Transcript REAL ESTATE TAX SALES AND TAX DEEDS IN

REAL ESTATE TAX SALES AND
TAX DEEDS IN ILLINOIS
Presented to NTLA on February 26, 2015
By: John W. Stanko, Jr. and Michael J. Wilson
Flamm, Teibloom & Stanko, Ltd. (312) 236-8400 • www.flamm.com
Michael J. Wilson & Associates, P.C (312) 781-9510. – www.michaeljwilsonassociates.com
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I. COLLECTOR’S ANNUAL APPLICATION FOR
JUDGMENT AND SALE

Each year, after the annual taxes have become delinquent, the County Collector (i.e., the County Treasurer)
publishes an advertisement giving notice that he or she intends to apply for an order of judgment and sale as to
parcels whereupon the taxes are delinquent. §21-110. The advertisement must be published at least ten days
before the date judgment is to be obtained. §21-115. Publication of the notice gives the court jurisdiction, and
any sale of delinquent taxes that was not advertised is invalid.

Not less than 15 days before the application, the County Collector must mail notice to the assessee of each
delinquent parcel by registered or certified mail. In all counties other than Cook, notice also must be mailed to
any lienholder of record who requests such notice. §21-135. Effective July 1, 2012, delinquent taxes may be
paid at any time on or before the business day immediately preceding the day the taxes are sold.

At the date specified in the advertisement, the State’s Attorney (as attorney for the County Collector) appears in
the circuit court and presents the application for judgment and order of sale. The court will consider any
objections to the application and then enter a judgment and order of sale directing that the delinquent parcels
be offered for sale. The sale must begin within five business days after the judgment and order of sale is
entered. §§21-115 and 21-150.

The tax judgment, sale, redemption and forfeiture record (commonly known as the “judgment record”) lists all
delinquent parcels and the amounts due. §21-160. The record is prepared by the County Collector; after the
sale, custody of the judgment record is transferred to the County Clerk. The judgment record will reflect whether
the parcel sold or forfeited. All extensions of the redemption period and all costs and “subtaxes” (see part IV(I)
infra) must be posted in the judgment record. The judgment record generally will disclose whether the property
has been redeemed from the tax sale, whether the sale has been set aside as a sale in error, whether a tax deed
proceeding has been filed and whether a tax deed has been issued.
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II. Annual Sales

Each year, parcels as to which all or part of the previous year's taxes are
delinquent are offered for sale. For example, parcels as to which all or part
of the 2013 taxes (which were due in 2014) are delinquent will be offered at
the 2013 annual sale.

The tax purchaser must pay the entire amount of taxes and penalties
outstanding (together with several hundred dollars in sale costs). The tax
purchaser also must pay all open taxes for prior years in order to complete
the sale and to obtain a certificate of purchase. If the tax purchaser fails to
complete the sale, a “5% certificate” is issued which constitutes a lien on
the property until the amount paid is redeemed with interest at five percent
per annum, but the tax purchaser cannot proceed to a tax deed. §21-240.

The penalty rate is the rate bid by the successful bidder at the tax sale.
Bidding begins at 18% per six months and proceeds downwards; the
bidding may go as low as zero
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III. Assignment of Certificates of Purchase
 A Certificate of Purchase may be assigned. §21-250. Public Act 92-
729, effective July 25, 2002, created a procedure by which an
assignee of a tax sale certificate may record the assignment with
the County Clerk. Previously, there was no procedure by which
such assignments could be recorded, so notice was sent to the
original tax purchaser even if he or she had sold the Certificate of
Purchase. The assignment procedure is voluntary, but an assignee
who fails to record his or her assignment takes the risk that notice
may be sent to the original tax purchaser rather than to the
assignee. There is a one-time $10 fee for recording an assignment.
§21-251.
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VI. THE REDEMPTION PERIOD

The statutory period of redemption can be either six months, two years, or
two years and six months from the date of sale. The factors that determine
the period of redemption are the type of property and the number of years
of delinquent real estate taxes included in the sale. Generally, the period
of redemption for residential properties is two years and six months from
the date of sale.

