Illinois county updates property tax sale rules after court warnings
Rock Island County required tax buyers at its Dec. 30 sale to attest they would protect homeowners’ equity as judges warn Illinois counties may be liable.
An Illinois county altered its property tax sale process after federal judges warned counties – not the state – could be responsible for repaying homeowners whose equity was taken under Illinois’ unconstitutional tax sale system.
Rock Island County required tax buyers participating in the sale to certify that if they ultimately take ownership of a property, they must pay the former homeowner the value of the home above what was owed in back taxes. The requirement marks the first known instance of an Illinois county altering its tax sale process in response to federal court rulings declaring the state’s system unconstitutional.
“We came to a real fork in the road,” Rock Island County Treasurer Nick Camlin said. He was referring to the growing pressure on Illinois counties as litigation over the state’s tax sale system continues.
In September, U.S. District Judge Nancy Rosenstengel of the Southern District of Illinois ruled counties may be liable for failing to return surplus equity to homeowners, even though Illinois law governs tax sales. Her decision allowed a proposed class-action lawsuit against several downstate counties to proceed.
While state law mandates the use of tax sales, Rosenstengel wrote it does not require counties to issue tax deeds without providing just compensation. The decision not to return excess equity is a discretionary choice made by county treasurers, she stated.
“It is not the bare issuance of the tax deed transferring the property that violates the Constitution,” Rosenstengel wrote. “It is the issuance of a tax deed without providing just compensation for the surplus value.”
In December, U.S. District Judge Matthew Kennelly echoed that conclusion in a ruling involving Cook County, writing that counties have an independent obligation to comply with the Constitution and rejecting the argument they are merely following state law.
Rock Island County’s Dec. 30 requirement appears to be the first time an Illinois county has formally attempted to assign responsibility for paying surplus equity, according to leaders of the Illinois County Treasurers’ Association. However, simply requiring tax buyers to sign an agreement that they will do so may not be enough to shirk county leaders’ liability in the process. If that is the case, taxpayers may still be the ones ultimately paying damages.
Under current state law, when someone falls behind on their property taxes, the county sells that debt to private investors called tax buyers. If the homeowner cannot repay the debt plus interest within what is typically a 30-month redemption window, the tax buyers can take the deed to the home.
The U.S. Supreme Court unanimously ruled in Tyler v. Hennepin County that such practices violate the Fifth Amendment. Other states changed their laws. Illinois has not.
Since 2019, more than 1,000 Cook County homeowners have lost their homes and all their equity, often over tax debts of less than $1,000. Their homes were worth more than $108 million combined.
Researchers estimate tax buyers in Illinois collected at least $148 million more than what was owed between 2014 and 2021. If courts require restitution, counties – and ultimately taxpayers – could be paying to make wronged property owners whole.
Facing mounting legal risk, counties have taken divergent approaches. Cook County has delayed tax sales while litigation proceeds. Rock Island County has attempted to shift responsibility to tax buyers. Other counties continue operating under the existing system.
Homeowners’ rights should not depend on where they live, and counties should not be forced to devise legal workarounds to avoid unconstitutional outcomes. Without statewide reform, Illinois remains the only state that continues to allow property tax sales that strip homeowners of their equity.
Lawmakers have known since 2023 that Illinois law must change. Each tax sale conducted without reform increases the cost that may ultimately fall back on taxpayers.