The Chancellor, a new, Victorian-style condominium complex at Washington Circle NW, is on the verge of bankruptcy, and the lenders are ready to foreclose on the project.

A newspaper notice this week said that units in the property would be auctioned off at the request of the lenders. The auction originally was set for next Monday, but has been rescheduled for Dec. 7, an auctioneer at Thos. J. Owen and Son said.

The developer--Circle Associates, headed by Simon Hershon--has not been able to sell many of the 51 residential units in the complex and cannot paid subcontractors for work already completed, sources said. The carrying costs of the construction loans are too great for the development firm to stay in business unless an accommodation can be reached with the lenders before Dec. 7, they said.

In addition, the developer is facing a lawsuit by a group of doctors who say the common elements on units they bought for a medical offices have not been finished as promised.

Hershon and officials at First National Bank of Maryland, the lead lender on the project, were not available for comment.

Hershon began buying property on the circle in 1979 but ran into problems when he discovered that the Foggy Bottom and West End Advisory Neighborhood Commission had filed a landmark application on the buildings.

Later he and the ANC reached a settlement in which he agreed to renovate the residences in a Victorian style according to a design by an architect recommended by the ANC. He was unable to demolish the buildings and was restricted on the height of the structure.

These restrictions plus the delays caused by the ANC fight increased development costs considerably, sources familiar with the project said. While the cost of building a comparable high-rise would be less than $100 a square foot, the costs at the Chancellor were about $170 a square foot, one source said. This meant that prices on the units were high compared with similar condominiums, several sources reported.

The developer had to go through another battle with the ANC in 1980 when he decided to sell some of the units as doctors' offices. This was settled when Hershon's agreed to limit the medical offices to one area of the complex.

The doctors have formed an umbrella group called Washington Circle Clinical Associates and are suing the developer to force completion of common elements.