A tax collector’s deed supported by a report of sale meeting the requirements of 32 V.S.A. §5255 operates as a conveyance of legal title to the interest in the land sold at tax sale when the tax collector’s deed has been properly executed and recorded after the time for redemption has passed. Marketable title will require that: (i) the title examiner make additional inquiry to determine that notice of the tax sale was given consistent with the requirements of 32 V.S.A. §5252 and §5253 and constitutional due process; and, (ii) the one year statute of limitations has passed (32 V.S.A. §5263). In the case of a potential or actual defect in the tax sale, a title examiner may also rely upon a final court order confirming title.
Comment 1 Adequate statutory notice may nonetheless violate constitutional due process, in that Vermont Statutes do not require proof of actual receipt of notice. See, Jones v. Flowers, 547 U.S. 220 (2006); See also Turner v. Spera, 140 Vt. 19 (1980). See also Hogaboom v. Jenkins v. Town of Milton, 2014 VT 11.
Comment 2 The tax collector’s deed conveys title against the taxpayer and anyone claiming under the taxpayer. 32 V.S.A. §5261. However, the State of Vermont Tax Department has expressed a position that tax sales do not extinguish State Tax liens recorded against the property. The Committee takes no position on the State’s asserted rights. The United States may take the same position with respect to Federal Tax liens.
Comment 3 The statutes of limitations applicable to the tax sale titles include:
(a) 32 V.S.A. §5294(4) and §5295(3).
(b) 32 V.S.A. §5263.
(c) 12 V.S.A. §501.
Comment 4 Another area of judicial inquiry, also with a constitutional due process element, has been the disparity between tax sale price and property value, Bogie v. Town of Barnet, 129 Vt. 46 (1970); Price v. Leland, 149 Vt. 518 (1988). However, in response to Bogie and its progeny, current best tax sale practices incorporate a method for determining whether the premises are divisible (so that less than the whole can satisfy the obligation), and for protecting the excess proceeds for the taxpayer. The 1995 amendment to 32 V.S.A. §5254 adding subsection (b) is also clearly directed towards the “divisibility” issue. The Vermont Supreme Court has not had this issue before it since the amendment was enacted.
Comment 5 A notice of tax sale should inform the taxpayers that they may seek an abatement of the taxes. Windsor v. Blanchard, Windsor Superior Court, April 4, 2000. S528-11-99 Wrcv.
Comment 6 Marketable title may be established when the grantee named in the tax collector’s deed and such grantee’s successors in title have held continuous, open, and notorious possession of the property described in the tax collector’s deed for a period of at least fifteen years.
Comment 7 The issue of distribution of excess proceeds from a tax sale is unsettled. See In Re Estate of Mary Lee Settle-Tazewell, District of Orange Probate Court, Docket No. OeP 025-09 ET.
Comment 8 An examiner may wish to consider whether the tax sale could be a fraudulent transfer. See In Re: Lauren Jo Chase, United States Bankruptcy Court, District of Vermont, Case #02-10582, Adversary Proceeding #03-1058. 9 VSA 2293(2) Act 117 amended 9 VSA §2293 by reducing the statute of limitations relating to fraudulent transfers from four years (prior to 7/1/18) to two years (on and after 7/1/18).
Comment 9 Subsection (ii) of the Standard was amended to change the statute of limitations from three years to one year per Act 117 of the 2017-2018 Legislative Session.
September 24, 2010:
- This Standard was added.
September 20, 2012:
- Standard revised by adding last sentence; original last sentence moved to Comment 6. Citation was added to the Flowers decision in Comment 1.
September 18, 2014:
- Standard revised to add the Hogaboom case citation to Comment 1 and to add Comment 7.
- Comment 8 was added.
September 2018 Standard was revised as follows:
- Comment 8 was revised to reflect the statutory changes in Act No.117 of the 2017 – 2018 Legislative Session.
- Comment 9 was added to reflect the statutory changes in Act 117 of the 2017-2018 Legislative Session.