Detailed answer: How surplus funds from a tax sale are handled in Vermont

When a municipality sells real property to collect delinquent property taxes, the sales price can sometimes exceed the total amount owed for taxes, interest, costs, and fees. Any amount left over after the municipality and other entitled parties are paid is called the surplus or excess proceeds.

Who has a claim to surplus funds?

• The municipality is paid first for the delinquent taxes, interest, and authorized sale costs.
• Other lienholders (for example, recorded municipal assessments, tax liens, or certain judgments) may have priority under state law.
• After payment of municipal liens, sale costs, and any higher-priority liens, any remaining surplus generally belongs to the former record owner and then to other claimants holding valid recorded interests (e.g., mortgagees) in the order of their priority.

Practical steps to recover surplus proceeds

1. Confirm whether a surplus exists. Contact the municipal treasurer, tax collector, or town clerk for the town where the property is located. Ask whether the tax sale produced surplus proceeds and whether the treasurer holds those funds.
2. Ask the municipality for the procedure and forms. Many Vermont towns have a standard claim form or process. The treasurer will tell you what documentation they require to consider a claim (proof of identity, proof of ownership or lien, recorded documents, etc.).
3. Prepare and submit documentary proof. Typical documents include a recorded deed showing ownership at the time of sale, recorded mortgages or liens, certified copies of judgments, photo ID, and any affidavits the town requires. If you are claiming as a mortgagee or other lienholder, provide the recording references.
4. File a written claim promptly. Timely filing is important. Municipalities often will not release surplus funds until they have cleared all potential claims and satisfied statutory requirements. If multiple claimants exist, the town may hold the funds until the claimants agree or a court decides priority.
5. If the town denies your claim or multiple claimants contest distribution, you may need to go to court. The treasurer may petition the Vermont Superior Court (or a claimant can file a civil action) asking the court to order how the surplus should be distributed. If court is required, parties present their documents and legal arguments, and the court decides distribution based on priority rules and applicable statutes.
6. If you are the former owner: If you believe you are entitled to the surplus as the owner at the time of sale, the municipality will typically require documentation proving your prior ownership (recorded deed) and identity. If you had junior lienholders, they may also assert claims.
7. Expect administrative timelines and potential delays. The municipality must follow statutory notice, accounting, and distribution rules before releasing funds. If the town must investigate multiple claims or the matter proceeds to court, payment can take weeks or months.

Where to find Vermont law and municipal guidance

Vermont statutes governing property taxation, collection, and related procedures are in Title 32 — Taxation. For an overview of statutes that govern municipal tax collection and sales, start with the Title 32 index available from the Vermont Legislature:

https://legislature.vermont.gov/statutes/title/32

For practical information about Vermont property tax administration, forms, and municipal contacts, see the Vermont Department of Taxes at:

https://tax.vermont.gov/

When the town holds the funds and you disagree

If the town refuses your claim or multiple claimants dispute priority, you generally have two options:

• Work through the town’s administrative process (submit additional documentation, provide affidavits, negotiate with other claimants).
• File a civil action in Vermont Superior Court asking the court to determine the rightful recipient(s) of the surplus proceeds. The court will resolve competing claims and order distribution according to law.

Who pays legal costs?

Costs vary. If you hire an attorney to pursue surplus proceeds, you will generally pay that attorney unless a court awards attorney fees in rare circumstances. Municipalities will typically deduct authorized sale costs before releasing any surplus.

Key takeaways

• Contact the municipal treasurer or tax collector first — they hold the funds and control the initial claims process.
• Gather recorded documents proving your interest (deed, mortgage, lien records, judgments) before submitting a claim.
• Be aware that competing claims may require court resolution; consider legal help if your claim is contested or complicated.
• Reference Vermont law in Title 32 for the statutory framework and consult the Vermont Department of Taxes for municipal procedures.

Helpful hints

• Act quickly. Administrative and statutory time limits can bar recovery if you wait too long.
• Start with the town office where the property is located — treasurers and tax collectors handle surplus claims routinely and can tell you the local steps and forms required.
• Bring or attach certified copies of recorded documents; the town will usually need recording references (book/page or instrument number) or a recording date.
• If you are a lienholder, provide proof of lien priority (recording date and instrument number). Priority determines who is paid from surplus funds.
• Keep copies of all communications and receipts. If the dispute goes to court, clear documentation speeds resolution.
• Be prepared for the town to hold funds pending resolution of competing claims; towns will not release funds until they follow statutory distribution rules or obtain a court order.
• If you are unsure of your rights or your claim is contested, consult an attorney who handles property, tax sale, or title disputes — especially if large sums are involved.