The holder of the Certificate of Purchase may extend the redemption
period to a maximum of three years from the date of the tax sale.
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V. SECTION 22-5 NOTICE

The First Notice the holder of the Certificate of Purchase is required to prepare is a notice
addressed to the person whose name appears on the most recent tax bill advising that person of
the tax sale, the date when the redemption period will expire and the amount needed to redeem the
property from the tax sale. Within four and a half months after the date of the tax sale, that notice
must be delivered to the Cook County Clerk, who will mail it to the taxpayer by certified mail.

Strict Compliance - Recent Appellate Court cases have expanded the strict compliance standard to
include Section 22-5 Take Notices. All notices pursuant to Section 22-5 must strictly comply or the
tax purchaser may not be entitled to a Tax Deed.

In Illinois, different counties have different requirements for submitting Section 22-5 Take
Notices. Some counties will prepare the Take Notices for you. We strongly suggest that you
prepare your own Section 22-5 Take Notices since the Notices prepared by the counties do not
strictly comply.

SERVICERS – All Section 22-5 Notices should be prepared by attorneys or under the supervision of
attorneys and should be reviewed by attorneys. Servicers are not familiar with recent statutory
amendments or Appellate Court decisions that necessitate changes in the preparation of the
Section 22-5 Notice.
In addition, several items in the Section 22-5 Notice can be inserted
incorrectly; expiration of the period of redemption, amount necessary to redeem, property location,
special assessments, and multiple year sales.
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VI. FILING TAX DEED PETITION (1/4)
1.
The holder of the Certificate of Purchase and his, her or its attorney must
make a diligent inquiry to determine the owners, occupants and other
persons interested in the property. You should obtain a report from a title
insurance company, which will disclose the owners and other interested
parties (other than occupants). You must review recorded documents,
telephone directories and voter registration records to obtain additional
public information. In some cases, you will need to review court files
and/or probate records and call people who may have information.

You must physically inspect the property during this period and determine what type of
property it is and who, if anyone, is occupying or using the property in any way. You also
should inquire of the occupants and/or persons in the area around the property to find out
what they know about who owns or has any other interest in the property. The purpose the
diligent inquiry is to make a complete list of names and addresses of persons or entities
who own, occupy or have any other interest in the property and to serve them with the
notice.

If you are not sure whether or not a person has an interest in the property, it is prudent to
serve that person with notice; there is no harm in serving notice on someone who may turn7
out to have no interest in the property, but failing to serve a person who does have an
interest in the property can cause your tax deed petition to be denied.
VI. FILING TAX DEED PETITION (2/4)
2. You must then prepare and file a Petition for Tax Deed in the Circuit Court
of the County, and pay the required fee. This is the beginning of a lawsuit
which, if successful, will result in your obtaining title to the property.
3. You also will need to prepare three sets of notices directed to the owners,
occupants and other persons who have an interest in the property. One set of
notices is given to the County Sheriff, who will attempt to serve those notices
upon the owners, occupants and other interested parties. The second set of
notices is given to the Clerk of the Circuit Court, who mails them to Owners
and occupants by certified mail. The third notice is published. The purpose of
this notice is to advise people who may have moved or who otherwise may
not receive notice. All three notices state that, if the property is not redeemed
from the tax sale by the end of the redemption period, a tax deed may be
issued and the owners, occupants and other interested parties may lose their
rights in the property.
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VI. FILING TAX DEED PETITION (3/4)
4. You should also prepare and record a Lis Pendens Notice in the
Office of the County Recorder of Deeds. This warns anyone who
might purchase the property that it is the subject of a tax deed petition
and may be lost if it is not redeemed.

The filing of the Petition For the Tax Deed and service of all notices
must occur between six and three months before the end of the
redemption period.
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VI. FILING TAX DEED PETITION (4/4)
5. You should check with the County Sheriff as to their progress in serving notices. If
you determine that a party has not been served, you may direct the Sheriff to try again.
Between two and three months before the end of the redemption period, you should
check the court file to determine whether all necessary parties have been served. If a
party cannot be served, then that person is deemed to have been served by the notice
published in the newspaper. If a party can be served, but if the Sheriff is unsuccessful
in serving that party, it may be necessary to extend the redemption period further (if
there is sufficient time to do so), to file an amended petition for tax deed and to serve a
new set of notices. In most cases, however, this will not be necessary.
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VII. Expiration of the Redemption Period

Shortly after the redemption period expires, you will need to check the
records of the County Clerk to determine whether or not the tax sale was
redeemed. If it was redeemed, you will receive the redemption money, and
have the tax deed proceeding dismissed.

