Eye On Illinois: Lawmakers must change tax delinquency rules to align with court rulings

Critical mass, falling dominoes or whichever metaphor you prefer, it appears Illinois lawmakers must finally address the state’s delinquent tax sale system.

In May 2023, the U.S. Supreme Court ruled unanimously in Tyler v. Hennepin County, a Fifth Amendment decision stemming from Minnesota that functionally held a government can’t foreclose on and sell a property without compensating the original owner for their equity.

Last October, U.S. District Judge Sara Ellis refused to dismiss a class-action complaint against nine Illinois counties regarding the application of state law. Under current rules, counties place a first-priority lien on delinquent properties. The unpaid property tax amount starts accruing interest, and if the owner can’t pay back the county, a state court requires the county treasurer to offer the dollar amount in an annual sale.

During that process, according to Ellis, “potential buyers, who are often corporations and LLCs, but occasionally individuals, bid on the interest rate they will charge the property owner to redeem the property.” Whoever bids the lowest rate immediately pays the county the balance, which gives them the right to collect the money back from the property owner along with their interest rate and also place a lien on the property.

The winner has to give the owner time to repay, typically 30 months. If they fail, the bid winner can ask a state court to declare them the owner of the property and evict any current occupants. Usually, the winner doesn’t want to occupy the property, but if they sell at market rate they stand to make a tidy profit while the original owner just loses out on whatever equity they had in the home or mortgage.

So there was little reason for surprise when Rep. Will Guzzardi, D-Chicago, filed House Bill 3146 earlier this month. The main change would be converting to an auction process wherein the county would set the minimum bid for a property as a combination of taxes owed along with interest and fees. If no one pays that amount, a tax buyer can get the deed by default. But if a home has value, the sale price would exceed the amount owed and the original owner would get the difference.

Obviously, the surest way to keep your property is to stay current on taxes. The debates on the reasonableness of the entire property tax code have raged for years with no sign of stopping. But on this specific issue, courts have made it clear the status quo is unsustainable.

If the General Assembly doesn’t enact change, it may be forced upon Illinois. There’s no telling how many property owners have seen equity vanish over the decades, but the time has come to prevent future losses.

• Scott T. Holland writes about state government issues for Shaw Local News Network. He can be reached at sholland@shawmedia.com.