City Transfer Stamps
Hard-core inspections hinder some home sales
(http://www.starnewspapers.com/countryclubhills/news/303394,181af8.article)
(http://www.starnewspapers.com/countryclubhills/news/303394,181af8.article)
March 19, 2007
BY JOHN K. RYAN The Star
Moving out of a house can be an intimidating experience.
First there’s the expense involved in the actual moving (van lines, for instance), as well as the long list of closing costs from the application fees to a title search.
On top of this is the cost of fixing items found during inspection and payment of real estate transfer stamps.
While such costs can be a burden, buyers and sellers in some south suburban communities have been running into an even bigger problem connected with inspections and stamps.
Some communities use the issue of transfer stamps to insist on improvements not covered by Illinois statute.
Primarily, state law covers problems that relate to the health and safety aspects of a house. But some cities and villages look for much more.
“It happens. Some municipalities attempt to use inspection ordinances to cause housing stock to be rebuilt at the owner’s expense,” said Ed Schussler, an Orland Park attorney who handles real estate transactions.
“Some cities and villages do things with inspections that are less than constitutional but get away with it because nobody challenges the inspection ordinance.”
Recently, a real estate group has stepped up to the challenge.
Two municipalities, Dolton and Calumet City, were brought to court by the Realtors Association of West/South Suburban Chicagoland.
The association charged the two communities with refusing to issue transfer stamps for reasons that were not permitted by law.
Both cases dealt with attempts to have sellers make changes that do not fall under the category of health or safety, as Illinois statute dictates.
“This is illegal,” said Thomas Joseph, local government affairs director for the association’s south region.
“Illinois statute prohibits the obstruction of a transfer of property. It is also against the U.S. Constitution.”
“The only requirement for obtaining a property transfer stamp is payment of the tax,” said Phil Stahl, a Chicago-based lawyer who represents the association.
Beauty not the issue
An ordinance in Dolton required that homeowners not only fix standard inspection items such as plumbing and heating at point of sale, but cosmetic items as well.
Thomas said he heard complaints from homeowners — particularly on “as-is” sales — about how the village insisted on improvements such as painting garage walls, re-carpeting floors and replacing linoleum or windows.
“These have nothing to do with health or safety. Even if they did, a town cannot refuse to issue a transfer stamp because of it,” Thomas said.
Sean Howard, spokesman for Dolton, said he “categorically denies” the village was asking residents to paint garage walls or replace linoleum.
“But we will have people fix such things as broken windows if it is a safety issue,” Howard said.
“We have fought hard the stereotype that housing stock in minority villages run by minority administrations becomes run-down.
“However, due to the lawsuit we’ve had to relax our inspection process. Now we rely on ticketing residences who don’t adhere to village ordinances on beautification of property.”
Joseph said the association was only concerned with municipalities interfering with the sale of property.
“If the village finds health and safety violations, they can deny occupancy (of the buyer), but they can’t deny the sale,” he said.
Stahl said the standard practice when improvements are necessary is setting up an escrow account at the close to pay the party responsible for the costs.
Howard said such a process often did not work in Dolton.
“It’s sometimes hard to get the seller back to do the repairs after the sale. The buyer gets hit with it instead,” he said.
On the final consent decree against Dolton issued in 2005, the village was ordered to amend its ordinance concerning home inspections at point of sale.
Size matters in Cal City
In a case now being appealed by Calumet City, the city was cited for two violations, said Stahl.
“First it held up issuing transfer stamps without a point-of-sale inspection. Calumet City didn’t get a search warrant for the inspection. It’s a violation of state law to do so without a warrant or consent,” he said.
The city was also refusing to issue transfer stamps on multiple-unit properties without the owner deconverting them to a lesser number of units in the same building.
“This would have a dramatic effect on a property’s value,” Stahl said
“The city offered no process for a property owner to protest this.”
Stahl said the court agreed with the association that Calumet City was in violation of the U.S. Constitution and infringing on property rights according to Illinois statutes.
“The city never articulated the public good they were attempting to do with the deconversion,” he said.
Calumet City argues that many of these multi-unit dwellings did not go through the proper zoning process to convert from single-family houses.
