Property tax debt sale reform will allow homeowners to keep more of
their equity
[June 01, 2026]
ByJ enna Schweikert and UIS Public Affairs Reporting (PAR)
Illinois could soon reform the state’s regulations on delinquent
property tax sales after the House approved a bill 80-35 along party
lines Saturday evening that lets homeowners keep their equity.
House Bill 4537 makes various changes to the regulations for selling
property tax debt. The key change is if a homeowner fails to pay their
debt in an initial redemption period, and their property is seized and
sold, they will receive any surplus funds left over from the auction.
That change will bring Illinois — the last state to do so — into
compliance with the 2023 Supreme Court decision Tyler v. Hennepin
County. Previously passed by the Senate, the bill will now head to the
governor.
In Tyler, the court decided that the sale process violated citizens’
right to fair compensation for government seizure of property and ruled
any surplus funds from the property sale must be returned to the owner
to reimburse the equity they had in the property.
The new regulations would give certain counties the chance to purchase
those debts themselves and offer more opportunity for the homeowners to
pay back their debt.
The Senate passed the bill 56-1-1 on Thursday. Sen. Chapin Rose,
R-Mahomet, voted no, and Sen. Willie Preston, D-Chicago, voted present,
out of concern that the changes won’t work.
“We have done what we could to try to address as many concerns as
possible, to try to address as much as we could, to try to ensure that
people who are unfortunately in a position of losing their homes because
of delinquent property taxes, have an ability to recoup some of the
surplus once those properties are sold,” said the bill’s sponsor, Sen.
Celina Villanueva, D-Chicago.
Process reforms
When an owner falls behind on property taxes, the county clerk can place
a lien — a legal claim against a person’s assets to ensure their debt is
paid — on the property. These liens can be sold as tax certificates in
annual sales, often to third parties who hike interest rates and charge
steep fees.
The property owners are given a redemption period at this point to pay
off the debt, during which buyers must meet specific deadlines notifying
the owner of the process steps. If the homeowner still can’t pay the
debt, then the tax buyers can seize and resell the property.
In that way, tax buyers can obtain a property for just the cost of the
debt, regardless of the property’s market value or equity the homeowner
had invested.
Villanueva’s bill addresses the issue by both restructuring the way
counties handle tax debt sales and giving homeowners the right to be
reimbursed for their equity.
“That was always my north star in this, is how do I protect people, how
do I help people,” Villanueva said. “It’s always been them.”
Counties with more than three million residents — effectively just Cook
County — can take part in a pilot program during the next six annual
sales by obtaining up to 100 tax certificates on certain low-tax,
homestead properties. They would need to submit an annual report to the
General Assembly detailing how many certificates the county acquired,
what happened to them and where the proceeds went between the taxing
district and the property owner.
That report will inform lawmakers if the new process works or whether a
trailer bill is needed, House sponsor Rep. Curtis Tarver, D-Chicago,
said on the floor Saturday night. Following the next six sales, those
counties would be required to adopt the process.
“Cook County initially wanted the ability to take all tax certificates.
… The pushback was to allow them to have a pilot program,” Tarver said.
“Then (they) would report back to the General Assembly annually, and
this will allow us to have an opportunity to see if that pilot program
is in fact working, and if they have the ability to really scale up to
take on all of the tax certificates.”
Some lawmakers pushed back on this model, however: “In six years, Cook
County’s going to do something completely different than the other 101
counties in Illinois, and I just don’t think that that makes sense,”
Rose told Capitol News Illinois on Friday.
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Sen. Celina Villanueva, D-Chicago, speaks on the floor on Thursday,
May 28. Villanueva led negotiations on this bill for several years.
(Capitol News Illinois photo by Jenna Schweikert.)
Outstanding certificates
In February, Villanueva sponsored a bill that extended Cook County’s
scheduled property tax sale to buy time while lawmakers negotiated this
bill. Cook County was the focus in many of those negotiations, in part
because it has significantly more outstanding certificates than any
other county.
Lawmakers approved a similar bill in April, House Bill 799, but that
bill only fixed the process moving forward, leaving those outstanding
certificates in limbo. Then on May 11, a federal judge ruled the Cook
County Treasurer’s office is liable to refund the money property owners
lost in the tax sales between the Tyler decision and now.
This bill modifies the sales-in-error regulations to create a new
category for any current outstanding certificates to be automatically
declared in error, meaning those sales will be reversed, tax buyers will
be refunded and the process will restart under the new statute.
There are also provisions extending the initial tax redemption period by
six months to a total of three years and establishing a surplus equity
fund for those who’ve lost their home in the past two years. That fund
would be supplied by a set of fees charged to the tax buyers.
Buyers in counties of more than three million residents, essentially
Cook County, must pay 5% of the total taxes, interest and penalties for
a certificate, capped at $1,000, plus an additional 5% of the taxes,
interest and penalties. Buyers in smaller counties must pay a flat $20
fee. When the certificate is issued, buyers in counties larger than
three million residents must pay $1,000 and those in smaller must pay
$500.
Some Republicans, including Rose, cast doubt on how effective the bill
would be because of those fees.
“If the tax buyer doesn’t get repaid their money, who’s going to ever
buy taxes?” Rose said.
The Illinois Tax Purchasers Association is opposed to the bill, out of
concern that the surplus equity fund fees will impact their business
model and drive tax purchasers out of the state, Rep. Steven Reick,
R-Woodstock, said on the floor Saturday.
“I understand the concern of pushing, you know, the tax buyers
completely out. Somebody’s got to pay the taxes, right?” Tarver said.
“That’s why we understand that the purpose of the pilot program is to
ensure that … if Cook County really is focused on keeping homeowners in
their properties, and they believe they have the ability to do that,
then let’s see that proven.”
The bill also establishes new notice requirements to ensure that
property owners know their rights, how to get help paying their tax
debts and what could happen if they don’t.
Negotiations
Illinois is the last state to come into compliance with Tyler because,
despite years of negotiations between lawmakers, stakeholders and
advocates, those involved struggled to find a statewide solution.
“90% of the bill, everybody was in agreement with,” Villanueva said.
“The question was, how do we ensure that we have a policy that is
statewide that works for everybody, because the county (Cook) is always
going to be slightly different than everybody else.”
Rose, Villanueva and Preston each said they support larger property tax
reforms in the future to address why residents are falling behind on
their payments in the first place.
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