Exemption not allowed on rental properties

Q. In 2003, my wife and I bought a townhouse in Cook County. I have been leasing the property since it was purchased.

I just realized I have been receiving the homeowners exemption all these years. What can I do to correct the situation? How far back can the county go to pay any taxes I owe? What would be the penalty, interest and costs?

Any help would be appreciated.

A. As many Cook County homeowners know, the Cook County assessor has been investigating and attempting to determine properties that are and have been improperly receiving the homestead exemption. As a general rule, a property owner is improperly receiving the homestead exemption on any property that is not the property owner's principal residence. Also, as a general rule, a property owner can only claim the homestead exemption on one property.

What appears to have occurred here is you purchased the property from a party properly receiving the exemption and neither you nor the county corrected the status of the property when you began leasing it. Unfortunately, it was your duty to inform the county of the change in status of this property pursuant to section 35 ILCS 200/15-20 of the property tax code.

In the event the county wishes to investigate your property, you will receive a Notice of Discovery. This is notice to you that the county will be conducting an audit to determine whether or not you are entitled to the homestead exemption for that property. Should the county determine you have received an exemption or exemptions you are not entitled to, you will receive a Notice of Intent to Lien. At that point, you may request a hearing to determine your liability.

If you have received one or more improper (referred to as "erroneous") homestead exemptions, you will be liable for the principal taxes due (the amount of all erroneous exemptions), interest of 10 percent per annum from the date each exemption was received and, if applicable, penalties and administrative costs. Penalties are applicable if you have received three or more erroneous homestead exemptions, in which case you will be charged a penalty that is equal to 50 percent of the principal taxes due. There are provisions regarding avoiding the penalty if you promptly resolve the unpaid taxes with the county after receiving the Notice of Discovery.

If you received one or two erroneous homestead exemptions, you are liable for up to three years immediately prior to 2014. If you received three or more erroneous homestead exemptions, you will be liable for the six collection years immediately prior to 2014. You may also be liable for any erroneous exemptions received on or after the 2014 collection year.

Before doing anything, I would suggest contacting an attorney that practices in this area to determine your best course of action.

• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tdr100@hotmail.com or call (847) 359-8983.