Real Estate Taxes


Cook County Real Estate Taxes are paid in arrears (2005 real estate taxes become a lien on the property in 2005, but are not paid until 2006). Taxes are paid in two installments. The first installment is due on March 1 and the second installment is due September 1. The first installment is an estimated installment and is calculated by taking 50% of the prior year’s tax bill. The second installment bill is actually the full year tax bill minus the first installment that was paid.

Be advised that the concept of the estimated 1st installment tax bill only applies in Cook County. All the other counties determine the full year’s tax bill when they send out their first installment in June of the year they are due. They are not paid in arrears.

- Each county may operate differently, please contact Matt directly to consult


At closing (Cook County) you are unaware of the taxes for the following year. As a result, the Seller gives the Buyer a credit for the real estate tax bill at closing. Because the Seller will have moved before the tax bill is released, the Buyer receives a credit to avoid paying for the taxes on the property for the period in which they were not the owners. Typically in Chicago, the prior year’s tax bill is multiplied by 110% in order to calculate the credit. This multiplier allows for a small annual increase in taxes.

New Construction

Taxes on new construction or conversion condominiums may initially appear quite confusing. When a developer converts an apartment building to condominiums or builds a new condo building, the property is taxed as vacant land or taxed on the apartment building as a whole. For example, if a developer purchases land in 2003, his tax bill due in 2004 will be assessed as vacant land or on the old building. If the Condominium Declarations are recorded with Cook County in 2004, the process of dividing the condos into separate tax units begins. A PIN, or Permanent Index Number, is assigned to each taxable parcel.

In such case, vacant land or an apartment building usually has one or only a few PINs. Unfortunately, after the condo units start closing, there are quite often only a few PINs for the entire building. As a result, many units share the same PIN number until individual PINS are assigned to each unit.

In the above example, the 2003 taxes, payable in 2004, would be paid in full by the developer.

If the closing occurred in 2004, the tax bill, payable in 2005, will be one bill for the entire building. There will be no first installment tax bill and the entire bill will be reflected on the second installment bill.

The 2004 taxes would be handled in a number of different ways as laid out in the developer’s contract. Many developers are calculating the 2004 taxes, by taking the 2003 taxes at some rate (110%) and prorating the amount at closing that is owed by each unit. In such case, the developer pays from Jan 1 until the date of closing and Buyer pays from date of closing till December 31. Both amounts may be held in escrow with the title company. The title company will pay the tax bill when it becomes available in 2005. If the funds for the tax bill are short, the Buyer will be responsible for the difference and the developer or management company will determine the amount owed based on the appropriate share (e.g. square footage).

Otherwise, the developer gives the Buyer a credit and makes the tax bill the responsibility of the association. This will result in each unit owner being responsible for their percentage share as listed in the Declarations. Alternatively, the parties may enter into a Tax Reproration Agreement. In such case, the tax bill is resolved when the actual bill is received.

Additional Issues

Because many lenders are unfamiliar with Cook County and the tax division process, many escrow accounts are mismanaged. Consequently, many lenders will pay a tax bill for an entire building before the bill has been divided. For example, a unit owner’s lender may pay the tax bill for the entire building (i.e. a $350,000 condominium pays a $75,000 tax bill). Trying to rectify this situation with a lender proves quite difficult and time consuming.