Vermont Tax Foreclosure
Prevention

Vermont provides a pathway for former property owners to recover surplus funds from tax foreclosure sales. The state uses a judicial process similar to mortgage foreclosure to enforce its tax liens, with surplus (called "residue") handled by a court-appointed commissioner under Chapter 133, Section 5061 of Vermont's statutes. Tax overages in Vermont are disposed of in the same manner as mortgage foreclosure overages. The process involves a one-year redemption period, after which a commissioner sells the property and distributes proceeds -- first to expenses, then to the town solicitor's fee and taxes owed, with any residue going to the former owner. Unclaimed funds become presumed abandoned after one year under Title 27, Chapter 14, Section 1242. Vermont is a moderately viable state for surplus recovery, with a clear legal framework but a relatively short abandonment period. Former property owners should act promptly to claim any residue from their property's sale. Note: This guide reflects information current as of April 2026. Tax foreclosure laws are actively evolving following the landmark Tyler v. Hennepin County Supreme Court decision (2023). Always verify current statutes and consult with a licensed attorney before taking action.

Vermont's tax foreclosure process is judicial and mirrors the mortgage foreclosure process in several key ways. Under Chapter 133, Section 5061, taxes lawfully assessed upon real estate constitute a first lien, underlying all mortgages, attachments, liens, or other encumbrances. This lien remains in full force for 15 years and may be enforced separately against each parcel. When taxes remain unpaid more than two years after the lien is created, the lien may be foreclosed in the same manner as mortgages on real estate. The process works as follows: 1. Notice: Parties having an interest in the land on record in the town clerk's office are given notice as directed by the presiding judge of the superior court. 2. Decree and Redemption Period: The judge issues a final decree and appoints a commissioner, who must be bonded. A one-year redemption period runs from the date of the decree. During this year, the property owner can pay the delinquent taxes and reclaim the property. 3. Commissioner's Sale: After the redemption period expires, the commissioner sells the real estate with the approval of the judge. 4. Distribution of Proceeds: The commissioner applies the proceeds in the following order: - First: Expense of the sale (including the commissioner's compensation and expenses) - Second: The town solicitor's fee - Third: The amount due the town, including costs - Fourth: The residue (surplus), if any, is disposed of by the commissioner with the judge's approval, in the same manner as proceeds from foreclosure of chattel mortgages.

In Vermont, surplus funds are referred to as the "residue" -- the amount remaining after the commissioner pays the expenses of sale, the town solicitor's fee, and the amount due to the town for delinquent taxes and costs. Vermont law provides that this residue is disposed of by the commissioner, with the approval of the judge, in the same manner as proceeds from foreclosure of chattel mortgages. This means the surplus is distributed to the former property owner and any other parties with legitimate claims (such as junior lien holders), as determined by the court. Parties who may be entitled to surplus funds include: - The former property owner at the time of the tax lien - Holders of mortgages or other encumbrances on the property - Other parties with recorded interests, as determined by the court Because the process is judicial and overseen by a commissioner with court approval, the distribution of surplus is subject to court supervision. This provides a layer of protection for claimants but also means the process may take longer than in states with purely administrative surplus distribution.

