Illinois lawmakers finally pass bill to end home equity theft
The state finally passed legislation to comply with a 2023 U.S. Supreme Court ruling that the government may not keep surplus equity when property is sold for unpaid taxes.
Illinois lawmakers finally passed legislation to become the last state in the country to comply with a three-year-old U.S. Supreme Court ruling.
State law allows the government to take an entire property for unpaid property taxes, even when they’re much less than the value of the property.
House Bill 4537 brings the state into compliance with the 2023 high court decision in Tyler v. Hennepin County, which ruled that in taking property, state governments must give owners the value that exceeds the amount owed in taxes.
Since the ruling, local governments in Illinois have been vulnerable to litigation without a clear constitutional process for collecting delinquent property taxes. Just last month a federal district court ruled that Cook County was in violation of the constitution and potentially on the hook for millions of dollars owed to owners who lost their properties.
If Gov. J.B. Pritzker signs HB 4537, a new public auction would sell property deeds themselves instead of a tax lien that gives the buyer ownership over the property if homeowners fail to pay off the taxes by the redemption deadline. Counties other than Cook would be allowed to acquire delinquent properties and sell them directly at auction.
The measure also would give the original property owner the right to any sale proceeds over the amount owed in property taxes and also gives an owner three years, up from 2.5, to prevent the sale by paying the unpaid taxes.
HB 4537 also creates a temporary fund to compensate owners who lost their surplus equity. The fund would pay claims, with the money coming from fees charged to tax buyers. Counties would remain on the hook for remaining claims if the fund runs out of money.
The bill also establishes a pilot program authorizing Cook County to acquire and directly auction off properties from the first six tax sales rather than first selling the tax liens to private buyers before the redemption period has passed. The fate of Cook County’s system depends on the success of the pilot program.