What Happens When You Don't Pay Property Tax?

Aug 8, 2016

They say the only certainties in life are death and taxes. In Illinois, property taxes have a few uncertainties as well, particularly when you don't pay.  

Municipalities and state governments have a vested interest in making sure everybody pays their fair share and, while each area may have a unique quirk, the overall process is universal. People pay their property taxes and, if they have trouble, seek out a deferment program.

DeKalb County Treasurer Christine Johnson
Credit ilga.gov

But if you can’t pay, your debt could be sold off to the lowest bidder. DeKalb County Treasurer Christine Johnson explains her local process.

“We mail out the bills right around May 1. The first installment was due June 3, the second installment will be September 2, and then we’ll go into the delinquent collection process,” she says.

It starts out with a simple delinquency notice sent out in mid-September. If that doesn’t get an owner’s attention, the process becomes more public.

“After that has gone out and we don’t get any response, we are required by law to publish the name of the taxpayer in the newspaper," she says. 

That usually happens in mid-October, and owners still have a chance to pay without further penalty. If they can’t -- or won’t -- pay, their properties become part of a tax sale. But that’s a bit of a misnomer, since nothing’s being repossessed. Instead, each property gets a tax lien, which investors buy out. They also bid on the interest rate for the delinquent taxpayer to repay.

“Mostly our sales go one to two percent. But it’s a live auction and, as the bids come in a lot higher than that, that’s the number that they get sold at. We take the lowest number that we hear,” she explains.

Regardless of who wins the auction, the state gets its taxes from the investor. From there, owners have a maximum of two years to pay the debt.

“During the year, the taxpayer/property owner has the ability to come in at any time to the county clerk’s office and redeem their taxes or pay them off. That money obviously goes back to the tax buyer who paid their taxes to begin with,” Johnson explains. 

This can provide some owners the time they need to assemble funds, but Johnson doesn’t suggest they view it as a low-interest loan. If they wait too long, they’ll be responsible for the following year’s taxes, and the tax buyer gets an automatic boost to the interest rate.

“You might bid zero one year, but if the people don’t come in and redeem, then you’ve bid 12, and you have an automatic 12 the next year. That kind of smooths out the rate,” she says. 

Only 2 to 3% of people get in trouble for not paying taxes initially. If owners don’t pay after two years, buyers can bring forth the repo man. But Johnson says that’s a slow process.

“There are numerous notices and court dates and I’s to dot and T’s to cross before they can go to deed on that property,” she explains. 

For about 1% of indebted owners, however, their property isn’t appealing enough to even attract a bid from investors. In that case, the government takes trusteeship of the deed and the tax debt is eliminated. Then they’re auctioned off at a catalog sale.

“This is like the last resort of stuff that absolutely nobody wants.”

What goes up for auction varies. It could be an orphaned parcel jutting off a larger property, or maybes the land is oddly shaped, like a thin strip. And sometimes the property looks like it was part of a sleazy reality show.

“The town had demolished what was a hoarder house, so the town wanted that vacant lot now,” she said. 

In one case, a man bought a hoarder house, refurbished it, and then rented it out. Some properties can stay in the catalog for years, but Johnson mentioned a property that had a sudden spike in interest.

“…it was at the time they developed the shopping center where JC Penny was and where Carson’s is. That was the driveway to where they wanted to enter into that mall, so all of a sudden that parcel became very interesting to a lot of people,” she said. 

Ultimately, whatever price the new owners pay for the property isn’t as important to the state as the long-term benefits.

“The whole purpose behind the trustees sale is to take these properties that nobody’s caring for and get them back on the tax roll as soon as possible,” she says. 

Thus, no matter the process, the state gets its revenue in the end. And the procedure is the same all across Illinois. Johnson suggests locals pay any back taxes soon, since this year’s sale starts on Halloween.