Vermont towns use tax sales to collect late payments. But critics say the process lacks guardrails.

A dozen or so cows munched on hay in Steve Shatney’s barn on a recent afternoon. Several cows turned as he walked in and a trio of pigs popped their heads over their pen’s fence.

“Oh you’re showing off,” Shatney said with a laugh.

Shatney, 64, has lived and worked on this farm his whole life; it’s all he’s ever wanted to do. His family has owned these 300 acres in Greensboro for more than a century.

In recent years money has been tight. A year and a half ago Shatney sold his 70 milking cows. It was the hardest day of his life, he said.

“The guys, they come in with canes and prods — they don’t know what the hell they’re doing,” Shatney said. “I led every cow onto the trailer myself. I said, ‘You touch them with a prod or anything, you’re going to go right out of here.’”

The Shatneys have had to diversify their offerings to keep the farm going, said Steve’s wife, Christine. The family now raises heifers and pigs, they hay and do some logging. Christine also works two food service jobs. But it can still be tough to keep up with the bills.

“You decide what you absolutely need to pay, and then whatever's left you put aside,” she said. “The taxes was always a little bit lower … we'll make it up next month, we'll make it up next month. And then when it came due, we never had the full amount.”

Taxes in Greensboro are due in early November, and then residents have about seven months to pay off any debt before the town holds its annual tax sale in June.

When homeowners fall behind on their taxes, municipalities can sell their property at an auction. It’s a process that’s called a tax sale. People then have a year to pay off their debt, which includes fees and interest, or the winning bidder gets their house.

Local officials say tax sales are an important tool to ensure municipalities get the taxes they’re owed and they say that people rarely lose their homes — but critics say the process lacks guardrails.

In 2022 the Shatneys owed the town just under $8,100. The town of Greensboro auctioned off their property for $24,000 to Rocco Realty, a New Hampshire-based real estate company.

“The town needs their tax money to pay their bills,” Christine Shatney said. “So they ended up selling the property but then you have a year to redeem.”

In this case, the Shatneys were at risk of losing their half million dollar farm over approximately $8,100 of debt.

The Shatneys eventually paid what they owed, but they still ended up in a fight for their home. State law allows investors, like Rocco Realty, not only to potentially to pick up properties for a fraction of their worth, but also to collect 1% interest per month on their winning bid.

“We paid exactly what the town and what the town's lawyer had written to us saying, ‘this is what you need to pay,’” Christine Shatney said. “And then we found out that that wasn't always the case — or so that company thought.”

Rocco Realty claimed the town didn’t charge full interest on their $24,000 dollar bid. The company didn’t merely ask the Shatneys to pay back the $1,500 in missing interest. They went to court to get the deed to the farm.

“That's pretty scary when you think you're going to lose your home, your livelihood,” Christine Shatney said.

Rocco Realty manager Marisa Smith, in a phone interview, declined to comment on the lawsuit.

Smith, who's a playwright and co-founded a publishing company, has acquired at least two Barre homes through tax sales. She says investors like herself get a bad reputation. Smith is now renovating one of the Barre houses she bought.

“If you look at it from one angle, it's like, ‘Oh, these mean investors just to take everyone's property away,’ ” Smith said. “I mean, it's not that at all. The tax investors take properties that no one has looked at or cared about for years and spruces them up.”

The Shatneys’ situation is unusual, but critics of tax sales say that it highlights broader problems with the process.

“There aren't a lot of guardrails,” said Grace Pazdan, an attorney with Vermont Legal Aid.

State law provides few protections for residents during a tax sale, Pazdan said. And while some towns, like Greensboro, offer repayment plans to help people avoid the process, that's not required under the statue.

Another gap, Pazdan says, is that state law doesn’t specify a threshold for when towns could bring a property to tax sale. Pazdan says in one instance, town officials initiated a tax sale over a $180 debt.

“We thought it was pretty shocking that the towns were really using this very draconian process that has these devastating impacts on families over really small amounts of debt,” Pazdan said.

The Shatney’s situation isn’t the only tax sale case the agency has taken on recently.

In late-January, Vermont Legal Aid sued the town of Barton and village of Orleans alleging that municipal officials failed to give their 66-year-old client the required 10-day notice prior to the tax sale. The woman, who was in Florida for the winter, didn’t get notification and believed her daughter, who was living in the home, was covering the taxes.

“We think it's pretty cut and dry,” Pazdan said. “The village of Orleans took our client's property that's worth at least $79,000, at least according to their own tax assessment … for a $6,500 tax debt. … And they have provided no compensation to her.”

Barton’s town clerk declined to comment.

The Vermont House recently passed a bill that makes some changes to the law, like giving property owners more notification about potential tax sales, and requiring towns to offer repayment plans. The bill is now headed to the Senate Finance Committee.

Some delinquent tax collectors, like Colchester Town Clerk and Treasurer Julie Graeter, already take steps to help residents avoid tax sales. But codifying those practices statewide is a good idea, Grater said.

“It's still going to be additional work on our part,” Graeter said. “But it's additional work that I think is helpful [and] just gives the delinquent taxpayer more opportunity to have a more similar experience from town to town.”

One contentious change in the new legislation is the reduction of interest that tax sale investors can collect on their winning bids. The Vermont League of Cities and Towns is concerned that might dissuade investors from bidding on properties — which would reduce tax revenue for towns.

“I'm nervous that the change to statute could potentially upend that system and make it so nobody's paying those taxes,” said Ted Brady, VLCT’s executive director. “And as a result, every Vermonter is going to have to shoulder the burden of more tax bills going unpaid.”

Back in Greensboro, Steve Shatney took me on a drive around the property. We drove up to a knoll where on a clear day you can see Burke Mountain.

“See that white fence out there — that's where my parents are buried,” he said, pointing to a small paddock. “That's another thing I'm really fighting to keep this place.”

The Shatneys recently got a win — a judge ruled that Rocco Realty wouldn’t be able to seize their home. But the lawsuit hasn’t been resolved, and the Shatneys might still be on the hook for the $1,500 of interest that Rocco Realty says they’re owed.

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