Nothing gets the phones ringing in my office quite like property tax bill season. Cook County mailed out 1st installment bills this past week. They are due by March 4th. The taxing system is dreadfully complicated and consumers, particularly new property owners, have questions.
Here are some of the most common questions received in my office and, of course, some answers too!
WHAT TAXES ARE WE PAYING?All Illinois property taxes are paid one year in arrears. In other words, the bills we all just received in 2014 are actually taxes due from 2013. This presents an obvious question for anyone who closed last year or earlier this month - is this my bill or the sellers?
WHO PAYS THE BILL - BUYER or SELLER?In all but the most exceptional circumstances, if you own the property now, you this is your bill to pay. This may not seem right, paying a tax bill levied against property you did not yet own, but (assuming you had a well drafted purchase contract and competent counsel) the seller gave a credit at the closing to “cover” this expense. The tax credit given at closing is analogous to the experience of dining at a restaurant with a companion who leaves the building before the waiter sets down the check - but gives you money to pay his/her share. Once the bill is down and the companion is gone, that bill is yours to pay. Hopefully, you and your friend (or sellers) estimated well. We lawyers do our best to project likely changes in the tax levy and try to allocate the taxes fairly. The dynamics of the deal - including the relative bargaining strength of any given buyer or seller may impact the actual “fairness” of a tax credit allocation, and can impact the formula used to calculate the credit. This may include arrangements to re-allocate taxes once the final tax bill is released. Check your closing papers or consult your attorney to see if there is a re-proration agreement in place for your purchase.
WHO PAYS THE BILL - BUYER or DEVELOPER?Those exceptional circumstances where a Buyer may not have to pay the bill? Some developers just do not want to leave credits on the table at a closing. They insist on paying year-of-closing taxes. New construction buyers should double check their closing settlement statements or check in with their lawyers to see what arrangements were made there.
WHO PAYS THE BILL - BUYER or LENDER?Some, but certainly not all Buyers pay their lenders money every month to cover not only loan principal and interest, but also escrow funds for taxes, insurance, and possibly mortgage insurance. If your lender collects an escrow - resist the temptation - do NOT pay this tax bill. That said, if your lender collects and escrow, DOUBLE CHECK to make sure that they actually pay the bill for you. From time to times gremlins in the system cause errors.
Here is my suggested three step approach
- confirm with your lender that it paid at least “something” to the County for your taxes. This can typically be done by checking with your loan servicer online or by telephone.
- surf to the County Treasurer’s web site and confirm that the bill is paid. In full. If the numbers match up, comparing the bill to the amount your lender paid, to the amount the County received you should be good to go. Any variance in the numbers? There may be a problem.
- make sure that taxes are paid all parcels of property. Check the tax status for all side lots, deeded parking spaces or condo storage spaces too.
THIS THE WHOLE ENCHILADA, RIGHT?Sorry, this is only a partial tax bill. All other Illinois counties show you the full annual tax amount, but only require payment of half the amount in each of two installments due. Collar county bills should be mailed out in late April or early May.
Cook County on the other hand, has not yet determined the actual tax levy. You are looking at an “estimated” bills - 55% of last year’s (2012) invoice. The other shoe should drop in late June when the second installment bill is issued out, likely to be due and payable by August 1st.