A federal judge ruled Monday that Cook County is liable to pay back potentially millions of dollars to people who lost their homes in the county’s annual property tax sales, three years after the U.S. Supreme Court ruled the system unconstitutional.
Since 2020, nearly 2,500 homeowners not only lost their properties but also the surplus equity in those homes after their delinquent property taxes were sold.
Under that system, if taxes went unpaid, counties sold tax certificates to buyers to recuperate money from properties with unpaid taxes. Those tax buyers often tacked on fees and interest in addition to the existing rent, which homeowners have 2½ years to pay off before the tax buyer can go to court to get the deed to their home, forcing the owner to vacate.
U.S. District Judge Matthew Kennelly wrote in his decision Monday that the county was “deliberately indifferent to the need to address the … violations that occurred from property tax sales.”
Cook County Treasurer Maria Pappas’ office, a defendant in the case, said it could not comment on active litigation.
The majority of homes lost this way since 2019 were taken after an initial property tax debt of $1,600 or less, according to an investigation by the Investigative Project on Race and Equity and Injustice Watch. The initial debt that cost people their homes was collectively $2.3 million, but the homes had a total market value of more than $108 million. Many cases involved the transfer of homes from Black neighborhoods like Roseland and Englewood to wealthy investors.
In 2023, the U.S. Supreme Court ruled it is unconstitutional for property owners to lose the surplus equity on property foreclosed due to delinquent taxes. Last December, a federal judge ruled the county’s tax sale system unconstitutional. And in February, state lawmakers passed a law delaying the tax sale process to Dec. 1 to give legislators time to bring the state into compliance with the Supreme Court ruling.
Illinois is the only state not in compliance with that ruling.
John Bouman, the attorney for the plaintiffs, said Monday’s ruling further confirmed Cook County could have intervened.
“Today’s ruling basically said, ‘Yes, the county knew about it. Yes, they could have done something to stop it. But they didn’t,’” Bouman said.
In the proposed new tax-sale system, the county will petition the court for a tax deed if homeowners don’t settle their property tax debt within three years. After that, the property could go to a foreclosure auction where owners could still bid on their own homes.
While the judge acknowledged Pappas’ office’s work to push reform on the issue, he still ruled in favor of relief for the homeowners. But questions remain about how that will be paid out.
Pappas’ office claimed in the lawsuit that fully compensating victims of the violation would cost “hundreds of millions of dollars” and “ruin one of the largest counties in the country.”
Kennelly called that a “wild overstatement” given that only 0.02% of county homeowners qualified and the average loss was about $70,000. That would leave the county with $15.4 million to be paid out annually.