Clearing Title Issues in Connecticut Foreclosures

Part I: How Lenders Can Protect and Obtain Marketable Title Through the Foreclosure Process

April 22, 2026

When a bank, mortgage company, or private lender starts a foreclosure case in Connecticut, one of the most important steps, frequently overlooked, is ensuring that title issues are properly cleared.  If title defects are not addressed early, they can slow down the foreclosure, create confusion about ownership, or even prevent the lender from selling the property after the foreclosure is complete.

For lenders pursuing foreclosure, clearing title issues is essential to ensure that the property can later be sold at highest possible value.  This article is the first in a two part series to provide a general overview of common title issues in Connecticut, and the steps typically taken to cure them.  In this article, we discuss what a title issue is, the difference between clear and marketable title, how to identify a title issue, and the role of title insurance.

What is a Title Issue?

A “title issue” is an umbrella term, covering a range of matters.  A title issue is essentially any defect, error, or uncertainty in the land records that affects someone’s legal ownership or interest in a property.  Title issues can range from minor recording errors, to more significant problems affecting the chain of ownership, which could potentially impact a lender’s ability to foreclose or sell the property.  Common examples include:

• A deed or mortgage that was not properly witnessed
• Mortgage Assignments recorded out of order
• A typographical error in a property description
• A prior lien that was never released
• Gaps in the chain of title (i.e. a mortgage from Bank A followed by an assignment from Bank B to Bank C, but no assignment from Bank A to Bank B)
• A property located in two municipalities, but documents were only recorded in one
• A borrower who owns adjoining parcels, but the mortgage only covers one parcel
• A mortgage that was never recorded

It is important to note that title issues are purely title related: they relate only to the legal record of ownership in the land records.  Title issues do not include environmental concerns, zoning problems, or issues involving the occupants of the property.  Those are separate matters.

Clear title v Marketable Title

What’s the Difference?

When reviewing the title to a property in a Connecticut foreclosure, it is important to understand the difference between clear title and marketable title.

• Clear title means the property is completely free of liens, encumbrances, or other claims.
• Marketable title means the title is free from significant defects that would prevent the property from being sold or reduce its fair market value.

Although the terms are related, clear title and marketable title are not the same thing.  As long as the defect doesn’t affect the property’s value or hinder its sale, the title is generally considered marketable.

Example –  When a Title Issue Doesn’t Affect Marketability

Consider a property that has had three owners over the past 40 years. During a title search, the deed from the second owner to the third owner contains a small error in the legal description. One boundary line is listed as “Northerly, 145.50 feet, more or less,” when the correct measurement is 135.50 feet.

However, every other document in the chain of title—including earlier deeds and the recorded survey—shows the correct measurement of 135.50 feet. Because the surrounding records clearly identify the correct property, the error is likely a simple typographical mistake. A reasonable buyer could still determine what property was conveyed.

In situations like this, the defect should not affect the marketability of the title. (See Connecticut Standards of Title, Standard 10.1.)

Why Marketable Title Matters

In most Connecticut foreclosure cases, the goal is to ensure the lender obtains marketable title after the foreclosure, rather than clear title. This allows the foreclosing plaintiff to then sell the property and convey good title to the eventual purchaser.

However, there are situations where clear title may be required.  Certain government-sponsored enterprises (GSEs), investors, or loan programs may require all liens and defects to be fully resolved before the property can be transferred.

Initial Title Review

The first step in resolving any title issue is to obtain a title search and review it carefully before the foreclosure case even begins.  Identifying potential title defects early allows the lender and its counsel to determine the best way to resolve the issue.  In some cases, the appropriate solution may involve having the court address the title defect as part of the foreclosure.

The 40-Year Title Search

In Connecticut, title searches typically go back at least 40 years.  This is because Connecticut follows the Marketable Record Title Act, Conn. Gen. Stat. §§ 47-33b through 47-33l.

Under this law, if a property owner has an unbroken chain of title going back 40 years to a recorded deed or transaction, that document becomes the “root of title.”  In most situations, any claims or defects that occurred before the root of title are considered extinguished.  As a result, title searchers generally do not need to review land records earlier than that 40-year period.

Attorney Review of the Title Search

Once the title search is obtained, it should be carefully reviewed by an attorney experienced in Connecticut foreclosure and title law.  A detailed review is important because some title defects are subtle and may be overlooked without careful legal analysis.

An experienced foreclosure attorney can:

• Identify potential title defects or gaps in the chain of title
• Determine whether a defect affects marketable title
• Recommend the appropriate method to cure the issue

Reviewing Additional Records

If a potential title issue is identified, further investigation may be necessary beyond the title search itself.

For example:

• Court records may need to be reviewed if a prior interest in the property was transferred through court proceedings.
• Probate court records may also be relevant if the property passed through an estate.
• The lender’s mortgage origination file may also contain documents, not on the land records, that clarify or resolve a title issue.

