Cook County likely on the hook after tax sale ruling

A federal judge ruled Monday that Illinois' Cook County is liable for Fifth and Eighth Amendment violations of homeowners' rights through the county's property tax sales program, by stripping them of equity remaining beyond payment of overdue taxes.

The tax sale program allows the county to seek a lien on property with delinquent property taxes and secure an order of sale to recoup the taxes, interest, penalties and other costs associated with the property.

The liens are sold at an annual tax sale overseen by the Cook County treasurer. Buyers compete to bid the lowest penalty percentage they plan to collect on any late payments made by the property owners.

The successful bid wins the lien and the right to collect unpaid taxes plus the penalty, and the county receives from that bidder the outstanding balance of unpaid taxes.

The property tax code requires counties to maintain a fund to compensate property owners for losses or damages due to the tax sale. Cook County's fund is "severely underfunded," according to the court's opinion, with only 5% of property owners receiving compensation for confiscated property.

Justin Kirvan, the policy director for Cook County Treasurer Maria Pappas, testified that the treasurer and the county didn't have authority to compensate property owners for lost equity from property tax sales, and that compensating homeowners for lost equity would disincentivize the payment of property taxes more broadly.

"Kirvan did not provide any data or analysis to support his contention," the judge noted.

A unanimous 2023 Supreme Court decision in Tyler v. Hennepin County, Minnesota held that when a property is sold to pay back taxes, the takings clause of the Fifth Amendment bars the government from keeping the amount above what is needed to satisfy the tax debt.

Monday's decision would likely cost the county around $15.4 million per year, Judge Matthew Kennelly of the District Court for the Northern District of Illinois, Eastern Division, wrote in his opinion.

"The County argues that requiring it to compensate property owners is impractical because the 'hundreds of millions of dollars' that it would be required to pay would 'ruin one of the largest counties in the country,'" Kennelly wrote. "On the record before the Court, this seems to be a wild overstatement."

On average, 220 homeowners lose their homes to the county's tax sales every year, entitling them to an average estimated compensation of $70,000 each, his opinion said.

However, Kennelly noted, after the county appropriated $15 million for the Homeowner Relief Fund in 2025, it then decided that the fund would provide only one-time payments of $1,000 to residents experiencing financial hardship due to property taxes.

"The county could allocate $15 million in a particular year to address property tax relief without facing financial ruin," Kennelly wrote. "It failed to do so."

Cook County Bureau of Finance spokesman Edward Nelson said by email that "we're not commenting on pending litigation."

But he pointed to tax sale legislation in Springfield that includes new fees for a surplus equity fund.

"Our goal is to provide individuals with the lost equity in their property as a result of the statutorily mandated tax sale," he said. "That's why we're supportive of the proposed legislation... We continue to work with stakeholders on finalizing the funding structure of the bill."

A spokesman for Pappas, who is listed as a defendant alongside the county, said the treasurer's office does not comment on active litigation.

"We believe that every homeowner's equity should be protected, regardless of their ability to pay their taxes," Chris Brown, director of operations for the Southwest Organizing Project, one of the plaintiffs, said by email. "We eagerly await the final outcome of this process and cannot comment further at this time."