Illinois Lawmakers Let Problematic Tax-Sale System Slide

Illinois’ long-troubled property tax sale system is under growing legal and political scrutiny, Crain’s reported. Two more federal lawsuits are challenging the state’s handling of delinquent tax sales, and a last-minute legislative proposal failed to impose a moratorium on tax lien sales.

The lawsuits, filed this week in U.S. District Court by Lombard attorney David Sigale, come two years after the U.S. Supreme Court ruled in the case Tyler v. Hennepin County that tax sales cannot strip homeowners of surplus equity above what’s owed in back taxes. Home equity theft via property tax liens is common in Illinois but has been reformed in 11 other states.

Cook County is poised to seize a home worth $130,000 over just $11,500 in unpaid taxes, violating the homeowner’s Fifth Amendment rights, according to one of the lawsuits, filed on behalf of a south Cook County homeowner.

The other lawsuit, filed on behalf of Chicago- and Naperville-based tax buyers, claims counties have left them holding “worthless” deeds under a tax sale system the Supreme Court has effectively invalidated.

The lawsuits pile onto existing legal pressure. In late April, Lake and DuPage counties filed nearly identical federal complaints, arguing the state is forcing them to run foreclosure sales they know are unconstitutional, risking liability whether they comply or not.

The Illinois General Assembly closed its session over the weekend without addressing the issue. An amendment to the property tax code that would’ve put a moratorium on tax sales until next spring failed to advance in the Illinois Senate, leaving any legislative action on hold until at least the fall veto session.

The stakes go beyond the courtrooms. Illinois’ opaque, unpredictable and litigation-prone property tax system has already eroded investor confidence, particularly in Chicago. Some institutional investors rank Cook County’s tax unpredictability among the top reasons they avoid the city, despite strong fundamentals like rent growth, transit access and a diverse economy.

— Judah Duke