Vermont HOA Foreclosure Law: When Your Association Can Foreclose on Unpaid Dues

Vermont HOA Foreclosure Law: When Your Association Can Foreclose on Unpaid Dues

Vermont has no state statute that specifically governs how a homeowner association can foreclose on unpaid dues. Your association's authority to place a lien and pursue foreclosure comes from your declaration of covenants, your bylaws, and Vermont common law on lien enforcement. Because Vermont is a judicial foreclosure state for all real property liens, your board cannot foreclose without filing a lawsuit and obtaining a court order.

What Vermont Law Requires

Vermont law does not grant HOAs automatic super priority lien status. When your association records a lien for unpaid assessments, that lien is junior to any first mortgage unless your declaration explicitly provides otherwise and the mortgage lender agreed to subordinate its interest. In practice, this means that if a bank forecloses on a unit, your association's lien is typically wiped out except for a limited amount of past due assessments that some courts may recognize as having priority.

The Vermont Superior Court has jurisdiction over foreclosure actions. Your association must file a complaint in the civil division of the superior court in the county where the property is located. You must serve the defendant owner, provide notice to all lienholders, and allow the owner an opportunity to cure the debt or contest the foreclosure. Vermont does not allow non judicial foreclosure of any real property lien, so your board cannot use a trustee sale or publish a notice of default and proceed without court involvement.

Vermont's strong homeowner protection tradition means courts scrutinize foreclosure actions closely. You must prove that the debt is valid, that your lien was properly recorded, that you complied with all notice requirements in your governing documents, and that foreclosure is a proportionate remedy given the amount owed. A 2019 dispute involving the Stowe Mountain Village Homeowners Association illustrates the importance of documentation. The association filed a foreclosure action against a unit owner who owed approximately $8,400 in unpaid assessments. The owner challenged the lien, arguing that the association had not provided adequate pre lien notice as required by the declaration. The court delayed the foreclosure and ordered the association to produce records of every notice sent. The case settled after six months, but the association incurred more than $12,000 in legal fees.

Pre Lien Notice and Lien Recording

Before your board can record a lien, you must follow the notice procedure in your declaration. Most Vermont declarations require written notice to the owner at least 30 days before the lien is recorded. The notice must state the total amount due, itemize assessments and late fees, provide a deadline for payment, and warn that failure to pay will result in a lien.

Once the notice period expires, your association can record a lien with the town clerk in the municipality where the property is located. Vermont uses a town based land records system, not a county recorder. The lien must describe the property, state the amount owed, reference the authority in your declaration, and include the date through which assessments are calculated. Recording fees in Vermont towns range from $10 to $18 per page as of 2025.

After you record the lien, you must send a copy of the recorded lien to the owner by certified mail. Keep proof of mailing. If the owner pays the debt, you must record a release of lien within 30 days. Failing to release a paid lien can expose your board to claims of slander of title.

The Judicial Foreclosure Process

If the owner does not pay after the lien is recorded, your board can authorize foreclosure. You must retain an attorney. Vermont court rules require that foreclosure complaints be filed by a licensed attorney. The complaint must name the owner, describe the property, attach a copy of the recorded lien, state the amount due with interest and fees, and request a judgment of foreclosure and sale.

The court will issue a summons. The owner has 21 days to file an answer. If the owner does not respond, you can move for a default judgment. If the owner contests the foreclosure, the case proceeds to discovery and potentially a hearing. Vermont courts allow owners to raise defenses including improper notice, failure to follow the declaration, miscalculation of assessments, or waiver by the board.

If the court grants foreclosure, it will issue a judgment and order of sale. The property is sold at a public auction conducted by the sheriff or a court appointed commissioner. The sale must be advertised in a local newspaper for three consecutive weeks before the auction date. Proceeds from the sale go first to the costs of sale, then to the first mortgage holder, then to junior lienholders including your association, and finally to the owner if any surplus remains.

Because Vermont is not a super priority state, your association often recovers little or nothing if a bank forecloses first. If your association forecloses and the property sells for less than the mortgage balance, you may recover only your costs of sale and a small portion of the debt.

Cost and Timeline

Judicial foreclosure in Vermont takes six months to 18 months from the filing of the complaint to the sale date. Legal fees typically range from $5,000 to $15,000 depending on whether the case is contested. Court costs, publication fees, and sheriff fees add another $1,500 to $3,000. If the property is in a rural area with low market values, the cost of foreclosure may exceed the amount owed.

Your board should conduct a cost benefit analysis before authorizing foreclosure. If the owner owes $3,000 and the property has a $200,000 mortgage, foreclosure is unlikely to recover the debt. In that scenario, your better option is to negotiate a payment plan, assess the unit owner for the debt as part of the next budget cycle, or wait for the bank to foreclose and then pursue a judgment for the unpaid assessments.

Payment Plans and Settlement

Vermont law favors settlement. Before filing a foreclosure complaint, your board should offer the owner a written payment plan. A typical plan allows the owner to pay the debt in 12 monthly installments with interest. If the owner misses a payment, the plan terminates and foreclosure proceeds.

Many Vermont associations include a provision in their collection policy that waives late fees and legal costs if the owner enters a payment plan and complies with its terms. This approach reduces legal expenses and keeps owners in their homes. It also protects your board from claims that it failed to mitigate damages.

What Your Board Should Do Now

Review your declaration and bylaws to confirm that they grant your association the right to place a lien and foreclose for unpaid assessments. Check whether your documents specify a notice period, a minimum amount due before foreclosure is allowed, or a requirement that the board vote before taking legal action. If your documents are silent, consult your attorney to determine whether Vermont common law provides sufficient authority.

Create a written collections policy that outlines the steps your board will take when an owner is delinquent. The policy should specify the number of days past due before a late fee is assessed, the number of days before a demand letter is sent, the notice period before a lien is recorded, and the criteria for authorizing foreclosure. Share the policy with all members so that owners understand the consequences of nonpayment.

Document every step of your collections process. Keep copies of all notices, certified mail receipts, lien recordings, and board votes. If a dispute arises, your records will determine whether the court allows foreclosure to proceed. Missing documentation can delay or derail your case.

Consult your attorney for your specific situation before recording a lien or filing a foreclosure complaint. Vermont foreclosure law is shaped by court decisions and procedural rules that change over time. An attorney can confirm that your process complies with current law and that foreclosure is the right remedy given the amount owed and the property's equity position.

How Manorway Helps

Manorway's AI assisted platform helps your board track delinquent accounts, generate demand letters, and maintain a complete timeline of collection actions. You can record board votes to authorize liens or foreclosure, store copies of recorded documents, and set reminders for key deadlines. When your board uses a governance platform to manage collections, you create an audit trail that protects you in court and demonstrates that your process was fair and consistent.

Foreclosure is a last resort, but when it is necessary, clear records and procedural discipline make the difference between success and failure. Manorway helps you stay organized so that your board can focus on governance rather than chasing paperwork.