The Chicago Renter’s Guide to Property Taxes

This week saw the start of the biggest regular clearance sale in Cook County with the beginning of the 2017 property tax scavenger sale. It's a chance for enterprising new landlords to get their foot in the door of a first building for just $250. It's a chance for Cook County to recoup some of the losses from owners who haven't paid their property taxes for a very long time. It began on July 12 and will continue through July 25, with Chicago properties up for auction between July 18-24. But for renters this probably seems like total jibberish - after all, renters don't have to pay property taxes and therefore have no reason to learn about their possible effect on apartment life. We're going to change that today with a crash course in Cook County property taxes.

Note: This information is specific to Chicago. Property tax administration varies drastically. If you do not live in Chicago, ask any local real estate agent or tax attorney for a rundown on how property taxes work in your area.

Who pays property taxes?

Every property owner in Cook County must pay property taxes, with the exception of properties owned by and used exclusively for religious, charitable, government or educational purposes. Homeowners pay property taxes. Landlords pay property taxes. Condominium owners pay property taxes. Business owners pay property taxes if they own the building.

Most freestanding churches, schools and museums are exempt. In the case of a building that's mixed use, such as the Thompson Center downtown, the parts of the building used for government offices and outdoor park are considered tax free while the mall section is taxable.

What are property taxes used for?

Looking at my own property tax bill, I can see that my taxes went to support the following:

• 0.33% North River Expanded Mental Health Services
• 5.66% Metropolitan Water Reclamation District of Chicago
• 0.08% Parks-Museum/Aquarium Bond
• 5.05% Chicago Park District
• 51.97% Board of Education Chicago
• 2.36% Chicago Community College District
• 1.79% Chicago School Building & Improvement Fund
• 1.70% Chicago Library Fund
• 22.74% City of Chicago
• 0.88% Cook County Forest Preserve District
• 4.42% County of Cook
• 1.81% Cook County Public Safety
• 1.21% Cook County Health Facilities

The specific breakdown will vary depending on where you live. For example, the "North River Expanded Mental Health Services" line item is exclusive to residents of the North Park, Albany Park and Irving Park neighborhoods.

Who determines how much property tax is owed?

Property tax administration is handled at the county level. The Cook County Assessor determines the tax rates based on the collective demands of county government and the cities and towns within the county borders. They also track which owners have filed for exemptions and discounts on their bills. The Cook County Treasurer handles billing and collection of those taxes. The Cook County Board of Review handles appeals from owners who feel they have been taxed at an incorrect rate.

What factors into the amount someone must pay in property taxes?

The land within the county is broken down into lots. Most residential lots are of similar size, but due to variations in land and street layout some lots may be bigger than others. Usually each building takes up a single lot, but some large buildings can span multiple lots. The Assessor calculates each lot's taxes and bills them individually, which means that owners may wind up paying 2, 3, or even 10 separate tax bills for a single large building. Included in the calculation of the tax bill is the lot size, the way the land is used (residential, commercial, industrial, etc.), how much of the land is used, and to an extent the actual monetary value of the property.

A lot of folks think that neighborhood sale prices alone determine the tax rate. This is not true. Neighborhood sale prices are, however, the most concrete way to prove to the Board of Review that a building is being taxed unfairly in comparison to similar buildings nearby.

Some landlords will convert unfinished basements and attics to apartments without telling the county. Since the number of units in a building is included in the calculation of the tax rate, these hidden conversions are illegal.

How much does an owner have to pay in property taxes?

This varies by neighborhood, building and owner. As a condo owner in a small building I pay about $4400 in property tax each year. The big 3-story vintage courtyard apartment building down the street from me pays about $23.5k per year. The non-condominium part of well-known mixed use skyscraper "Aqua" paid about $5 million last year spread across 7 different lots.

How much do property taxes go up each year?

