Vermont Foreclosure Law

Quick Facts
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust, Mortgage
- Timeline: Typically 210 days
- Right of Redemption: Yes
- Deficiency Judgments Allowed: Yes

In Vermont, lenders may foreclose on mortgages or deeds of trust in default using the strict or the power of sale foreclosure process.

Strict Foreclosure
The strict foreclosure process is based on the premise that the lender owns the property until the mortgage has been paid in full. If the borrower breaks any of the conditions established in the mortgage prior to the time the loan is paid in full, he or she will lose any right to the property and the lender will either take possession of the property or arrange for it's sale. In Vermont, a suit must be filed in the county where the property is located before either of these actions can occur. The borrower will be served a summons to appear before the court and informed of his rights, at which time the lender may move for a summary judgment and avoid the trial altogether.

Regardless, the borrower has either a six (6) month (post-1968 mortgages) or a twelve (12) month (pre-1968 mortgages) redemption period.

Power of Sale Foreclosure
A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee.

In Vermont, power of sale foreclosures are conducted either judicially or non-judicially, depending on the type of property securing the deed of trust or mortgage.

Judicial Foreclosure
In Vermont, lenders who wish to obtain a foreclosure using the power of sale clause in the deed of trust must first file a complaint in a court having jurisdiction in the county where the property is located to try and obtain a decree of sale. This form of foreclosure must be used when the property includes a dwelling of two units or less, with the owner using said property as their principal residence. The sale of this type of property may not be held until seven (7) months after the decree of sale has been issued.

Non-Judicial Foreclosure
In Vermont, when a power of sale is contained in a mortgage relating to any property except for a dwelling house of two units or less, that is occupied by the owner as a principal residence, or farmland, the lender may exercise the power of sale without first commencing a foreclosure action or obtaining a foreclosure decree.

Power of Sale Guidelines

At least thirty (30) days prior to the publication of a notice of sale, a notice of intent to foreclose must be sent to the borrower by registered or certified mail at his or her last known address. The notice of intent must include information on the mortgage to be foreclosed, state the condition breached and the lenders right to accelerate the mortgage, and include the total amount necessary to cure the default. The borrower must also be informed that he or she is entitled to receive a notice of sale at least sixty (60) days prior to the date of sale.

The borrower may redeem the property at any time prior to the foreclosure sale by paying the full amount due on the mortgage, plus costs.

The sale must be held on the property itself, unless otherwise ordered by the court, and the property must be sold to the highest bidder. Anyone may bid at the sale, including the lender. The borrower is entitled to receive any surplus from the sale, but they may also be sued for deficiency if the sale price is not enough to cover the amount of the mortgage in default.

If the property is sold without court action, as in non-judicial foreclosure by power of sale, the notice of sale must include the following language:

"The mortgagor is hereby notified that at any time before the foreclosure sale, the mortgagor has a right to petition the superior court for the county in which the mortgaged premises are situated, with service upon the mortgagee, and upon such bond as the court may require, to enjoin the scheduled foreclosure sale. Failure to institute such petition and complete service upon the foreclosing party, or their agent, conducting the sale prior to sale shall thereafter bar any action or right of action of the mortgagor based on the validity of the foreclosure, the right of the mortgage holder to conduct the foreclosure sale, or compliance by the mortgage holder with the notice requirements and other conditions of section 4532 of Title 12. An action to recover damages resulting from the sale of the premises on the date of the sale may be commenced at any time within one year following the date of the sale, but not thereafter."