State Laws You Should Know
Bill Ward, Executive Vice President, HBAI
In 1983, the Illinois General Assembly passed legislation intended to protect real estate developers from rising assessments which result from initial platting and subdividing farmland for real estate development. The Developer’s Exemption has been in the Illinois Revenue Act for 32 years and is referred to in HBAI circles as the “Vacant Lot Act.”
The law prevents assessors from increasing the valuation of the property during development and sale of the lots. The property must be: 1. Platted and subdivided in accordance to the Plat Act; 2. The Plat must occur after January 1, 1978; 3. At the time of platting, the property is in excess of five acres (originally 10); 4. At the time of platting the property is vacant or used as a farm as defined by statute. Cook County is exempt from the provisions of this benefit.
The legislature’s exclusive focus in enacting this section was to encourage developers to develop land that had previously been used as farmland or had been vacant. Stated another way, the particular evil that this law was intended to remedy was the imposition of a higher tax upon real estate developers before they had the opportunity to reap the benefits of their investments.
When passed in the Illinois House, then State Rep. Dennis Hastert declared the broader goal of the bill: “This, indeed, does deal with the economic recovery where builders are starting to plat land or bring land into…and start to build houses and get the economy going.”
The Vacant Lot Act can be found in the Illinois Revenue Statute, Chapter 35, ILCS 200/10-25.
The Model Home Act
In 1985, HBAI advocated for a new section to the Illinois Revenue Act that would change the manner in which assessors value single family homes which are used as model homes.
The Model Home Act allows single family homes, condominiums, and town homes which are used for display or demonstration model homes, if properly eligible and qualified, to be assessed for real estate taxation purposes at the fair market value of the land upon which they are built prior to the construction of the home.
In order to be eligible for the benefits of this law the dwelling unit must: 1. Not be occupied as a dwelling unit; and 2. Be used as a display or demonstration unit model home for prospective buyers of either that dwelling or of similar homes built on other tracts or lots.
The Model Home Act battles the same evil that the Vacant Lot Act addresses: imposing taxation prior to reaping any benefits. The difference between the two is this: the Vacant Lot Act happens automatically; the Model Home Act requires a verified application prior to receiving the benefit.
HBAI has improved this law over the years:
- Use of furnishings, appliances, offices and office equipment used for sales activities shall not affect the tax level of the model home (1993);
- Townhomes & Condominiums were expressly added in 1994;
- We extended the deadline for filing an application for special assessment to April 30 in Cook County and December 31 in all other counties (1999).
There is a limit of 3 homes in a 3 mile radius, but no limit to how many radiuses may be used, as long as they are incongruent, (Chapter 35 ILCS 200/10-25).