Letter: Caution on your first residential real estate transaction
December 3, 2015

Dear Editor:

One of the most overlooked aspects when purchasing a residential home for a primary residence or investment property is checking and double-checking the accuracy of claimed or unclaimed homestead tax exemptions. Here’s why.

Illinois homestead exemptions that are available to owner-occupants and to tenants (in prescribed circumstances) should be removed by the county or township assessors when the property is sold or transferred. But that isn’t always the case, and in Cook County exemptions may follow the property, not the new owner.

The new owner, however, may not be entitled to a homestead tax exemption. Many such new owners, who have assumed that their tax bills were accurate when closing the real estate transaction, or who may have never reviewed their own tax bills paid on-line or through an escrow account, are now being issued huge debit liabilities in the thousands of dollars.

Recent Illinois law compounds the problem. The Homestead Exemption (Pub. Act 98-615 and, within Cook County only, Pub. Act 98-0093, as amended with Pub. Act 98-1143) empowers the assessor to assess back taxes for unqualified or “erroneous exemptions.”

The new law allows the assessor to back tax for up to six years, apply steep ten percent interest rates, and impose up to $500 or more in monthly penalties, backed with a threat of liens for owners who do not make their alleged erroneous exemption debts payable in 30 days.

The Cook County Assessor reports their offices have collected over $6 million in 2014 for unqualified exemptions. From July 2014 to July 2015, the Cook County Assessor placed 258 liens for a total amount owed of $1,098,225. Only seven, or 2.7%, of these liens were cleared. The majority (58%) were recorded in the City of Chicago, with 38% recorded in the West & South Suburbs and the remaining 4% in the North & Northwest Suburbs. (See Lien Chart). Homeowners and small landlords in receipt of a Cook County Erroneous Exemption Notification to Place a Lien find that although they never applied for the exemptions, they are responsible for erroneous claimed exemptions in the past, even if continued by error by the county.

Confusion now abounds among professionals and laymen about poorly understood Illinois property tax exemptions.

Raila & Associates, P.C.