A Greensboro family will not lose their 300-acre farm after being sued by an out-of-state company that claimed the family owed $1,500 interest on tax debt. And a 66-year-old woman will get back her house after the village of Orleans seized it over a $6,500 tax bill.
Both cases are tied to tax sales — a process municipalities use to collect unpaid taxes, but can also lead to people losing their homes. As Vermont Public reported in March, advocates for low-income Vermonters have been concerned about the process. They are now hopeful that recent legislative changes will add some guardrails.
Tax sales allow municipalities to sell a resident's property if they fall behind on their taxes and then use the proceeds to cover the unpaid taxes. Homeowners don’t immediately lose their property; they have a year to pay off their debt, which includes fees and interest, or the winning bidder gets the house.
The Shatneys went through the tax sale process two years ago after falling behind on taxes and owing the town of Greensboro just under $8,100. The town auctioned off the Shatneys' half million dollar farm, which had been in their family for more than a century, for $24,000 to New Hampshire-based Rocco Realty.
The Shatneys eventually paid what they owed the town, but Rocco Realty claimed the town of Greensboro didn’t charge full interest on their bid. State law allows investors to collect 1% interest per month on their winning bid. The company went to court and asked for the deed to the Shatneys' farm.
But the court ruled that since the Shatneys paid the amount the town told them they needed to pay to redeem their property, even if there was an error in the interest calculation, the court couldn’t force the Shatneys to hand over their deed.
“It was a huge relief,” Christine Shatney said in a recent phone interview. “We went for months there not knowing how things were gonna work.”
The lawsuit shifted to a debate over the amount of interest owed to Rocco Realty. Eventually, the parties agreed to settle rather than continue litigation over a small amount of money, said Greg Fox, an attorney at Vermont Legal Aid who represented the Shatney family.
“At the end of the day, the settlement essentially was [to] take the money that was originally paid,” Fox said in a recent interview.
The Shatneys didn’t have to pay the $1,500 interest Rocco Reality claimed they were owed, but the family did have to pay $1,000 towards legal fees incurred by their mortgage lender during the lawsuit. That amount was rolled into their home loan, according to the settlement.
Rocco Realty manager Marisa Smith, in a phone interview, called the lawsuit a waste of time and money.
“We were never after the property, we just wanted the law to be followed in terms of the proper amount of interest according to Vermont law,” Smith said. “I hope the Shatneys can keep their property forever and ever — and I really mean that.”
The Shatney lawsuit isn’t the only tax sale-related legal fight that has been recently settled. On June 17, Vermont Legal Aid announced that the village of Orleans agreed to return a 66-year-old woman’s house to her after it was seized through a tax sale. The village took Penny Flynn’s home, which was assessed at $79,300, for a $6,500 tax debt.
Vermont Legal Aid sued the town of Barton and village of Orleans in late January, alleging that municipal officials failed to give Flynn the required 10-day notice prior to the tax sale and took her property without just compensation or due process.
Under the settlement, there will be a lien on Flynn’s house until she pays her tax bill.
“The client has a decision to make — whether to come up with the money to pay off the lien to get it off the house, or to sell the property and recover her equity,” Fox said.
New legislation signed by Gov. Phil Scott this year could help prevent Vermonters from getting into situations like those faced by the Shatneys and Flynn.
The bill, Act 106, requires towns to send a 30-day notice to homeowners before a tax sale, and requires towns to pin a notice to a house if certified mail bounces back. Towns must now offer people repayment plans prior to the tax sale process, and the plans are required to take into consideration factors that led to their delinquency.
“We're hopeful that for our really low-income, fixed-income clients, that will mean more favorable repayment terms that they can actually manage,” said Grace Pazdan, an attorney at Vermont Legal Aid.
The Vermont League of Cities and Towns is generally on board with the changes, since most codify best practices for municipalities, said Ted Brady, VLCT’s executive director.
But Brady is concerned about one provision in Act 106 that requires towns to wait until homeowners are a full year behind on their taxes before initiating a tax sale. That could allow large amounts of debt to build up and saddle municipalities who need those funds for things like the state education fund.
“If you don't give towns the ability to collect from non-paying taxpayers, then everybody else is going to have to pay,” Brady said.
For the Shatneys, their recent experience inspired them to tie their tax payment to their monthly mortgage payments so they wouldn’t have to go through another tax sale. Even though their monthly bills are higher now, it brings them peace of mind.
“Some months are struggles,” Christine Shatney said. “But so far, so good.”
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