Hello BP community. Interested in finding out if anyone has had general homestead exemptions and or senior citizen homestead freezes applied to their property taxes for a family member that rents a SFR from them in Illinois. Realize this pool of people may be very limited, but still worth a shot. The follow up is how it was set up in the rental agreement and what else is needed ongoing. From what I can read in the tax code it seems possible with the homestead exemption here:
This annual exemption is available for “residential property that is occupied by its owner or owners as his or their principal dwelling place, or that is a leasehold interest on which a single family residence is situated, which is occupied as a residence by a person who has an ownership interest therein, legal or equitable or as a lessee, and on which the person is liable for the payment of property taxes.” (35 ILCS 200/15-175) The amount of exemption is the increase in the current year’s equalized assessed value (EAV), above the 1977 EAV, up to a maximum of $7,000 in Cook County and $6,000 in all other counties.
Our scenario is my mother and step dad live in a SFR of ours and their rent is solely based on the total costs of the property (mortgage, insurance, and property taxes). We pay for any appliances, etc. that need to be replaced like in most any rental agreement. They are also both 65 so the senior citizen exemptions would apply if possible. It may appear that I would just need to have the taxes sent to them since they would then be a lessee that is liable for the payment of property taxes.? Thanks in advance.
From what you quoted, the two basic requirements are legal or equitable interest as lessee, and liable for payment of property taxes.
If you have the tax bills sent to them, they pay it, it only meets one of the above requirements. I have a business once, the lease requires me to pay the property taxes, and the landlord had me set up as the payee with the city. But this does not give me equitable ownership.
To qualify for equitable ownership, the renters would also need to have a long term triple net lease with you, with a term of at least 30 years, but not more than 99. These NNN leases usually require the lessee to pay the taxes, which is one part of the tripe net. They also pay operating expenses and utilities, which is the other two of the triple net. These leases should also be recorded in the public records.
NNN leases are commonly used for commercial transactions. Some people think they do not apply to residential. I can't comment on state laws everywhere, but here in NY, I have heard of NNN leases used in residential transactions. You can even get a mortgage on NNN leases as they are recognized as one form of real estate ownership. In these cases, the ownership is split, you have "fee simple ownership", and they have "equitable ownership", which is what you quoted from the state law.
Thanks Frank for the quick and enlightening reply. A lot of information is available searching under the title triple net or NNN lease which I didn't know the term for before your post. There is also a county in Illinois that had a form to fill out for this exact scenario, but I can only find it for 2014 and no other years.
I will have to look into the possibility of a triple net lease, and if it makes sense because as far as I have looked now, things may get a little tricky once they start doing the maintenance on the house if anything breaks for tax and depreciation purposes.