Everything You Need To Know To Make Decisions About Owners Real Estate Taxes
Boards of directors of Chicago condominium associations have the ability to act on behalf of the unit owners they are elected to represent in order that owners homes are assessed fairly by the Cook County real estate tax assessor. This action is called a collective appeal .A board’s authority to make this appeal is found in the Illinois Condominium Property Act Section 10(c). Here is an explanation of the real estate tax system to guide condo association boards through the process.
As of March 3, 2015, the first installment of 2014 property tax bills will be due to the Cook County Treasurer. The first installment accounts for 55% of the 2014 tax total. Should any changes occur to the prior year’s tax bill; they will be reflected on the second installment in the fall. If you have a new Property Tax ID Number for 2014, the entire tax total will be due on the second installment since there is no prior year issued for the PIN. The second installment will probably be due August 1, 2015.
During 2015, all property located in the City of Chicago will be re-assessed by the Cook County Assessor as part of the triennial. Cook County townships are divided into three areas and one area is assessed each year see the triennial map to see which townships fall into each taxing district, the rest of Illinois counties reassess every four years referred to as a quadrennial. Complaints and appeals can soon be submitted to the Assessor for the 2015 tax year. The process is scheduled to begin in select areas and will continue through the year for various Chicago townships. To view a tentative list of filing dates for each area, go to the Cook County Assessors web site.
The current tax bills payable in 2015 are for real estate taxes for the year 2014. The tax bills are a result of an assessed valuation and then a notice of the assessed valuation sent to each taxpayer. Then there is a period of time allowed to appeal the assessed valuation.
The tax bill is a mathematical calculation that is a result of the assessed valuation multiplied by the state equalization factor and then the equalized assessed valuation is multiplied by the local tax rate to calculate the annual real estate tax. The board of directors of a condominium can engage a professional to appeal the assessed valuation of each of the association’s units called a collective appeal but an appeal has is not directed at changing the equalization factor or the tax rate. An assessed valuation can decrease and a tax bill can theoretically increase. Actually it is quite common over the last 40 years to see a common relationship between tax rates and assessed valuations. Normally when property values increase tax rates decrease and when values decrease rates will increase.
At one point when I was managing Americana Towers Condominium Association, 1660 LaSalle Condominium Association and Hemingway House Condominium Association (collectively over 1,000 hi rise units in Lincoln Park)there were well publicized Illinois Tax Rate decreases. All these associations retained law firms to act on their behalf and reduce assed valuations. The law firms communicated that they were successful in reducing the assessed valuation so unit owners expected lower tax bills. When the second installment bills were sent to the owners my phone wouldn’t stop ringing. Unit owners wanted an explanation why their tax bill was higher even though tax rates were lower and assessed valuations for the quadrennial (then Cook County was like the rest of the state)had been reduced. Well the reason for higher taxes were that property values had risen dramatically so even a reduction in assessed valuation left the assessment higher than in the previous quadrennial and the state equalization factor increased as well. Communication about every step in this price is important in order to avoid unhappy owners surprised by the tax bill.
The assessed valuation is based on a percentage of market value. Protests are made to the county assessor and board of review. There is normally a 30 day period to file an appeal after the assessed valuation notice is sent to the taxpayer of record. If the board has retained a professional to act on their behalf they present data to dispute the assessors market value using records of recent sales within the association and possibly appraisals.
The other factors affecting the tax bill are the equalization factor and the tax rate. The tax rate is the sum of the tax rates for several taxing bodies with the largest rates going to schools and the city (around 80%). Libraries and park districts are examples of other taxing bodies. The establishment of each tax rate for a taxing body starts with a budget, hearings are held and finally there is a levy ordinance.
The equalization factor is unique to Cook County. Cook County taxes at a lower rate than the rest of the state 10% of the market value for residential and 25% of the market value for commercial real estate. The rest of the state uses 33% of the market value for all real estate. The state equalization factor is the multiplier to put Cook County on a more equal basis with the rest of the state. The multiplier is now 2.6621. It has been as low as 1.5 and as high as 3.6.
The boards authority to retain a professional is in the Condominium Property Act – Section 10(c) “Upon authorization by a two-thirds vote of the members of the board of managers or by the affirmative vote of not less than a majority of the unit owners …, the board of managers acting on behalf of all unit owners shall have the power to seek relief from or in connection with the assessment or levy of any such taxes … and to charge and collect all expenses incurred therewith as common expenses.”
This provision to the condo act has saved condo owners thousands of dollars and reduced the stress level and hours of time for condo board members. In the early years of managing 3600 Lake Shore Drive Condominium Association this provision was not in place. 3600 was a large condominium recently converted from a rental. There were over 500 unit owners in a new association where very few people knew each other. The taxes were going to increase unless the board acted because most new owners were not even familiar with real estate taxes. The governing documents allowed for a collective appeal but it required approval of 65% of the owners. It took one solid weeks work on my part with hours of time of the building manager Debbie Chornamaz and probably two weeks of volunteer effort from unit owners spearheaded by the board president Richard Strimling but we did get the approval. Now it only takes two thirds of the board of managers to get this same authority to seek relief from real estate taxes.
Typically attorneys who specialize in real estate taxes are the professionals retained to protest the valuation. Many of these attorneys work on a contingency fee basis based upon the savings that is a result of assessed valuation reduction. These professionals may be willing to be paid their fees over three years. Fees and payment schedules are negotiable.
The professional’s fees should be a budget line item as a common expense and therefore part of the expenses to be covered by assessments. The law allows this and this is a much more transparent transaction to unit owners and potential owners than billing retroactively after the service has been provided.
In advising unit owners board members should also be able to explain to unit owners that it is each owner’s responsibility to apply for personal deductions. The most common:
Homeowners exemption- Must be their primary residence
Senior citizens exemption – Must be over 65
The homeowner exemption is calculated by multiplying the local tax rate by $6,000.
Some of this article is based on information presented in an ACTHA webinar by Elliott & Associates P.C. Attorneys, Michael J. Elliott.