It varies wildly from year to year. Properties are reassessed by the county every 3 years, which can cause the rate to go up or down considerably. From 2012-2014 the tax on my condo went up about $120. From 2015-2016 it went up by almost $900. An appeal to the Board of Review could knock it right back down again. If an elderly owner has a "senior freeze" exemption their taxes get locked at the rate they were at in the year the exemption was issued until the owner dies or the building changes hands.

Are there tax exemptions like there are for income taxes?

There are a handful of reasons why the county would lower your income tax bill, but far fewer than the exemptions allowed for income taxes. Property tax discounts ("exemptions") are designed to help offset major unexpected jumps in the tax bill for those who might not be able to handle such changes. They are available for the following:

• Seniors
• Disabled owners
• Veterans
• Owners who make major home improvements
• Long term owners of 10 years or more
• Owner-occupants

When are property taxes due?

It takes a long time and a lot of fiddling to properly calculate how much every building in the county owes in property tax. In fact, it takes so long that they're billed to and paid by the public in the year after they're spent. So, this year, 2017, we're actually paying the 2016 taxes.

The bills come out in two installments, one in March and one at a floating date in the second half of the year. The March installment is always 55% of what you paid the previous year. Once the county knows the amount they actually need to pay their bills from last year they issue the second installment, which has been known to arrive anywhere from July to October.

It's generally a good idea for renters to be at least slightly aware of these dates, and stay well clear of their landlords around that time. There's nothing like a big property tax bill in the mailbox to make a landlord super grouchy.

What happens if an owner doesn't pay their property taxes?

Most people know what happens when you don't pay your income taxes. Pretty much everyone has heard of some celebrity who got thrown in jail for tax evasion, or someone whose wages were garnished for missing an income tax filing date. In contrast, if you don't pay your property taxes, the county will find someone else to pay them on your behalf at events called tax sales.

Before we get into tax sales, I should specify that Cook County Tax Sales are not property sales. They are Tax Lien sales. The "buyers" are replacing the original owner's debt to Cook County with a debt to themselves, and the building as collateral.

When someone buys property taxes at tax sale, they pay only the unpaid tax amount plus any late fees that have piled up. They then must continue to pay future tax on the property if they wish to eventually take the deed to the building. The original owner has a set amount of time called the "reclamation period" to settle the debt and retain ownership. If the original owner doesn't set the balance due to zero by the deadline, the person who paid the taxes can claim ownership of the property outright.

Some of you doing the math will realize that this a good, if slow, way to get property on the cheap, and you'd be right - the lowest amount paid at a property tax sale in recent years was $290.94. However, those looking to buy property at the tax sales need to know that the county does absolutely no marketing, inspections, or renovations.

Properties are listed by property identification number (PIN) only. It's up to interested buyers to figure out the address using publicly-available cross indexing lists. While lists of PINs are made available for purchase from the county before the sales begin, buyers must visit the locations and verify the condition of any buildings.

The entire purchase must be completed at the time sale. There are no installment plans. You cannot expect to get a mortgage to help you buy something at a tax sale.

What's the difference between the annual sale and the scavenger sale?

The county runs two different types of sales to recoup the losses on unpaid taxes. The first attempt is called the annual sale, where any buildings running a 1 year debt are put up on the block. The annual sale for 2016 occurred late, in April 2017. The annual sale for 2017 will happen this fall. Properties at the annual sale must go for the full past due tax bill plus late fees and a transaction fee.

Not every building will sell at the annual sale. If an owner can't afford their property taxes, their building may be run down. The tax debt may be too high for any cash buyer to afford. For the leftovers the county tries again to recoup at least some of the amount owed.

This second attempt is the scavenger sale, which is what is occurring downtown right now. It happens in odd-numbered years and serves as the bargain basement clearance of buildings with past due property tax. Included are all the properties from the previous two annual sales that still have unpaid tax due to the county. The scavenger sale is an auction. Bidding starts at the lower of $250 or 50% of the taxes owed.

How many properties are sold at the Tax Sales?

