Overview
Technically, in Illinois, a tax investor is purchasing at auction, a tax certificate. The auctions are held on the County level in Illinois. Most of the auctions are held between October through December of each year. In Illinois a bid down process is used. This means that the initial penalty rate is set by statute at 18% every six months (ie 36% annual) but the potential buyers offer competing rates for the property by public outcry. Thus, one potential buyer may offer 17% and then another 16% until a bid is accepted (ie going, going, gone, the bid goes to XYZ investor at 16% if that was the last bid). There is some correlation between the interest rates offered by banks and the auction rate but it is not a close correlation. Moreover, the interest on an Illinois Tax Certificate is penalty interest every six month not accrued interest. Thus, the penalty rate is not the same as an accrual rate of interest. From an investment stand point, the rule of thumb is that most, more than 90%, of the tax certificates redeem. Most of these redemptions occur after the first notice issued by the tax buyer or his attorney. If, as a tax investor, you are looking to obtain return on investment based upon the speed of redemption, you need to realize that the First Notice must be delivered to the County Clerk with in 4 months and 15 days of the date of sale of the tax certificate. The form for First Notice is set forth in the Illinois Property Tax Code at 35 ILCS 200/22-5. Many County Clerks in Illinois have the statutory form at the Clerk's office for a tax buyer's use. If you have not found this form, go to the button "22-5 Notice" and you will find the statute and the statutory form. The statute tells you what to do. Just remember, the form must be filled out completely and you must follow the statute or you will not obtain a tax deed.
Once a tax buyer has made his purchase, the foreclosure process follows a statutory form. The statutory process of Illinois does not result in an administrative tax deed as in many other states. In Illinois, the process is oriented toward providing procedural due process to the tax obligor with the end result being that if the tax obligor does not redeem the property taxes, and all of the other statutory notices and due diligence has been complied with, then the Circuit Court will, upon application by the tax buyer, order the County Clerk to issue a tax deed to the tax buyer. The process and steps for this process, which must be completed no later than three years from the date of the tax sale, are set forth in the Illinois Property Tax Code, 35 ILCS 200/1-1 et.seq. and as set forth in the Illinois Constitution, Article IX, section 8.
The Illinois Property Tax Code, 35 ILCS 200/1-1 et. seq. is organized into nine Titles: General, Assessment Officials, Valuation and Assessment, Exemptions, Review and Equalization, Levy and Extension, Tax Collection, Tax Objections and Other Provisions. Within the nine titles are thirty six articles each of which is then further broken down into divisions, paragraphs and sub-paragraphs. The current code was enacted effective January 1, 1994 (P.A. 88-455). The current code replaced the Revenue Act of 1939. However, many of the provisions of the current code simply re-enacted the language from the 1939 Revenue Act. Contained within the State Bar Edition of the Illinois Compiled Statutes is a Disposition Table that compiles the former sections with the new sections in terms of the "Illinois Compiled Statutes" which was a complete revision of the Illinois Revised Statutes pursuant to Illinois Public Act 87-1005 (effective January 1, 1993). In order to correlate the Illinois Revised Statutes with the Illinois Compiled Statutes one must refer to the 1992 State Bar Edition of the Illinois Compiled Statutes for its Disposition Table. Thus, in order to understand the Illinois case law, one must be able to interrelate one current tax code with two historical tax codes (which use different numbering systems) but in fact at times use the same language. In terms of case law, as noted by In re Wells, Inc., 102 B.R. 685 (N.D. Ill. 1989) the Illinois system has been described as one which has been similar in certain aspects of its procedure since 1881, Wells citing to Gage v. Scales, 100 Ill. 218 (1881). To say the least, like any type of tax work, it can be complicated and time consuming to understand what the Legislature meant, as interpreted by an Illinois Appellate Court. Underlying this entire system of property tax code is the Illinois law on real property which can and will affect at least the following issues: conveyancing, lien priority, covenants (both positive and negative) which may (or may not) run with the land, deeds, grants, easements, tenancies, occupiers of land, title insurance issues, legal descriptions, etc. The concepts of Illinois property law delve back to the ancient cases of English Common Law because Illinois like most of the States adopted English Common Law as the initial basis for legal decisions at the time of Illinois' origination as a State.
As a thumb nail sketch, the Illinois property tax code can be summarily reviewed in terms of the First Notice, the Second Notice, the Due Diligence Period, The Tax Petition, the Application for an Order for Tax Deed and the Tax Deed. Similarly, when a tax buyer is not able to obtain the sought relief of a tax deed then the tax buyer looks to the statutory relief of "Sale in Error" in order to plead for the return of the tax payer's investment. At times, the return of the investment is with interest and at times it is not. Again, the statutory process for pleading a Sale in Error follows a set of rules set forth in the Illinois Property Tax Code. Subordinate lien holders and property owners look to the same procedures to defend, appeal or seek post-judgment relief from the process or an issued tax deed.
The bottom line in Illinois is that you will need to understand the Illinois Property Tax Code thoroughly and you need a lawyer to assist you in the process if you seek to complete the foreclosure process or defend against it.
