Illinois Updates State Delinquency Legislation

Illinois lawmakers have passed a new bill that could significantly change how delinquent property taxes are handled. The Illinois House and Senate approved House Bill 4537, updating the rules for selling property tax debt. The bill is now waiting for the governor’s signature.

Before this bill, Illinois counties sold property debt to investors who could ultimately seize property if owners failed to redeem their delinquent status. In Tyler v. Hennepin County, the U.S. Supreme Court unanimously held that local governments cannot keep the surplus equity when they seize and sell a home to collect unpaid property taxes. Illinois is the only state affected by the ruling that has not yet reformed its property tax debt system.

Under House Bill 4537, the Cook County treasurer’s office will have six more annual tax sales, with the last sale occurring in 2030. Additionally, this legislation calls for Cook County to concurrently run a pilot program allowing the county to withhold 100 delinquent tax certificates at each of the final six sales. The program is limited to properties whose owners have claimed a homeowner’s exemption and whose certificates are among the county’s lowest tax debts. Selected properties will have the opportunity to enroll in an installment plan that allows fractional payments over a three-year redemption period. Currently, property owners have two and a half years to clear debt with no payment plan available.

House Bill 4537 also creates a surplus equity fund for at-risk property owners who may lose their properties after their delinquent tax certificates have been purchased. In these cases, the tax buyer may pursue the deed to the property, triggering foreclosure. Under the new system, property owners would be able to file a claim to recover lost equity in their homes from the surplus equity fund, financed by additional fees paid by property tax buyers.

In the current system, Cook County can put tax liens on property with at least one year of delinquent property taxes and then sell those liens at the annual tax sale. During the redemption period, homeowners must pay the tax buyers the original debt amount, in addition to fees and interest. 90-95% of property owners settle their outstanding debt within the 2.5-year period. If those who do not reclaim their interest do not do so, a tax buyer can petition the court for the deed to the property. When a tax buyer secures the deed to a property, the property owners have no equity in the home.

Under the new system, delinquent tax certificates will continue to be sold after the county completes six annual tax sales. However, if a tax buyer or another interested party seeks the deed to a property, the property will be auctioned, and the proceeds will first be used to satisfy the tax debt. The opening bid will equal the total amount of delinquent property taxes. Any amount above that total will be treated as surplus equity and paid directly to the homeowner. Property owners may also participate in the public auction. For tax certificates not purchased at the sale, the county will offer homeowners the option to enroll in a payment plan.

For more information related to Illinois House Bill 4537 or how this may affect your property, please contact the qualified attorneys at Rock Fusco & Connelly, LLC.