An Introduction to Illinois Tax Sale Proceedings
The following is adapted from a sample letter we send to new tax buyer clients. It assumes that the client already has purchased delinquent real estate taxes on one or more properties and completed the notice required by Section 22-5 of the Illinois Property Tax Code. This letter will give you a general overview of the tax deed process. This is a complicated process, and it is not possible to give a complete examination of every detail in a letter. If there are unusual aspects to your matter which are not dealt with in this letter, but if you retain our firm to represent you, we will advise you regarding those aspects as they arise.
If you have not yet purchased taxes and are interested in learning more about the different types of tax sales, the redemption period or other aspects of the tax sale process, you should consult our outline of Illinois law regarding tax sales and tax deed proceedings here.
I. Extending the Redemption Period
The holder of the Certificate of Purchase may extend the redemption period to a maximum of three years from the date of the tax sale. It is your responsibility to make sure that the redemption period does not expire before we file our tax deed proceeding. Due to the large number of tax deed matters which our firm handles, we cannot be responsible for making sure that the redemption period is properly extended. Approximately thirty days before the end of the redemption period, you should either file a notice with the County Clerk extending the redemption period or contact us to find out how to do so.
The First Notice The holder of the Certificate of Purchase is required to prepare a notice addressed to the person whose name appears on the most recent tax bill, advising that person of the tax sale, the date when the redemption period will expire and the amount needed to redeem the property from the tax sale. Within four and a half months after the date of the tax sale, that notice must be delivered to the Cook County Clerk, who will mail it to the taxpayer by certified mail.
Filing the Petition and Serving Notices In order to obtain title to the property, a number of steps must be taken between five months and three months before the redemption period expires:
The holder of the Certificate of Purchase and his, her or its attorney must make a diligent inquiry to determine the owners, occupants and other persons interested in the property. We will obtain a report from a title insurance company, which will advise us of the owners and other interested parties (other than occupants). We will review recorded documents, telephone directories and voter registration records to obtain additional information. In some cases, we will review court files and/or probate records and we may call people who may have information. You must physically inspect the property during this period and report to us on what type of property it is and who, if anyone, is occupying or using the property in any way. You also should inquire of the occupants and/or persons in the area around the property to find out what they know about who owns or has any other interest in the property. The purpose of all of this is to make a complete list of names and addresses of persons or entities who own, occupy or have any other interest in the property. If we are not sure whether or not a person has an interest in the property, it is our practice to include that person in the list; there is no harm in serving notice on someone who may turn out to have no interest in the property, but failing to serve a person who does have an interest in the property can cause our tax deed petition to be denied.
We must then prepare and file a Petition for Tax Deed in the Circuit Court of Cook County, and pay the required fee. This is the beginning of a lawsuit which, if successful, will result in your obtaining title to the property.
We also will prepare three sets of notices directed to the owners, occupants and other persons who have an interest in the property. One set of notices is given to the Cook County Sheriff, who will attempt to serve those notices personally upon the owners, occupants and other interested parties, or by certified mail if they cannot be served personally. The second set of notices is given to the Clerk of the Circuit Court, who mails them to the same parties by certified mail. The third notice is published in the Chicago Daily Law Bulletin or in another newspaper. The purpose of this notice is to advise people who may have moved or who otherwise may not receive notice. All three notices state that, if the property is not redeemed from the tax sale by the end of the redemption period, a tax deed may be issued to you and the owners, occupants and other interested parties may lose their rights in the property.
We also prepare and record in the Office of the Cook County Recorder of Deeds a notice which states that you have filed a tax deed petition. This warns anyone who might purchase the property that it is the subject of a tax deed petition and may be lost if it is not redeemed.
These steps must be taken between five and three months before the end of the redemption period. Frequently, however, we take these steps within the last three months of the redemption period. Immediately before filing our tax deed petition, however, we file a notice with the County Clerk extending the redemption period to a date more than three months and less than five months from the date when we took these actions, so that we will have taken the necessary actions at the appropriate time.
The Cook County Sheriff will advise us as to their progress in serving notices. If we determine that a party has not been served, we may direct the Sheriff to try again. Between two and three months before the end of the redemption period, we check the court file to determine whether all necessary parties have been served. If a party cannot be served, then that person is deemed to have been served by the notice published in the newspaper. If a party can be served, but if the Sheriff is unsuccessful in serving that party, it may be necessary to extend the redemption period further (if there is sufficient time to do so), to file an amended petition for tax deed and to serve a new set of notices. In most cases, however, this will not be necessary.
II. Expiration of the Redemption Period
Shortly after the redemption period expires, we check the records of the County Clerk to determine whether or not the property was redeemed. If it was redeemed, you will receive the redemption money, the tax deed proceeding will be dismissed and our work will be completed.
If the property is not redeemed, we will prepare and file our Application for an Order Directing the County Clerk to Issue a Tax Deed. This is a lengthy document, supported by an affidavit and exhibits, which documents our compliance with the requirements for obtaining a tax deed.
We then appear in court on the date which was specified in the notices, at which time the case will be assigned to a judge and scheduled for a “proveup hearing.” The proveup hearing usually occurs between one and two months after the end of the redemption period.