“Illinois statute says a property owner cannot have multiple units in an area zoned for single family,” said John Murphey, an attorney representing Calumet City in the case filed by the association.
“The zoning ordinance keeps the quality of housing stock up and protects property values.”
An initial order for the city to change its policy was issued in spring of last year. Calumet City changed the ordinance, but Stahl said it did not fix all the problems.
“They continued to require homeowners to have a home inspection to receive a property transfer stamp. The court decided that the new ordinance was still in violation.”
Calumet City is appealing the most recent decision.
“The judge said the ordinance is unreasonable restraint on selling property,” Murphey said. “The city vehemently disagrees”
As for now, the federal court has suspended Calumet City’s right to conduct point of sales inspections.
Mark Sterk, the attorney for Calumet City, sent a memo to the city’s department of inspectional services alerting them to this fact.
Inspectors shall not make any mention of “deconverting” multifamily dwellings, Sterk’s memo says, and it further states that transfer declaration applications should now proceed without regard to a property’s zoning classification.
Finally, the issuance of transfer stamps in Calumet City should not require payment of outstanding water bills, according to the memo.
Murphey said the problem stems from federal courts interfering in local affairs.
“When towns pass laws to maintain property values, nobody argues,” he said.
“A federal court should be hesitant to interfere when local representatives know the problems of a community more than downtown courts.”
Not an isolated problem
Schussler claims he has run across communities in the south and west suburbs with inspection policies that go well beyond standards set by state statute.
“It’s not to say all towns have inspection policies that are illegal, but some are,” he said.
“And the issuing of transfer stamps give villages the ability to make life difficult for someone selling a home. Municipalities that require both inspections and stamps are especially tough.”
Schussler recalled one client from Cicero who ran up against a particularly rigid building inspector.
“He insisted the client replace all their windows, despite the fact they were not damaged,” Schussler said. “When asked why, he told the client ‘Because I’m the inspector and I said so.’ ”
All ordinances, however, are not uniformly difficult on the homeowner.
Schussler said some include exemptions of transfer tax fees for those who meet certain qualifications.
“For instance, Oak Lawn allows an exemption for seniors or for those who move to another home in the community. I believe a few towns offer that.”
John K. Ryan may be reached at jryan@starnewspapers.com or (708) 802-8807.
First there’s the expense involved in the actual moving (van lines, for instance), as well as the long list of closing costs from the application fees to a title search.
On top of this is the cost of fixing items found during inspection and payment of real estate transfer stamps.
While such costs can be a burden, buyers and sellers in some south suburban communities have been running into an even bigger problem connected with inspections and stamps.
Some communities use the issue of transfer stamps to insist on improvements not covered by Illinois statute.
Primarily, state law covers problems that relate to the health and safety aspects of a house. But some cities and villages look for much more.
“It happens. Some municipalities attempt to use inspection ordinances to cause housing stock to be rebuilt at the owner’s expense,” said Ed Schussler, an Orland Park attorney who handles real estate transactions.
“Some cities and villages do things with inspections that are less than constitutional but get away with it because nobody challenges the inspection ordinance.”
Recently, a real estate group has stepped up to the challenge.
Two municipalities, Dolton and Calumet City, were brought to court by the Realtors Association of West/South Suburban Chicagoland.
The association charged the two communities with refusing to issue transfer stamps for reasons that were not permitted by law.
Both cases dealt with attempts to have sellers make changes that do not fall under the category of health or safety, as Illinois statute dictates.
“This is illegal,” said Thomas Joseph, local government affairs director for the association’s south region.
“Illinois statute prohibits the obstruction of a transfer of property. It is also against the U.S. Constitution.”
“The only requirement for obtaining a property transfer stamp is payment of the tax,” said Phil Stahl, a Chicago-based lawyer who represents the association.
Beauty not the issue
An ordinance in Dolton required that homeowners not only fix standard inspection items such as plumbing and heating at point of sale, but cosmetic items as well.
Thomas said he heard complaints from homeowners — particularly on “as-is” sales — about how the village insisted on improvements such as painting garage walls, re-carpeting floors and replacing linoleum or windows.
“These have nothing to do with health or safety. Even if they did, a town cannot refuse to issue a transfer stamp because of it,” Thomas said.
