Vermont Ways & Means hears report on Act 106 tax-abatement and tax-sale changes; working group backs $1,500 minimum before tax sale

BURLINGTON, Vt. — At a Feb. 12 Ways & Means Committee hearing, legislative staff and members of a multi-stakeholder working group reviewed how Act 106 changed municipal tax-abatement and tax-sale law and recommended several next steps, including a widely supported proposal to require at least $1,500 in delinquent municipal charges before a town may initiate a tax sale.

Kirby Keaton, city council staff, summarized Act 106’s principal changes, saying the law added a one-year waiting period before a municipality may initiate a tax sale and requires the municipality to offer a “reasonable repayment plan” before moving to sale. Keaton noted the statute also expanded what municipal charges may be abated, added rules for class abatements (for groups of similarly affected properties), extended notice periods, and required translation resources for notices.

Why it matters: The tax-sale and abatement process affects low- and moderate-income homeowners, mobile-home residents and municipal budgets. Vermont Legal Aid, municipal officials and investor-practitioners gave sharply different views on how often tax sales turn into permanent loss of housing and on which reforms would best protect homeowners while preserving town finances.

What Act 106 changed

- Waiting and repayment: Act 106 requires that taxpayers be delinquent for at least one year before a tax sale can be initiated and that a municipality offer a reasonable repayment plan first. Keaton said a taxpayer may refuse or fail to respond and an initiated sale may proceed if the plan is denied, unanswered or violated.

- Notices and translations: The statute lengthened some notices to 30 days, requires first-class mail and, if available, email; requires posting a notice on a structure’s front door when appropriate; and mandates that a translation resource be offered with notices and on the property tax bill backer (the informational material the Department of Taxes provides with tax bills).

- Abatement procedure and class abatements: The law clarifies required written findings when a board of abatement acts, broadens abatable municipal charges (including some utility/service fees), and allows class abatements in narrowly defined situations (for example, many properties damaged in a natural disaster), provided any partial abatement is proportional for all members of the class.

- Redemption interest and timing: Keaton described the redemption mechanics: a purchaser receives monthly interest (1% per month) on the sale price during the one-year redemption period and surplus sale proceeds (amounts paid above the tax debt) go to the prior owner. The law also adds notices to warn owners 90–120 days before the end of the redemption period.

Working group recommendations and areas of agreement

The working group included representatives from Vermont Legal Aid, the Vermont Bankers Association, the Vermont League of Cities and Towns (VLCT), Vermont Housing Finance Agency, NeighborWorks Alliance of Vermont, the Champlain Valley Office of Economic Opportunity’s Mobile Home Project, municipal clerks/treasurers, listers and a bar association representative. Participants reported one clear area of consensus: a $1,500 minimum delinquency threshold before a town may initiate a tax sale.

- Threshold: Chris D’Elia, president of the Vermont Bankers Association, said the group settled on $1,500 as a “reasonable” threshold that balances avoiding tax sales for very small debts while not making the threshold so high municipalities could not recover amounts owed.

- Data collection: The working group and stakeholders urged a statewide data-collection system so policymakers can track how many tax sales occur, which properties are redeemed, and how much equity owners lose. Vermont Legal Aid and other witnesses said existing public records are fragmented and incomplete.

Divergent views from advocates, investors and municipalities

Vermont Legal Aid. “We are hearing from and working with hundreds of low- to moderate-income homeowners who are facing either mortgage foreclosure or property tax sale,” said Asden, director of the Consumer and Homeowner Rights Project at Vermont Legal Aid. Legal Aid’s testimony urged the $1,500 threshold and a statewide registry of tax-sale notices, arguing many low-income owners — especially mobile-home residents and people who do not file income tax returns because they are below filing thresholds — do not receive or do not understand information about available property tax credits and therefore accrue larger delinquencies.

Investor/practitioner evidence. Alan Bjerke, an attorney who has attended more than 100 tax sales, presented a different picture from his 2022 data: of roughly 115 properties that were noticed and actually went to sale in his sample year, only 36 deeds issued to purchasers; more than half of the properties were paid off before the sale; and many parcels sold were vacant, landlocked or parts of mass-subdivisions of tiny parcels rather than occupied homes. Bjerke warned that a $1,500 threshold could make collection on many tiny, low-value parcels effectively impossible.

Municipal concerns. VLCT witnesses and municipal tax collectors told the committee that while Act 106’s longer timelines and repayment-plan requirement have brought some taxpayers to the table, municipalities remain liable for education taxes and may bear cleanup costs or other expenses when properties are delinquent. VLCT said towns are concerned about the fiscal effects of higher thresholds and urged clarity on allowing municipalities to recover cleanup, salvage or hazardous-waste-removal costs when a property ultimately sells (a legislative proposal, H.72, was mentioned by witnesses as a potential vehicle to allow such recovery).

Other contested topics

- Equity restitution: The group did not reach agreement on requiring the law to account for full homeowner equity (the difference between appraised/market value and sale proceeds) when a home is lost at tax sale. Proponents argued for protecting homeowners’ equity; opponents said factoring full equity would discourage bidders and could leave towns owning blighted properties.

- Interest rate during redemption: Stakeholders remain split on whether the statutory 1% per month interest to purchasers should be reduced (advocates say it impedes redemption) or kept (some argue it incentivizes bidders and thus helps towns be made whole).

- Purchaser rights during redemption: The working group generally opposed granting purchasers or towns express statutory rights to enter and secure properties during the redemption period because purchasers do not hold title until redemption ends, and existing law enforcement and municipal tools were judged preferable.

Clarifying details recorded in the hearing

- Statutory and procedural numbers: one-year waiting period before initiating tax sale; 30-day notice requirement in some contexts; redemption period of one year with 1% per month interest to the purchaser during redemption; recommended minimum debt threshold of $1,500 (working group consensus).

- Data observations: Alan Bjerke reported surveying roughly half of Vermont towns and compiling 2022 tax-sale records; his sample showed 115 properties sold at auction that year and only 36 deeds issued to purchasers. Vermont Legal Aid reported instances of sales initiated for amounts under $1,000 in some towns and cited examples of tax delinquencies of a few hundred dollars leading to tax-sale notices in prior years.

- Notice and outreach: Act 106 expanded bill-backer information to all residential properties (not only those that filed a homestead declaration) to increase awareness of property tax credits; required a link or resource for translations.

What the committee will do next

Committee members said they have limited time this session and may keep changes narrow, focusing first on the $1,500 threshold and on implementing or funding better statewide data collection. Lawmakers discussed revisiting reimbursements for municipalities that abate education taxes in disaster situations through the budget or budget-adjustment processes.

No formal legislative votes were taken during the hearing; witnesses gave testimony and the committee scheduled follow-up appearances by practitioners and municipal officials in coming weeks.

Ending: The Ways & Means Committee will consider the working group report as it weighs whether to pursue statutory or budgetary changes, with more hearings and written materials to come.