Illinois Homeowners Celebrate a Win with New Policy

Geraldine Tyler, a 94-year-old grandmother residing in Minnesota, faced a harsh reality in 2010 when she fell behind on property taxes for her one-bedroom condo. Tyler had moved into a senior living apartment, and the subsequent financial strain resulted in her inability to keep up with tax payments. In an action that has sparked national outrage, Hennepin County seized Tyler’s property, sold it for $40,000, and kept the $25,000 surplus, instead of returning it to her.

Unfortunately, Tyler is not an isolated case. A study conducted by the Pacific Legal Foundation between 2014 and 2021 revealed startling statistics: a total of 8,950 homes and an astonishing $860 million in life savings were stripped away due to home equity theft by local governments nationwide. In Illinois alone, at least 3,539 homes were confiscated, resulting in an average loss of 85% of the homeowners’ equity, amounting to $303 million.

In Illinois, the legal structure enables private tax buyers to pay government taxes on behalf of delinquent homeowners. These buyers can then either collect the debt along with interest from the property owners or sell the property outright if the homeowners continue to default on payments for over two and a half years. In May 2022, Cook County announced plans to sell tax debts on 37,000 properties with unpaid taxes. Shockingly, nearly 20,000 of these properties had tax debts under $1,000.

Groups like the Illinois Policy Institute lent their support to the Pacific Legal Foundation’s legal battle. Their collective efforts paid off on May 25 when the U.S. Supreme Court unanimously ruled in favor of Geraldine Tyler, affirming that the $25,000 in surplus funds from her home’s sale should be returned to her.

Although the landmark ruling was a win for Tyler, there are still 19 other states, along with Washington D.C., where similar laws exist. The Pacific Legal Foundation is pushing forward, sending formal letters on May 30 to these states and the nation’s capital, demanding revisions to state laws to align them with the Supreme Court’s decision. Nebraska has already responded positively, passing Legislative Bill 727, which stipulates that taxpayers are entitled to any surplus funds and can even allocate them toward future taxes.

In Illinois, where the highest number of homes was seized and where residents lost the most equity, the situation remains dire. If lawmakers fail to act, the door is now open for taxpayers to sue to recover their equity. “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” Chief Justice John Roberts eloquently summarized in his decision.

With some of the highest property taxes in the nation, Illinois residents, particularly those who are economically disadvantaged, remain vulnerable to losing substantial home equity if they miss a tax payment. Tyler’s case should act as a catalyst for legislative change not just in Illinois but across the nation, to put an end to this exploitative practice.