Cook County is on the hook for tens of millions of dollars to homeowners who lost their homes and their built-up equity as a result of the annual tax sale, a judge has ruled, while leaving unclear the total tally and how the county will pay for it.
It’s the latest challenge in a sprawling legal and legislative debate over how Illinois handles late property tax payments. While the county has fought this case, it has also been negotiating with legislators in Springfield for months on how to fix the system, so far without resolution.
Until this week, it wasn’t clear whether or who should pay back the lost equity. The argument hinged on whether the county was responsible, or “deliberately indifferent” to the need to fix an unconstitutional policy.
After a two-day bench trial last month, federal Judge Matthew Kennelly ruled Monday that the county should have known full well the tax sale was unconstitutional.
Currently, when property owners fail to pay their property taxes for 13 months, the county can auction off their delinquent taxes to third-party buyers. The owners get up to 30 months — and sometimes as long as three years — to repay their original bill, plus penalties and interest. If they don’t, those third-party tax buyers can take the deed and ownership of the property. The tax buyers also get to pocket the home’s equity beyond the debt.
If a homeowner racked up $10,000 in tax-related debt on a home worth $100,000, for example, and couldn’t pay it back, plaintiffs argued they were unfairly losing $90,000 in equity to those private buyers because of the county’s policy.
A sample of 380 properties compiled by the plaintiffs in the case lost a combined $27.7 million to such “equity theft,” according to court records. The total class is about 2,500, though the plaintiffs’ attorney says the group grows every time Cook County issues a new deed. This figure only accounts for certain types of homes, as well, not business owners who lost their properties in the same process.
Neither the plaintiff, the county nor the court has set the class nor estimated the damages — they could be defined by a formula, mini-trials for each claimant or some kind of hybrid approach, according to Leah Levinger, one of the attorneys from Legal Action Chicago, which is representing homeowners in the case. Levinger said they plan to request interest costs from the county, too.
While Cook County doesn’t profit off the system, Kennelly ruled in December the county violated the Fifth and Eighth amendments of the U.S. Constitution related to unfair “takings” and excessive fines.
He chastised the county in his ruling this week for “inconsistent” testimony, noting officials contended the county “never thought about providing compensation to property owners who lost their property through tax deeds because it did not view the process as unconstitutional. Then, the County argues that it did not provide such compensation because its home-rule authority was limited.”
Cook County Board President Toni Preckwinkle’s office declined to comment on pending litigation, as did Treasurer Maria Pappas’ office.
Though it had the data “at its fingertips,” the county also failed to undertake any of its own analysis about whether it could pay back property owners for lost equity, Kennelly continued.
Attorneys for the plaintiffs hired their own outside expert to calculate how much equity homeowners lost since December 2020.
That expert found 1,729 eligible parcels at the time of the analysis in 2024. A sample of 205 of those showed “lost equity” totaling $14.1 million, with individual cases ranging from as low as about $5,500 to as high as $406,000 and averaging just over $69,000.
The plaintiffs took another sample of 175 more eligible parcels using the same methodology. The total lost equity added up to $13.6 million, with the average at about $78,000. The values ranged from $2,755 to as high as $950,000.
The eligible class includes homeowners whose properties were sold in Cook County’s annual tax sale and lost their deed on or after Dec. 15, 2020. Their homes’ fair cash value — as set by the Cook County assessor — must be larger than what they owed in taxes, fees and interest.
The county does have a pot of money it has used to pay back people whose homes were improperly lost in tax sales. But that “Indemnity Fund” has been “severely underfunded,” county officials acknowledged during the bench trial. While its balance has traditionally stood around or under $2 million, by 2022 it owed more than $22 million to people who lost their deed in the tax sale through no fault or negligence of their own.
Kennelly noted, however, that the county managed to appropriate $15 million to its Homeowner Relief Fund in 2025 “without facing financial ruin,” and could have allocated that much to the indemnity fund.
How the system will work going forward remains an open question. While the next tax sale is not scheduled until December, the process for dealing with delinquent property taxes and recording them in the county’s new property tax system are unresolved.
Both Preckwinkle and Pappas’ teams have been working on legislation to put up deeds for public auction. Under that proposal, Senate Bill 3940, delinquent taxes would be deducted from the sale price and the rest would be returned to the original homeowner. It’s a process similar to what happens in mortgage foreclosures, supporters say.
To help pay back those who have had equity “stolen,” the latest amended version of the bill would add $500 in minimum “surplus equity fund” fees paid by tax buyers at the annual tax sale on top of the $80 they pay to the indemnity fund. The bill was referred to the Revenue Committee earlier this month, but has faced opposition from the tax buyers lobby, whose business model would essentially be phased out under the current legislation.
In an emailed statement, Preckwinkle spokesperson Cara Yi said, “We continue to work with stakeholders on finalizing the funding structure of the bill,” which Pappas’ team echoed.
Meanwhile, the continuing property tax system upgrade helmed by Tyler Technologies is facing headwinds related to late payments and the tax sale. According to the latest report from the county’s property tax tracker, there have been “a significant amount of outstanding defects” involving “fees, subsequent taxes and penalties” related to property tax redemptions — the system for property taxpayers to pay back late taxes and fees that were already sold to tax buyers.
Given the uncertainty around tax sale legislation, building the system in time for handling the next tax sale in December is also “at risk,” according to the county’s tracker.
