McHenry County could be in for a big budget surprise if is brought into and loses a class action suit seeking compensation for the difference between the back taxes collected and the market value of the property upon which such taxes were levied.
The origin of the potential problem is a suit out of Minnesota in which the U.S. Supreme Court ruled (Hennepin v Tyler) in May of 2023.
The decision concluded the difference between the taxes and penalties owed and the value of the property was a violation of constitutional provision that “private property [shall not] be taken for public use, without just compensation.”
The Cook County Record explained the Supreme Court decision:
“$40,000 condominium was seized and sold by the county over $2,300 in unpaid property taxes, plus $12,700 in penalties and interest. Hennepin County then kept the surplus from the sale, in a practice dubbed by critics as ‘home equity theft.”
In a unanimous ruling authored by Chief Justice John Roberts, the court said the county’s tax sale went too far, and the county should only be allowed to collect what is owed, with the homeowner retaining the surplus.”
In most instances, it is not an Illinois county that keeps the ‘surplus,’ but the people or companies who bid on the ability to pay the overdue taxes and, then, collect them, plus usually exorbitant interest (up to 12% every six months).
But it is county governments which were sued in November, 2023, not the tax buyers.
Chicago Federal Judge Sara Ellis has the say and she has ruled that it doesn’t matter whether the counties themselves kept the windfalls from the tax sales or if they are taken by private buyers.
While McHenry County was not one of the counites sued, a Federal class action suit out of Southern Illinois could end up involving McHenry County.
McHenry County Treasurer Donna Kurtz sees a significant difference between the Minnesota situation and the one in Illinois.
“Based on the Supreme Court ruling in which Hennepin County took the property, sold it, and kept the proceeds and profits; we have been advised that the ruling does not appear to apply to IL.
“In IL tax buyers buy the unpaid taxes not the property.
“The property owner then has 2.5 years to pay back the tax buyer with interest. The county does not take profits or engage in the sale of the house. The tax buyer may initiate this after numerous notices to the property owner over the 2.5 years.
“The profit, if any, is received to a private citizen, i.e. the tax buyer, not the County.
“In summary, the County receives revenue to pay for the unpaid taxes, as well as any fines or interest. But that is it. No proceeds from property foreclosures, etc. are received by the County.”