Sean Howard, spokesman for Dolton, said he “categorically denies” the village was asking residents to paint garage walls or replace linoleum.
“But we will have people fix such things as broken windows if it is a safety issue,” Howard said.
“We have fought hard the stereotype that housing stock in minority villages run by minority administrations becomes run-down.
“However, due to the lawsuit we’ve had to relax our inspection process. Now we rely on ticketing residences who don’t adhere to village ordinances on beautification of property.”
Joseph said the association was only concerned with municipalities interfering with the sale of property.
“If the village finds health and safety violations, they can deny occupancy (of the buyer), but they can’t deny the sale,” he said.
Stahl said the standard practice when improvements are necessary is setting up an escrow account at the close to pay the party responsible for the costs.
Howard said such a process often did not work in Dolton.
“It’s sometimes hard to get the seller back to do the repairs after the sale. The buyer gets hit with it instead,” he said.
On the final consent decree against Dolton issued in 2005, the village was ordered to amend its ordinance concerning home inspections at point of sale.
Size matters in Cal City
In a case now being appealed by Calumet City, the city was cited for two violations, said Stahl.
“First it held up issuing transfer stamps without a point-of-sale inspection. Calumet City didn’t get a search warrant for the inspection. It’s a violation of state law to do so without a warrant or consent,” he said.
The city was also refusing to issue transfer stamps on multiple-unit properties without the owner deconverting them to a lesser number of units in the same building.
“This would have a dramatic effect on a property’s value,” Stahl said
“The city offered no process for a property owner to protest this.”
Stahl said the court agreed with the association that Calumet City was in violation of the U.S. Constitution and infringing on property rights according to Illinois statutes.
“The city never articulated the public good they were attempting to do with the deconversion,” he said.
Calumet City argues that many of these multi-unit dwellings did not go through the proper zoning process to convert from single-family houses.
“Illinois statute says a property owner cannot have multiple units in an area zoned for single family,” said John Murphey, an attorney representing Calumet City in the case filed by the association.
“The zoning ordinance keeps the quality of housing stock up and protects property values.”
An initial order for the city to change its policy was issued in spring of last year. Calumet City changed the ordinance, but Stahl said it did not fix all the problems.
“They continued to require homeowners to have a home inspection to receive a property transfer stamp. The court decided that the new ordinance was still in violation.”
Calumet City is appealing the most recent decision.
“The judge said the ordinance is unreasonable restraint on selling property,” Murphey said. “The city vehemently disagrees”
As for now, the federal court has suspended Calumet City’s right to conduct point of sales inspections.
Mark Sterk, the attorney for Calumet City, sent a memo to the city’s department of inspectional services alerting them to this fact.
Inspectors shall not make any mention of “deconverting” multifamily dwellings, Sterk’s memo says, and it further states that transfer declaration applications should now proceed without regard to a property’s zoning classification.
Finally, the issuance of transfer stamps in Calumet City should not require payment of outstanding water bills, according to the memo.
Murphey said the problem stems from federal courts interfering in local affairs.
“When towns pass laws to maintain property values, nobody argues,” he said.
“A federal court should be hesitant to interfere when local representatives know the problems of a community more than downtown courts.”
Not an isolated problem
Schussler claims he has run across communities in the south and west suburbs with inspection policies that go well beyond standards set by state statute.
“It’s not to say all towns have inspection policies that are illegal, but some are,” he said.
“And the issuing of transfer stamps give villages the ability to make life difficult for someone selling a home. Municipalities that require both inspections and stamps are especially tough.”
Schussler recalled one client from Cicero who ran up against a particularly rigid building inspector.
“He insisted the client replace all their windows, despite the fact they were not damaged,” Schussler said. “When asked why, he told the client ‘Because I’m the inspector and I said so.’ ”
All ordinances, however, are not uniformly difficult on the homeowner.
Schussler said some include exemptions of transfer tax fees for those who meet certain qualifications.
“For instance, Oak Lawn allows an exemption for seniors or for those who move to another home in the community. I believe a few towns offer that.”
John K. Ryan may be reached at jryan@starnewspapers.com or (708) 802-8807.
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