Illinois overhauls tax sale rules for homeowners

Illinois has passed long-awaited reforms to its property tax sale system after lawsuits challenged the old process as unconstitutional. The changes, including a longer repayment window and a Cook County pilot to reduce private investor involvement, are aimed at protecting homeowners’ equity and aligning the state with Supreme Court rulings.

Why it matters: - Illinois has changed a tax sale system that could strip homeowners of both their homes and all accumulated equity over a relatively small unpaid tax debt. - The reforms are meant to protect homeowners, reduce constitutional risk and end a process that lawsuits said was overly punitive. - The changes also move Illinois closer to the rest of the country, after the state was described as the last in the nation to use the older system.

What happened: - Illinois recently passed legislation to reform property tax sales after a series of lawsuits and a pause on Cook County tax sales. - The changes apply to Cook County and the rest of Illinois. - The legislation came after Cook County property tax cases challenged the old system as a violation of the Fifth and Eighth Amendments. - The Cook County Treasurer helped lead the reform effort, with support from officials around the state, including the governor.

The details: - Under the old system, a homeowner who failed to pay property taxes within 13 months could see the debt sold to private investors. - If the debt was still unpaid after 30 months, the investor could take the property and the homeowner could lose all equity. - Under the new rules, homeowners will still forfeit the property if the debt is not resolved, but they will receive sale proceeds after debts and penalties are paid. - The repayment period before foreclosure has been extended from 30 months to three years. - Cook County will launch a pilot program that lets the county take over a set share of debt certificates, reducing private investor involvement. - The pilot will run for the next few years and could later expand statewide. - The reforms were also shaped by pending lawsuits in other counties, including Lake and DuPage.

Between the lines: - The legislation addresses the most severe outcome in the tax sale process, but it does not solve the broader problem of rising assessments and tax bills. - Homeowners still need exemptions and assessment appeals to reduce taxes before tax bills become unmanageable. - Illinois exemptions include the homestead exemption, as well as breaks for people over 65, veterans and people with disabilities. - Property tax appeals can reduce assessed values for homes, rentals and commercial property. - Many Illinois appeal windows are now open, including in Cook, Kane, DuPage and Lake counties.

What's next: - Cook County’s pilot program will be tested for several years before any expansion is considered. - Property owners will continue to face annual deadlines for exemptions and appeals, and missing those windows can lock in higher taxes for the year. - Further litigation pressure may fade if the reforms hold up under the new legal framework.

The bottom line: - Illinois changed a long-criticized tax sale system, but homeowners still need to act early on exemptions and appeals to avoid falling into the process in the first place.