If the tax sale is not redeemed, you will need to prepare and file an
Application for an Order Directing the County Clerk to Issue a Tax Deed.
This is a lengthy document, supported by an affidavit and exhibits, which
documents your compliance with the requirements for obtaining a tax
deed.

You then appear in court on the date which was specified in the notices, at
which time (in Cook County) the case will be assigned to a judge and
scheduled for a “prove-up hearing.” The prove-up hearing usually occurs
between one and two months after the end of the redemption period.
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VIII. The Prove-up Hearing

At the hearing, you (or the person who inspected the property on your behalf) will appear in
court and testify under oath regarding the inspection of the property and the efforts you made to
identify the owners, occupants and other interested parties. Your attorney will testify regarding
his/her efforts to identify and locate those parties and the other steps taken to comply with the
requirements for obtaining a tax deed. In more than 90% of all prove-up hearings, none of the
owners, occupants or other interested parties appear or object to the tax deed proceeding. They
are, however, entitled to do so.

At the end of the prove-up hearing, if the judge finds that you have taken the actions required to
obtain a tax deed, in Cook County the judge will take the case “under advisement” until you
present a transcript of the prove-up hearing (which is prepared by the court reporter); proof that
taxes for all years subsequent to those covered by the tax sale have been paid; and a proposed
order. In most other Counties in Illinois the Judge will sign the Order Directing the Issuance of a
Tax Deed right then. In Cook County you must present those items to the judge, and the judge
will then enter an order directing the County Clerk to issue a tax deed. You then prepare a tax
deed and submit it to the County Clerk along with the original Certificate of Purchase and the
order entered by the judge. The County Clerk then issues the tax deed, which you must record in
the Office of the County Recorder of Deeds. Upon the recording of the tax deed, you become the
owner of the property.
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IX. DEADLINE FOR
OBTAINING/RECORDING TAX DEEDS
 By law, the tax deed must be issued and recorded within one year
after the date when the redemption period expired. If this is not
done, your Certificate of Purchase or unrecorded tax deed
becomes null and void, and you have no right to obtain any refund
or reimbursement of any of the monies you have paid. Thus, it is
very important that the process be completed within one year after
the date the redemption period expires.
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X. SUBSEQUENT YEARS’ TAXES


In order to obtain a tax deed, you are required to pay all taxes which have accrued
after the taxes covered by your Certificate of Purchase. You may pay those taxes
either before or after the redemption period expires. If you pay them before the
redemption period expires (and pay a fee of $80.00 for each year’s taxes), you can
“post” your payment of your taxes on the judgment record of the tax sale. If the
owner redeems from the tax sale, the owner also will have to redeem the
subsequent years’ taxes by paying the amount you paid plus a penalty of 12% per
year (or fraction thereof) from the date when you paid those taxes until the date they
are redeemed. You are not allowed to post any taxes within thirty days before the
redemption period expires.
You may wait until after the prove-up hearing to pay the subsequent years’ taxes.
This allows you to wait and see whether there are any problems with the tax deed
proceeding or whether anyone appears to object to our tax deed petition. If not, you
should pay the taxes immediately after the prove-up hearing and provide us with
receipts for the payment of those taxes.
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XI. SALES IN ERROR
 In a few cases, events occur which make it impossible
to obtain a tax deed. The owner may declare
bankruptcy; a federal tax lien may be recorded on the
property; the property may be destroyed or rendered
uninhabitable; or other facts may occur which make it
either impossible or unreasonable to obtain a tax deed.
In such cases, you can ask the court to declare the tax
sale a “sale in error” and to order that the amount you
have paid at the tax sale (including court costs and
subsequent years’ taxes, but not including attorneys’
fees) be refunded to you. In some cases, interest is
awarded on the amount refunded.
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XII. RECEIVERSHIPS
 If the property is at risk of being vandalized or
destroyed while the tax deed proceeding is pending,
you (or a person you designate) may be appointed as a
receiver for the property. The receiver has the power to
board up and secure the property, or in some cases to
collect rent from tenants, while the tax deed proceeding
is pending. If you think it may be necessary to have a
receiver appointed, please consult with us regarding
this possibility.
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XIII. INDEMNITY FUND PROCEEDINGS (1/7)

