7-Aug-15 – While members of the embattled Illinois Legislature are fighting with Governor Bruce Rauner over the state’s pension problems and inflated budget, there are other issues in the world of real estate that need attention.

Thousands of Chicago homeowners are worried because Cook County Assessor Joe Berrios has sent threatening letters to more than 20,000 law-abiding suburban homeowners warning they are being investigated for tax fraud regarding bogus homeowner exemptions.

The assessor’s office now has an eight-man investigative Fraud Unit filled with seasoned former Chicago Police Department detectives who are actively looking for property tax cheaters. These are not mindless bookworm bureaucrats, friends, and neighbors – these streetwise ex-CPD detectives have seen everything.

Got a neighbor who doesn’t like you? The assessor’s office now has a whistleblowers link on its website so, in effect, the entire county has been deputized to search down tax cheats.

And no, it’s not just the past due taxes you’ll have to pay. There is a 50 percent penalty plus interest.

The homeowner’s exemption can save hundreds of dollars in real estate taxes for every Cook County homeowner who resides in his or her own home. For example, the exemption for a typical North Side single-family home on the 2014 property tax bill amounted to a $478 tax cut.

The assessor’s office says the mass mailing was necessary to claw back millions of dollars from tax cheats who unfairly claim homeowner’s exemptions on properties in which they do not reside – for example, rental properties – or folks taking a Senior Exemption for which they’re not qualified.

So if you inherited a home from your parents, or some other elderly person who was taking an exemption, and you have not notified the county that a senior citizen no longer owns the house, now would be a good time to get around to it. The records proving this inconsistency are easy to find and cross-check – and believe it, they’re now finding a lot of people who are getting property tax deductions they do not deserve.

The county believes there is more than $200 million in past due property taxes they can collect. They have already collected $20 million in the 18 months the Fraud Unit has been in existence. If they find you first they’re going to look at the last four years of tax records and file a lien on your home if you can’t pay.

However, an analysis of homeowners who received the threatening letters revealed the assessor simply targeted anyone who claimed an exemption on more than one parcel of real estate, including many homeowners who own a dwelling that sits on more than one lot and therefore has more than one Property Information Number.

In other cases, the exemptions were never applied for by new owners but automatically came with the property when it was transferred.

One real estate investor told this writer he purchased a small income property – a four-flat – that was formerly owner-occupied and carried a homestead exemption.

The new owner did not reside in the property and he overlooked the exemption on his tax bill because his real estate lawyer did not alert him to the issue. This oversight does not mean he is guilty of tax fraud, the investor said, but the assessor’s office will tell him that he is liable for the extra taxes going back four years – plus the penalty and interest charges.

“We found one guy who owned 20 buildings and he was taking [fraudulent] exemption on all of them,” said Berrios (left). “We got him for $174,000 in past due property taxes.”

This is why real estate investors are lobbying Governor Rauner for the passage of Senate Bill 780, according to Michael Mini, executive vice president of Chicagoland Apartment Association (CAA), which represents more than 7,000 apartment professionals who own and manage over 160,000 rental units in the Chicago area.

“This legislation is needed because of a situation that often occurs when residential property is transferred,” said Mini (right). “Previously granted homestead exemptions may not be removed and exemptions for which the property no longer qualifies may remain on the property.”

CAA says SB 780 addresses this situation by requiring the new owner to apply or reapply for any homestead exemptions for which the property may be eligible.

To ensure that new homeowners receive all exemptions for which their property qualifies, the bill requires an assessor to mail information to the new owner regarding the rules and filing periods for applying and/or reapplying for exemptions.

If the new owner does not apply or reapply, or the property no longer qualifies for an existing exemption, the legislation requires the assessor to cancel the exemption for any ensuing assessment year.

“While this legislation generally does not apply to large multi-family apartment buildings, it would help those who own and manage single-family rental properties – and inherit past improper homestead exemptions – to have them removed from the property tax records,” notes Mini.

Proposed law would simplify payment of security deposit interest

Another nagging legal issue for landlords is the state law that requires them to pay interest on rental apartment security deposits.

It is not that landlords are refusing to pay the interest. With interest rates so low, annual payments have become an accounting headache. The current security deposit interest rate is only 0.01 percent.

This is why real estate investors and CAA are lobbying the governor for passage of House Bill 1319.

HB 1319 amends the Security Deposit Interest Act by modifying the requirement that a landlord pay accumulated interest to a resident within 30 days after the end of each 12-month rental period. The bill limits the requirement to pay interest on security deposits that have accumulated in an amount of $5 or more.

“With interest rates at historic lows, the five dollar threshold makes common sense and will provide administrative relief associated with the handling of a negligible amount of security deposit interest,” explained Mini.