Back in 2023, the U.S. Supreme Court issued a rare unanimous decision in Tyler v. Hennepin County holding that taking and selling a home to satisfy a debt to the government, specifically property taxes, and keeping the surplus value, violates the Fifth Amendment’s Takings Clause. The Takings Clause prohibits the federal government, and state governments, by way of the Fourteenth Amendment, from taking private property without just compensation.
In the Tyler case, the homeowner owed approximately $15,000 in property taxes, penalties and interest. Hennepin County seized the property and sold it for approximately $40,000. Hennepin kept the $25,000 excess instead of returning it to Tyler. The Supreme Court ruled that Hennepin County’s retention of the $25,000 “excess” violated the Fifth Amendment.
While many states have taken steps to update their property tax sales systems in light of the Tyler ruling, Illinois has not been one of those states. According to Illinois Policy, citing the Pacific Legal Foundation, Illinois is the only state that is not in compliance with the Tyler ruling.
Illinois’ lack of compliance may be changing as a result of a decision issued by the United States District Court for the Northern District of Illinois a few weeks ago. In Kidd v. Pappas, the District Court ruled that Illinois’ property tax sale system violates the Firth Amendment’s Takings Clause and the Eighth Amendment’s Excessive Fines Clause.
In other words, when a property owner becomes delinquent on property taxes and, ultimately, a tax deed is issued to a buyer of the taxes and any excess proceeds are not paid to the property owner (the excess being retained by the county), such process is unconstitutional.
The Court did not yet give further rulings or specifics. Any changes will need to be made by the state legislature. Although proposals to change the property tax system have been introduced since the Tyler ruling in 2023, none of them have passed in Illinois.
Stay tuned to this developing area of Illinois real estate law.
