The Illinois Constitution provides that “[n]o person shall be deprived of life, liberty or property without due process of law nor be denied the equal protection of the laws.’ However, what happens when people are deprived of their property and equity is not returned to them? This is a question frequently asked by people who lose their property due to non-payment of real estate taxes. Every year Illinois counties auction off properties for the failure to pay property taxes at annual “tax sales.” The remedy for how to restore equity to property owners who lose their property is currently being litigated in the Northern District of Illinois federal court.
The Illinois legislature realized the harsh realities of depriving people of their property due to a failure to pay real estate taxes. In an attempt to restore this lost equity the legislature created the Indemnity Fund. The Indemnity Fund was created to ameliorate the harsh effects of the tax sale system by compensating owners who lose their property to tax deeds and who are deserving of relief. The notion of returning equity to prior owners has further been expanded by a recent U.S. Supreme Court ruling in Tyler v. Hennepin County (click here for more information about Tyler) in which the ruled that counties violate the Fifth Amendment when they foreclose on a property to collect more than the amount owed for taxes.
In the Northern District of Illinois, a class action lawsuit was filed against some Illinois county treasurers, among other parties, stating that the sale of real estate at a tax sale is unconstitutional, in part, because people are being deprived of their property without just compensation. In an attempt to dismiss this class action lawsuit, the treasurers argued that property owners can use the Indemnity Fund to restore their equity. This issue is still to be answered though there is a question as to whether the Indemnity Fund actually works.
Cook County is the second largest county in the United States. By sheer size alone it is no wonder that it auctions off thousands more properties at tax sales than the other counties in Illinois. By the volume of properties sold, the Indemnity Fund is used much more frequently in Cook County than in any other county. However, with this frequency comes a drain on the Fund. Currently, it is taking about seven years for the Cook County Indemnity Fund to pay judgments In favor of those who lost their property. This begs the question: does the Indemnity Fund work? Courts are still trying to determine this question. One way to remedy this issue in Cook County is to infuse more money into the Indemnity Fund.
While the Cook County Indemnity Fund is being used, other counties in Illinois have restored minimal equity from their Indemnity Funds. In DuPage County, which has a little under one million residences, the Indemnity Fund has only restored equity to six people since 2013. Out of the thousands of properties that were lost to tax deed in DuPage County only six people in over a decade have been repaid equity lost. This notion is not unique to DuPage County and is common throughout most of the 101 counties in Illinois. For the bulk of people who lose property in Illinois due to delinquent taxes it seems fair to say that they have not and will not ever receive their lost equity.
If you or someone you know lost property to a tax deed you may be entitled to a money judgement. Our firm has been handling tax sale matters for more than 35 years and may be able to help. If interested, please contact us.
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