite the recent amendment, Lenders should continue to inform owners in default about the foreclosure by market sale option in order to potentially avoid costs and delays associated with a traditional judicial foreclosure.