OLR Bill Analysis
AN ACT CONCERNING THE REAL ESTATE CONVEYANCE TAX.
This bill extends the expiration date of the basic 0. 25% municipal real estate conveyance tax rate for two years, until July 1, 2012. In doing so, it also maintains the optional rate of up to 0. 5% allowable in 18 eligible municipalities for the same two years.
Under current law, the basic municipal rate is scheduled to drop from 0. 25% to 0. 11% on July 1, 2010. Because 18 towns are eligible to impose an additional tax of up to 0. 25% on top of the basic rate, the maximum rate allowable in the 18 towns under current law would also drop from 0. 5% to 0. 36% on that date.
The bill also (1) restores an exemption, eliminated in 2009, from the tax for transfers made pursuant to a foreclosure by sale and (2) exempts from the tax transfers of a seller's principal residence when the transfer is (a) in lieu of a foreclosure or (b) a “short sale,” which, under the bill, means that the sale price is less than the total amount the seller owes on the property for mortgages and liens for municipal property taxes and utility or other charges that have priority over mortgage liens.
EFFECTIVE DATE: July 1, 2010 for the municipal rate extension and October 1, 2010 for the exemption provisions.
Real Estate Conveyance Tax
With some exceptions, Connecticut law requires a person who sells real property for $ 2,000 or more to pay a real estate conveyance tax when he or she conveys the property to the buyer. The tax has two parts: a state tax and a municipal tax. The applicable state and municipal rates are added together to get the total tax rate for a particular transaction.
In addition to the basic municipal tax rate of 0. 25% until July 1, 2010 and 0. 11% thereafter that applies in all towns, 18 specific towns have the option of levying an additional tax of up to 0. 25%. The 18 towns are: Bloomfield, Bridgeport, Bristol, East Hartford, Groton, Hamden, Hartford, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Stamford, Waterbury, and Windham.
Foreclosure by Sale
Under a foreclosure by sale, any party can ask the court to force a sale of the property. The court appoints a committee to sell the property, after which the court grants the deed to the purchaser. The borrower whose home is being foreclosed may stop the sale by paying up his or her mortgage. A “foreclosure by sale” is distinct from a “strict foreclosure” or bank foreclosure through which a lender asks the court for the deed.
Finance, Revenue and Bonding Committee
Joint Favorable Substitute