Illinois lawmakers finally passed legislation making it the last state in the country to comply with a three-year-old U.S. Supreme Court ruling on property seizures. House Bill 4537 addresses a practice where the government could take an entire property for unpaid property taxes, even when those taxes were much less than the property's value. The bill brings Illinois into line with the 2023 Supreme Court decision in Tyler v. Hennepin County, which ruled that state governments must give property owners the value that exceeds the amount owed in taxes when seizing property.
Under the new legislation, counties would conduct public auctions that sell property deeds themselves rather than tax liens that give buyers ownership if homeowners fail to pay by the redemption deadline. Counties other than Cook would be allowed to acquire delinquent properties and sell them directly at auction. The measure also gives the original property owner the right to any sale proceeds over the amount owed in property taxes and extends the redemption period from 2.5 years to three years, giving owners more time to prevent the sale by paying unpaid taxes. HB 4537 also creates a temporary fund to compensate owners who already lost their surplus equity, with money coming from fees charged to tax buyers. Counties would remain on the hook for remaining claims if the fund runs out of money. The bill also establishes a pilot program authorizing Cook County to acquire and directly auction off properties from the first six tax sales rather than first selling the tax liens to private buyers before the redemption period has passed.
Since the 2023 Supreme Court ruling, local governments in Illinois have been vulnerable to litigation without a clear constitutional process for collecting delinquent property taxes. Just last month, a federal district court ruled that Cook County was in violation of the constitution and potentially on the hook for millions of dollars owed to owners who lost their properties. The ruling in Tyler v. Hennepin County established that governments can't keep surplus equity when property is sold for unpaid taxes, but Illinois state law had continued to allow exactly that practice.
The new system fundamentally changes how Illinois handles property tax collection by shifting from a tax lien model to direct property auctions in most counties. This means that when someone falls behind on property taxes, the government can't simply pocket all the proceeds from selling the home—it has to return any amount beyond what's owed. The pilot program for Cook County will determine the fate of its property tax collection system going forward, with success of the first six tax sales dictating whether the county adopts the new approach permanently. If Gov. J.B. Pritzker signs HB 4537, Illinois will finally join the other 49 states in complying with constitutional protections against government seizure of surplus property value.