If a tax deed has been issued and it is not possible to have the tax deed
order set aside, it may still be possible to obtain relief for the property
owner. Application of County Treasurer. The Indemnity Fund was created
to ameliorate the harsh effect of the tax sale system by compensating
owners who lose their property to tax deeds and who are deserving of
relief. Indeed, the very purpose of the indemnity fund is to provide. The
Indemnity Fund has been an invaluable part of the tax sale system.
Remember - a petition of indemnity under this Section must be filed within
10 years after the date the tax deed was issued.
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XIII. INDEMNITY FUND PROCEEDINGS (2/7)
A. Owner-Occupied Residential Property

If the property consists of four or fewer dwelling units and if the owner resided on the
property on the last day of the redemption period, the owner must show only that he or she
is equitably entitled to just compensation. “The Court shall liberally construe this equitable
entitlement standard to provide compensation wherever, in the discretion of the Court, the
equities warrant the action.” This provision gives the trial court very broad discretion to
award compensation, without regard to the owner’s fault or negligence. The Supreme Court
has held that when a person seeks indemnity the trial court’s focus rests on equity alone.

A broad range of circumstances can be considered including the mental, physical, and
financial status of the person seeking indemnity, the person’s comprehension of property
taxes and the duty to pay them, and the person’s diligence and credibility. Though not
determinative, fault or negligence certainly may also be considered. Each case must be
decided on its own facts.
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XIII. INDEMNITY FUND PROCEEDINGS (3/7)
 B. Other Property

The owner of any other property must show that he or she sustained loss or damage by reason of
the issuance of a tax deed “without fault or negligence of his or her own.” This is a higher
standard, and requires a greater degree of blamelessness. However, “the phrase ‘without fault or
negligence,’ is not given its broadest legal interpretation. To do so would make the section
meaningless, as any owner who has lost his or her property by the issuance of a tax deed is to
some extent at fault.”

Thus, while the trial court must apply a “without fault or negligence” standard in determining
whether a property owner who comes within has the right to indemnity, the court must also
“liberally construe this Section” to provide compensation whenever, in its discretion, the equities
warrant such action.
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XIII. INDEMNITY FUND PROCEEDINGS (4/7)
 C. Procedure

1. Damages under §21-305(a)(1) (equitable entitlement) are limited to the fair
market value of the property as of the date the tax deed was issued, less any
mortgages or liens thereon, and the award cannot exceed $99,000.

2. Under certain circumstances, however, the indemnity award may include the
amount of a mortgage on the property.

3. The Act mandates liberal construction to provide compensation whenever, in
the discretion of the Court, the equities require relief. §21-305(b)(1).

4. A petition for indemnity may be brought concurrently with a petition for relief
under §2-1401 of the Code of Civil Procedure. §22-45.
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XIII. INDEMNITY FUND PROCEEDINGS (5/7)

5. The County Treasurer (who is ex officio trustee of the Indemnity Fund), is
“subrogated to all parties in whose favor judgment may be rendered against
him or her, and by third party complaint may bring in as a defendant any party
(other than the tax purchaser) who is or may be responsible for causing the
loss. §21-305(b)(2).

6. Judgments accrue interest at 6% per annum from date of judgment until the
judgment was satisfied. Indemnity judgments are currently taking 2-3 years to
be paid.
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XIII. INDEMNITY FUND PROCEEDINGS (6/7)

D. Other Provisions Applicable to the Indemnity Fund

1. The fee paid into the Indemnity Fund at the time of each tax purchase is increased to $80.
Prior to December 31, 2006, the fee also included 5% of the taxes paid at the sale. A similar
fee is required for subsequent years’ taxes paid by the tax purchaser and posted to the
judgment record. With the loss of the additional 5%, it is taking much longer for Indemnity
Fund judgments to be paid.

2. Any contract involving the proceeds of an indemnity judgment must be in writing, and is
subject to discovery.

3. Certain conduct, including inducing a taxpayer to seek relief from the indemnity fund
rather than seeking to recover the property or entering into an agreement to acquire an
indemnity fund judgment before the end of the redemption period, is made a criminal
offense.