The primary Vermont statutes governing surplus fund recovery: - Chapter 133, Section 5061 (Force and effect of lien): Establishes that taxes assessed on real estate are a first lien for 15 years. When taxes are unpaid more than two years, the lien may be foreclosed in the same manner as mortgages. Establishes the one-year redemption period, the appointment of a bonded commissioner, and the order of distribution of sale proceeds (expenses, town solicitor fee, taxes, then residue). - Title 27, Chapter 14, Section 1242 (Presumptions of abandonment): Establishes when property is presumed abandoned. Specifically, subsection (a)(11) provides that property held by a court, government, or governmental subdivision, agency, or instrumentality is presumed abandoned one year after the property becomes distributable. - Vermont disposes of tax overages in the same manner as mortgage overages, which simplifies the legal framework. The same rules apply regardless of whether the foreclosure was initiated for tax delinquency or mortgage default. The judicial nature of Vermont's tax foreclosure process means that the court oversees the entire proceeding, from the initial foreclosure decree through the final distribution of surplus. This provides transparency and accountability but requires engagement with the court system. In Tyler v. Hennepin County (2023), the U.S. Supreme Court ruled unanimously that governments cannot keep surplus proceeds from tax sales beyond what is owed, finding this violates the Takings Clause of the Fifth Amendment. This landmark ruling has strengthened property owners' rights to surplus funds nationwide. Note: Vermont has a 12-month window for claiming surplus at the municipality level. For practical recovery purposes, focus on larger cities where surplus amounts are more likely to be significant.

To claim surplus funds from a tax foreclosure sale in Vermont: 1. Determine whether surplus exists: Contact the Local Tax Collector or Treasurer in the town where your property was located. Ask whether surplus (residue) was generated from the sale of your property. 2. Contact the commissioner: If a commissioner was appointed to handle the sale, they are responsible for distributing the residue. The court records should identify the commissioner. 3. File a claim with the court: Because Vermont's tax foreclosure is a judicial process, claims to surplus may need to be made through the court that issued the foreclosure decree. Contact the superior court in the county where the property was located. 4. Provide documentation: - Government-issued identification - Proof of ownership at the time of the tax lien (deed, tax records) - Any correspondence related to the foreclosure proceeding 5. Court determination: The judge will review claims and approve the commissioner's distribution of the residue to entitled parties. 6. Check unclaimed property: If the surplus has been held for more than one year and has been deemed abandoned, it may have been transferred to the state's unclaimed property division. Search Vermont's unclaimed property database. 7. Receive payment: Once the court or unclaimed property division approves your claim, you will receive payment.

Key deadlines in Vermont: - Two-Year Delinquency Trigger: Tax liens can be foreclosed when taxes remain unpaid more than two years after the lien is created. - 15-Year Lien Duration: The tax lien remains in full force for 15 years from the date the grand list is filed with the town clerk. - One-Year Redemption Period: After the judge issues a foreclosure decree, the property owner has one full year to redeem the property by paying the delinquent taxes. The commissioner can only sell after this period expires. - One-Year Abandonment Presumption: Under Title 27, Section 1242(a)(11), property held by a court or government agency is presumed abandoned one year after it becomes distributable. This means surplus funds that remain unclaimed for more than one year after the sale may be transferred to the state as unclaimed property. - Act Promptly: Given the one-year abandonment window, former property owners should file claims as soon as possible after the commissioner's sale. Once funds are transferred to unclaimed property, the process becomes more complex. The one-year abandonment timeline is relatively short compared to many states. Property owners should not delay in pursuing their surplus.

AuctionBlock.org is a mission-driven company that provides assistance to former property owners seeking to recover surplus funds from tax foreclosure sales. In Vermont, where the process is judicial and involves a court-appointed commissioner, navigating surplus recovery can feel overwhelming. AuctionBlock.org can help: - Free research: We will contact the town Tax Collector or Treasurer and the superior court to determine whether surplus exists from your property's sale. - Free claim preparation: We will help you assemble the necessary documentation and file your claim with the court or unclaimed property division. - Timeline management: We will help ensure your claim is filed before the one-year abandonment presumption kicks in. - No fees: Unlike for-profit services, AuctionBlock.org charges absolutely nothing. You keep 100% of your recovered surplus. - Redemption guidance: If you are still within the one-year redemption period, we can help you understand your options for reclaiming your property. - Education and prevention: We provide free resources about tax foreclosure prevention and property owner rights in Vermont. Do not let your surplus funds slip away to the state as unclaimed property. Contact AuctionBlock.org today for a free consultation about your Vermont tax foreclosure surplus claim.