III. The Proveup Hearing
At the hearing, you (or the person who inspected the property on your behalf) will appear in court and testify under oath regarding your inspection of the property and the efforts you made to identify the owners, occupants and other interested parties. One of the lawyers in our firm will testify regarding our efforts to identify and locate those parties and the other steps we have taken to comply with the requirements for obtaining a tax deed. In more than 90% of all proveup hearings, none of the owners, occupants or other interested parties appear or object to the tax deed proceeding. They are, however, entitled to do so.
At the end of the proveup hearing, if the judge finds that we have taken the actions required to obtain a tax deed, the judge will take the case “under advisement” until we present a transcript of the proveup hearing (which is prepared by the court reporter); proof that taxes for all years subsequent to those covered by the tax sale have been paid; and a proposed order. We will present those items to the judge, and the judge will then enter an order directing the County Clerk to issue a tax deed. We then prepare a tax deed and submit it to the County Clerk along with the original Certificate of Purchase and the order entered by the judge. The County Clerk then issues the tax deed, which we record in the Office of the Cook County Recorder of Deeds. Upon the recording of the tax deed, you become the owner of the property.
IV. Deadline for Obtaining and Recording a Tax Deed
By law, the tax deed must be issued and recorded within one year after the date when the redemption period expired. If this is not done, your Certificate of Purchase becomes null and void, and you have no right to obtain any refund or reimbursement of any of the monies you have paid. Thus, it is very important that the process be completed within one year after the date the redemption period expires.
V. Subsequent Years’ Taxes
In order to obtain a tax deed, you are required to pay all taxes which have arisen after the taxes covered by your Certificate of Purchase. You may pay those taxes either before or after the redemption period expires. If you pay them before the redemption period expires (and pay a fee of $80.00 for each year’s taxes), we can “post” your payment of your taxes on the judgment record of the tax sale. If the owner wishes to redeem the property from the tax sale, the owner also will have to redeem the subsequent years’ taxes by paying the amount you paid plus a penalty of 12% per year (or fraction thereof) from the date when you paid those taxes until the date they are redeemed. This makes it more difficult for the owner to redeem the property, and also ensures that you receive a fair rate of return on the money you have expended to pay the taxes. If you do pay the taxes before the redemption period expires, please consult with us before doing so, so that we can make sure the taxes are posted immediately after you pay them. You are not allowed to post any taxes within thirty days before the redemption period expires, because doing so may unfairly confuse the owner who is trying to redeem the property from the tax sale.
You may wait until after the proveup hearing to pay the subsequent years’ taxes. This allows you to wait and see whether there are any problems with the tax deed proceeding or whether anyone appears to object to our tax deed petition. If not, you should pay the taxes immediately after the proveup hearing and provide us with receipts for the payment of those taxes.
VI. Sales in Error
In a few cases, events occur which make it impossible to obtain a tax deed. The owner may declare bankruptcy; a federal tax lien may be recorded on the property; the property may be destroyed or rendered uninhabitable; or other facts may occur which make it either impossible or unreasonable to obtain a tax deed. In such cases, we can ask the court to declare the tax sale a “sale in error” and to order that the amount you have paid at the tax sale (including court costs and subsequent years’ taxes, but not including attorneys’ fees) be refunded to you. In some cases, interest is awarded on the amount refunded.
If the property is at risk of being vandalized or destroyed while the tax deed proceeding is pending, you (or a person you designate) may be appointed as a receiver for the property. The receiver has the power to board up and secure the property, or in some cases to collect rent from tenants, while the tax deed proceeding is pending. If you think it may be necessary to have a receiver appointed, please consult with us regarding this possibility.
VIII. Fees and Expenses
Our fee for handling an uncontested tax deed proceeding does not include out-of-pocket costs, including the fees paid to the Clerk of Circuit Court, Cook County Sheriff and Recorder of Deeds; the fee paid to the newspaper for publication of notice; the court reporter’s fee; and miscellaneous charges for issuance and recording of the tax deed. These out-of-pocket costs vary widely, but generally range between $900.00 and $1,500.00. We require payment in advance of a retainer before beginning work on the matter. That retainer will be deposited in our Clients’ Funds Account, because we are required to keep those funds which belong to our clients and which we have not yet earned separate from our own money. At the time we file the tax deed petition, the entire fee is earned; we will issue a bill for the fee and our out-of-pocket costs incurred to date, and we will draw a check from the Clients’ Funds Account to our own account to pay that bill. If the amount of the bill exceeds the amount of your retainer, you must pay the balance within thirty days from the date of the bill. Any remaining funds on deposit will be held for expenses which may be incurred later, such as the court reporter’s fee and charges for issuance and recording of the tax deed.
It will take between thirty and sixty days from the time we receive your retainer until the time we are prepared to file a tax deed petition on your behalf. The petition should be filed at least four months before the end of the redemption period so that the Sheriff will have time to serve notices. Accordingly, it is important that we receive your retainer at least six months before the last date to which the redemption period can be extended. If you retain us after that date, we will do the best job we can on your behalf, but we cannot be responsible for problems that may occur due to our having insufficient time to locate and serve notice upon parties who may be entitled to notice.
As you can see, this is a complex process. If you have any questions or want to retain our firm to handle your real estate tax sale certificate, please do not hesitate to call John Stanko or Emmett McCarthy. Our firm has extensive experience in this area of law, and we would be happy to assist you.