4. Any award under the “equitable entitlement” portion of the statute (applicable only to
owner-occupied residential property containing one to four units) is limited to $99,000. To
recover more than $99,000, the owner must show that he or she lost the property without
fault or negligence.
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XIII. INDEMNITY FUND PROCEEDINGS (7/7)

5. All petitioners must be barred or otherwise precluded from bringing an action to recover
the property. Previously, this requirement did not apply to owner-occupied property
containing one to four units.

6. In determining fault or negligence, the statute now requires that the court consider
whether the owner exercised ordinary reasonable diligence under all of the relevant
circumstances. §21-305(a)(2).

7. In determining the amount of the award, the fair cash value shall be reduced by the
principal amount of all taxes paid by the tax purchaser prior to issuance of the tax deed.
§21-305(a)(3).

8. If the taxpayer was personally liable for the amount due on any mortgage note, the court
shall order an additional indemnity award sufficient to discharge the taxpayer’s personal
liability.
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Conclusion
 This is a very brief and basic outline for the procedure to
perfect your tax lien certificate in the State of Illinois. For a
more thorough outline and understanding of the process in
Illinois please feel free to contact me or visit our website at
www.Flamm.com where we have a more detailed outline
available for review.
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JOHN W. STANKO, Jr.

John graduated from St. John’s University (Collegeville, MN)
in 1985 and The John Marshall Law School (Chicago) in 1988.
He is a past Chair and legislative liaison of the Real Estate
Taxation Committee of the Chicago Bar Association. John
has written and has spoken at many seminars regarding real
estate tax sales and tax deed proceedings for the Chicago
Bar Association, Illinois Institute for Continuing Legal
education and legal as well as financial institution platforms.
John has been a court-appointed expert witness in litigation
involving the Illinois Property Tax Code.

John W. Stanko, Jr.
20 North Clark Street
Suite 2200
Chicago, IL 60602
Ph: 312-236-8400
E-mail [email protected]
www.flamm.com

Before joining Flamm & Teibloom Ltd., and becoming a
partner, now Flamm Teibloom & Stanko, Ltd., John spent 12
years as Corporate Counsel for two of the largest tax
purchasers in Illinois, the last three years as Lead General
Counsel. John has written legal opinion letters relating to the
Illinois Property Tax Code for financial institutions and
investors. John’s practice is concentrated in real estate
taxation, tax sale, tax deed and indemnity litigation in addition
to commercial and residential real estate transactions and
real estate litigation.
John’s clientele in tax sale and tax deed litigation ranges from
private investors to large corporate tax purchasers and
servicing agents as well as private property owners,
mortgage companies, banks, title companies and
municipalities.
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MICHAEL J. WILSON
Michael graduated from Cornell College in 1987 and The DePaul University
College of Law in 1990. For over 20 years, Michael has concentrated his law
practice in real estate taxation, tax sales, tax deeds, and indemnity fund
litigation. In addition to his real estate taxation practice, Michael’s law practice
also includes real estate litigation, landlord/tenant disputes and litigation,
commercial and residential real estate transactions. For large corporate tax
purchasers, Michael has also assisted with portfolio analysis and
management.
MICHAEL J. WILSON &
ASSOCIATES, P.C.
309 WEST WASHINGTON ST.
SUITE 1200
CHICAGO, ILLINOIS 60606
TELEPHONE: 312-781-9510
E-MAIL: [email protected]
www.michaeljwilsonassociates.com
As an active member of the Chicago Bar Association’s Real Estate Taxation
Committee, Michael served as the Chairperson, Vice-Chairperson, and
Legislative Liaison of the Real Estate Taxation Committee and Chairperson of
the Tax Sale, Tax Deed Subcommittee. Michael has been a speaker before
various groups regarding real estate taxation, tax sales, and tax deeds.
Michael has participated in drafting amendments to various sections of the
Illinois Property Tax Code and litigated many trial and appellate court case. In
addition, Michael has been an expert witness in litigation regarding tax sales
and tax deeds.
Michael’s clients include individuals, large corporate tax purchasers, mortgage
companies, banks, and title companies.
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