Connecticut
Connecticut Conveyance Tax On An Investment Property
The tax comes off the sale side, before your payoff, and one of its tiers is set town by town. Underwrite the exit with it in the model, not after.
Read the articleMost private lending education in the United States is written from a deed-of-trust perspective. A borrower stops paying, a trustee records a notice, a period runs, and the property is sold at a public auction on the courthouse steps. It is fast, it is largely administrative, and it is how a great many note investors picture their remedy.
Connecticut does almost none of that. There is no power of sale, no trustee, and no automatic auction. Foreclosure here goes through the Superior Court, and one of the two routes available ends without any sale at all.
The short version
Connecticut foreclosure is judicial and takes one of two forms. In a foreclosure by sale, the court supervises a sale. In a strict foreclosure, the court sets deadlines called law days; if nobody redeems, title passes to the foreclosing lienholder by operation of law. No auction, no bidding, no proceeds — the property itself.
A Judicial State, With Two Routes
Every Connecticut foreclosure is a lawsuit. The lienholder sues, the borrower and any junior lienholders are made parties, and a judge enters judgment. What differs is the form that judgment takes.
Strict foreclosure is the older form and the one Connecticut is known for. There is no sale. The court sets a sequence of dates by which the parties may redeem, and if none of them does, ownership moves to the plaintiff.
Foreclosure by sale is the alternative. The court orders the property sold under its supervision, appoints a committee to conduct the sale, and the proceeds are distributed according to lien priority.
Both are slower and more procedural than a trustee sale, and both put a judge between a lienholder and the collateral. For an investor used to non-judicial states, that is the single biggest adjustment.
How Law Days Work
A law day is a deadline to redeem — to pay the debt in full and keep, or take, the property. The court sets them, and it sets them in a sequence that follows lien priority:
- The owner is given the first opportunity to redeem.
- If the owner does not, the right passes down to each junior lienholder in order of priority, each with its own date.
- If no one redeems, title becomes absolute in the foreclosing plaintiff — the first lienholder, in the ordinary case.
That sequence is the practical expression of what a first lien is. A junior lienholder wanting to protect its position has to pay off everything senior to it. Where there is not enough value to make that worthwhile, junior interests are extinguished as their dates pass, and the senior lienholder ends up with the property free of them.
How far out the court sets those dates varies with the circumstances of the case, and the court has discretion. Anyone quoting you a standard timeline for a Connecticut foreclosure is describing their own experience, not a rule.
In a strict foreclosure nothing is sold and nobody bids. A deadline passes, and ownership moves.
Which Route A Case Takes
The court chooses, and the choice turns broadly on whether there is equity in the property above the debt.
| Strict foreclosure | Foreclosure by sale | |
|---|---|---|
| Typical circumstance | Debt meets or exceeds value | Value materially exceeds the debt |
| Is there a sale? | No | Yes, court-supervised |
| How it ends | Title vests in the plaintiff when law days run | Property sold; proceeds distributed by priority |
| What the lienholder receives | The property | Cash, up to what it is owed |
| Surplus above the debt | Not distributed — there is generally none | Flows down the priority ladder |
| Junior liens | Extinguished if their law days pass | Paid in order, to the extent of proceeds |
There is a logic to this that is worth internalising. A sale exists to find out what a property is worth and to hand any surplus to the people entitled to it. Where there is no surplus, a sale is an expensive way to discover nothing, so the court transfers the property instead.
Where Mediation Fits
Connecticut runs a Foreclosure Mediation Program through the Judicial Branch. Its eligibility is drawn narrowly: it applies to actions involving one- to four-family, owner-occupied residential property in Connecticut used as the homeowner's primary residence.
A business-purpose loan secured by non-owner-occupied property does not meet those criteria and does not enter that program. This is worth stating plainly and without spin: it is a structural feature of how the program was drawn, reflecting that it exists to help homeowners keep their homes. It is not an advantage anyone should be selling you, and it says nothing about how long any particular case takes or how it ends.
What Vesting Actually Gives You
Here is where note investors most often mis-model the outcome. When title vests, you have not been repaid. You own a building.
That is a different asset with a different set of problems:
- It must be insured — as vacant or tenant-occupied property, on a different policy from the one that named you as mortgagee.
- It must be secured and maintained, through a Connecticut winter if the timing lands that way.
- Anyone in occupation is now your issue, and removing them is a separate legal process.
- It must eventually be sold to turn the asset back into money, with brokerage, carrying costs and Connecticut's conveyance tax on the sale all coming off the top.
Which is why the equity beneath your lien at origination is the number that matters. A first lien determines your position in the recovery. It does not determine the outcome. A first lien reduces risk; it does not remove it.
Why This Shapes Underwriting
Everything above argues for the same conclusion, and it is the reason we underwrite the way we do rather than a claim about results. If the realistic remedy is that you may end up owning the collateral, then the collateral has to be something you would be content to own, and the file has to give you the evidence to judge that before you fund.
That is why an investor funding an individual first-lien note with us reads the whole file — the appraisal, the title commitment, the insurance binder, the borrower's credit and liquidity, and our underwriting memo — rather than a summary page. And it is why the mortgage is recorded in the investor's name and the lender's title policy insures that position from the outset; if the remedy ever matters, the paperwork behind it has to be right. Investors who would rather hold a slice of many loans than one whole one generally look at the credit fund instead.
If you are weighing a Connecticut note and want to talk through the collateral rather than the headline, the note desk will take the question.
This article is a general description of how Connecticut foreclosure procedure is structured. It is not legal advice, it is not a description of any particular loan, borrower or case, and it is not a prediction of any outcome; how a specific matter proceeds is directed by Connecticut counsel and decided by the court on its own facts. Court practice and statutes change — confirm the current position with Connecticut counsel.
This page is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or any interest in a loan. Any note is offered solely through the loan file and the assignment documents for that specific loan. An investment in a real estate note is illiquid, there is no public market for it, and you should be prepared to hold it to maturity. Real estate lending involves risk, including delinquency, foreclosure, delay, and the possible loss of principal. A first lien reduces risk; it does not remove it. Riva Lending does not provide investment, legal, or tax advice; consult your own advisors.