The taxes for about 50,000 PINs are listed each year for the annual tax sale. About a third of them are purchased at that time. The rest are kicked over to the scavenger sale if the debt is not settled by the owner in the interim.

What happens if nobody wants a particular building at the Tax Sale?

Many of the buildings offered at the tax sales are absolute dumps. Nobody wants them, nobody buys them, nobody's willing to pay taxes on them. If a tax debt is not settled at either sale, the taxes are forfeited to the state of Illinois, and the property is noted by the county in the Tax Judgment Record.

Forfeited taxes can be purchased by outside investors at the county building downtown at any time. In some cases the County may choose to keep them as a "no-cash" purchase. The debt remains on the books for up to 20 years until it is paid by someone - either the original owner, a tax buyer, or the new owner of the property.

What does it mean for a renter if someone buys their building's taxes?

If your landlord hasn't paid their taxes and they're purchased by someone else, it does not mean you have a new landlord yet. Your old landlord has the entire redemption period to make things right, pay down the debt and keep the building. The full transfer process takes 2-3 years, and three-quarters of the tax sales do not wind up with the building changing hands.

You may not know that your building's taxes have been sold. Given the nature of the tax sale process there will be no open houses, no "for sale" signs and no showings, although you may see people walking around taking pictures and peering into the windows immediately before the sale occurs.

Continue paying rent to the name and address stated on your lease regardless of the tax sale status unless you receive written notice from a new owner that the property has changed hands.

While a tax sale does not mean you're going to lose your apartment immediately, it is a strong indicator that it's time for you to be looking for a new place to live. It is definitely a symptom of money problems for the landlord. While there are some political extremists out there who don't pay property taxes as a form of protest, they're pretty rare. More likely, unpaid taxes mean either a clueless landlord or a landlord without the funds to maintain the building and pay their mortgage. It also means they're handling your rent payments irresponsibly.

Could a renter buy the taxes for their landlord's building?

Yes, in theory, a renter with the funds to cover an unpaid tax debt could buy their landlord's unpaid tax bill. They would have to be able to cover the future tax bills in full though if they intend to completely replace the landlord as owner at the end of the redemption period.

Personally I think there are easier ways to become a landlord but if you want to do it the hard way there's nothing stopping you.

Where can I check if someone bought my landlord's unpaid taxes?

The quickest way is to look up your address at the Cook County Property Tax Portal. You'll probably need to search by property address to discover your building's PIN. Once you find your PIN, the records of tax sales from the past five years are in the bottom center of the building's detail page.

If all that is too much for you, tax sale information and unpaid tax amounts are included in every RentConfident Report along with a ton of other data. Just get us your address and we'll do the rest.

I live in a converted basement or attic apartment. Where can I check if my apartment is legal?

The legality of an apartment depends on much more than the tax rolls. A landlord can tell the county about a converted unit, pay taxes on it, and it still could be illegal if it fails to meet city building codes.

There was a time when residents could verify the number of units in some buildings by check with the Cook County Assessor's website. In recent years we have found this data has been removed from public view for more and more buildings, although for these it remains available by FOIA request.

Where can I see what the property taxes for my building are used for?

Your landlord probably uses part of your rent payment to pay their annual property tax bill. If you want to know how those taxes are distributed across city and county departments, you can use the PIN which you find at the Property Tax Portal linked above to look up and download a PDF copy of your landlord's most recent tax bill at the Cook County Treasurer's website.

It's also worth noting that hyperlocal tax initiatives such as the "North River Mental Health" item on my bill are often included on election ballots. My neighbors and I vote each year on whether to continue funding that project with our property taxes. This means that by voting as a renter you can dictate how at least some of your rent money is used.

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If you have other questions about property taxes, let us know in the comments, our Facebook page or on Twitter. We know that this matter can be a cause for some intense conflict. While we hope that all our readers treat each other with respect and patience, for this topic we ask that all commenters make an extra effort to keep their cool.