Conducting a thorough review before starting a foreclosure case helps lenders identify risks early, and resolve title issues efficiently, ensuring the property can ultimately be sold with marketable title.

The Role of Title Insurance

Once a title issue is identified, the next step is determining whether the problem is covered by a title insurance policy. Because title defects are common, almost all banks, mortgage companies, and private lenders obtain title insurance when a mortgage is originated. That policy often plays a critical role in resolving title issues during a foreclosure case.

While a full explanation of title insurance is beyond the scope of this article, lenders involved in foreclosure should understand how title insurance works and why it matters when curing title defects.

What Title Insurance Does—and Does Not—Cover

Unlike most types of insurance, title insurance protects against past problems, not future events.  Title insurance covers risks and defects that already existed at the time the mortgage was issued, but were unknown or undiscoverable at that point.

For example, health insurance covers the risk that someone may become sick or injured in the future.  Title insurance works differently.  It protects the insured from losses caused by hidden or undisclosed title issues that were present when the loan originated—even if no one could have found them by reviewing the land records at that time.

In short, title insurance protects lenders from past title problems, not new ones that arise later.

Example: Hidden Mechanic’s Lien

A common example involves mechanic’s liens, which frequently arise in foreclosure cases.  Connecticut law allows contractors to file a mechanic’s lien for unpaid work, as long as it is recorded within 90 days after the work is completed (Conn. Gen. Stat. § 49-34).  Importantly, once recorded, the lien’s priority can “relate back” to when the work first began (Conn. Gen. Stat. § 49-33(b)).

Consider this timeline:

• February 1 – Contractor begins work
• March 31 – Work is completed
• April 30 – Lender records its mortgage
• May 31 – Contractor records a mechanic’s lien

Even though the mechanic’s lien is recorded after the mortgage, it can take priority over the mortgage because the work began earlier.  If the lender had no knowledge of the work at the time the mortgage was recorded, there would have been no way to discover the issue from the land records alone.

Because that risk existed at the time the mortgage originated, it is exactly the type of hidden risk that title insurance is designed to cover.

Title Insurance Typically Covers Loss – Not Every Defect

It is also important to understand that title insurance generally only protects against financial loss, not the mere existence of a title defect.

If a title issue exists but does not affect marketable title — meaning the property can still be sold without issue and without loss in value — the insurer may not honor a claim.  However, even if a property can still be sold, a title defect may reduce its fair market value.  For example, if a title issue causes a property to sell for $300,000 instead of $500,000, the lender may suffer a quantifiable loss. In that situation, title insurance coverage may still apply.

For this reason, it is important for lenders to document the foreclosure file carefully so any claim under the title policy is preserved and supported by evidence of the loss.

How Lenders Should Handle a Title Insurance Claim

If a title insurance policy exists, lenders should take the following steps when a title issue is discovered:

1. Make a Prompt Claim

Notify the title insurer as soon as possible.  Provide clear documentation of the issue and follow the notice requirements in the policy.  When possible, the claim should be made before the foreclosure case is filed.

2. Stay in Communication

Most title policies require ongoing communication with the insurer.  Respond promptly to requests for information and keep communication open throughout the process.

3. Review the Insurer’s Response

The title insurance company may respond in several ways:

• Settlement – The company may pay a monetary amount to settle the claim.
• Indemnity – The company may agree to cover future losses, including insuring over the defect upon resale, often allowing the lender to proceed with the sale after foreclosure.
• Defense – The company may appoint counsel (at the insurer’s expense) to resolve or litigate the issue.
• Denial – The company may reject the claim, for example, if the issue is not covered or it arose after the policy date.

4. Take Appropriate Next Steps

Any response from the insurer should be reviewed with foreclosure counsel. If coverage is denied, an appeal may be appropriate. If coverage or indemnification is provided, the lender must strictly follow the insurer’s instructions to avoid voiding the policy.

Understanding how title insurance works in Connecticut foreclosure cases helps lenders manage risk, resolve title issues more efficiently, and protect their ability to recover through the sale of the property after foreclosure.

Conclusion

For lenders, mortgage companies, and investors, the ability to identify and resolve title issues can mean the difference between a smooth foreclosure and a prolonged, costly one.  By securing an experienced Connecticut foreclosure attorney to conduct a thorough review, evaluate title insurance options, pursue non-judicial cures, and litigate where necessary, lenders can protect their interests and deliver marketable title upon completion of the foreclosure case.

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Our firm routinely assists banks, servicers, and private lenders with title clearance in foreclosure and post-foreclosure matters throughout Connecticut. Whether your issue involves a missing assignment, an unreleased lien, or a break in the chain of title, we can help identify the most efficient curative path.

For more information or to discuss a title issue affecting a Connecticut foreclosure, please contact: Joseph R. Dunaj at jdunaj@npmlaw.com.

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