Judge Says Cook County on the Hook for Millions in Tax Sales

Cook County may have to pay back millions of dollars to homeowners stripped of their equity through the county’s delinquent property tax sale system, after a federal judge ruled Monday that officials failed to stop an unconstitutional process that cost thousands of residents their homes.

U.S. District Judge Matthew Kennelly found the county liable for damages tied to tax sales that let investors seize homes over delinquent property tax bills while pocketing any remaining equity. The Chicago Sun-Times reported that the ruling marks another blow to Illinois’ embattled tax sale system.

Cook County Treasurer Maria Pappas has been calling for a legislative fix since the U.S. Supreme Court’s 2023 ruling in Tyler v. Hennepin County, which found that governments violate the Fifth Amendment when they seize properties for unpaid taxes and keep the surplus equity beyond what’s owed.

The decision could expose Cook County to significant payouts tied to nearly 2,500 homeowners who lost properties since 2020 after falling behind on taxes, the newspaper reported. In many cases, the debts were relatively small. Most homes were lost over initial tax debts of $1,600 or less, according to prior reports by the Investigative Project on Race and Equity and Injustice Watch. Those debts totaled about $2.3 million, while the homes themselves carried a combined market value exceeding $108 million.

The system worked by allowing counties to sell tax certificates to investors when property taxes went unpaid. Tax buyers then piled on interest, penalties and fees during a redemption period lasting up to two-and-a-half years. If owners failed to pay, investors could obtain deeds through the courts and force residents out, often capturing tens or hundreds of thousands of dollars in equity in the process.

Kennelly wrote that the county showed “deliberate indifference” toward constitutional violations stemming from the sales. Plaintiff attorney John Bouman argued the ruling confirms county officials had the authority to intervene but chose not to.

Pappas’ office declined to comment Monday, though Pappas has previously warned compensating victims could cost “hundreds of millions of dollars” and financially destabilize the county. Kennelly dismissed that estimate as exaggerated, noting only a fraction of homeowners qualify and pegging the average loss at roughly $70,000. He estimated annual liability at about $15.4 million.

The ruling lands as Illinois lawmakers scramble to overhaul the state’s tax sale framework. Illinois remains the only state not yet compliant with the Supreme Court’s decision. Legislators earlier this year delayed upcoming tax sales while debating reforms that would replace the current forfeiture process with a court-supervised foreclosure auction system, where homeowners could still bid on their own properties.

— Eric Weilbacher