Posts from: January 2015

New Property Tax Incentive Classification to Stimulate Real Estate Development in Cook County

Cook County recently amended its real property assessment classification ordinance to add a new property tax incentive classification to stimulate real estate development in the County.  The new classification, known as “Class 7c – Commercial Urban Relief Eligibility (CURE)”, provides eligible commercial property owners with a five year reduction in property tax levels for: (i) all newly constructed buildings or other structures, (ii) the utilization of vacant structures which have been abandoned for at least 12 months, and (iii) all buildings and other structures which are substantially rehabilitated to the extent the rehabilitation adds to the value of the property.  The Class 7c classification also extends the assessment relief to the property value attributable to the underlying land.

Projects which qualify for the Class 7c incentive will receive a reduced assessment level of 10% of fair market value for the first three years, 15% for the fourth year and 20% for the fifth year. Without this incentive, commercial property would normally be assessed at 25% of its market value. This has the effect of reducing the assessment by 60% for each of the first three years, 40% for the next year and 20% for the fifth year.  For a newly constructed building with a $5,000,000 fair market value in the City of Chicago, the savings based on 2013 tax rates, would be approximately $136,000 for each of the first three years and approximately $546,000 over the five year duration of the incentive.

To be eligible for Class 7c, the property must be “real estate used primarily for commercial purposes”, which is defined as “any real estate used primarily for buying and selling of goods and services, or for otherwise providing goods and services, including any real estate used for hotel and motel purposes.” Qualifying property must meet four eligibility factors:

    • The property’s assessed valuation for three of the past six years has declined or remained stagnant due to the depressed condition of the property;
    • The proposed project development or redevelopment is viable, likely to proceed on a reasonably timely basis and result in an economic enhancement of the property if granted a Class 7c designation:
    • The Class 7c designation materially assists in the development of the property and the development would not have gone forward without the Class 7c designation; and
    • The designation is reasonably expected to result in an increase in property tax revenue and the creation of employment opportunities at the property.

An application for Class 7c designation must be submitted prior to the commencement of construction, rehabilitation or reoccupation.  The application must include a resolution or ordinance from the municipality in which the property is located supporting the project and stating that the municipality has confirmed the above-referenced eligibility factors and that the area in which the property is located is in need of commercial development.

For further information regarding the Class 7c incentive program, and real estate development and related issues, please contact:

Jeffrey M. Galkin:  jgalkin@lgattorneys.com or 312-368-0100

or

Morris R Saunders:  msaunders@lgattorneys.com or 312-368-0100

Recent Illinois Supreme Court Case Clarifies That Prescriptive Easements Do Not Require Exclusive Possession

An easement is a right or privilege to enter and use land which is in possession of another. For example, if there are two parcels of land, owned by two separate property owners and one of the properties does not have access to the road, the property owner of the accessible land may grant the owner of the non-accessible land an easement to use a particular portion of the accessible property to reach the road. Another example is when a utility company desires particular access on, or over, or under a piece of property, the property owner will grant the utility company an easement. There are various types of easements, including express easements (which may be “granted” or “reserved” in a deed or other legal instrument), implied easements (which courts typically determine when there is a claim brought, and which involves an analysis of the intentions of the parties and takes into account the practices and customs for the use of the property) and easements by necessity (situations where a court determines if the easement is absolutely necessary, e.g., where a property is completely without access to a public way).

There is another kind of easement, an easement by prescription – which is the subject of the Illinois Supreme Court’s September 18, 2014 decision in Nationwide Fin., LP v. Pobuda, 2014 IL 116717, reh’g denied (Nov. 24, 2014). The plaintiff, Nationwide Financial, LP (“Nationwide”) became the owner of a parcel of land which was adjacent to a lot owned by the defendants, the Pobudas (the “Pobudas”). The Pobudas alleged that they consistently traveled over the northwest corner strip of Nationwide’s newly acquired property during the 22 year period prior to Nationwide’s ownership of the property. The prior owner had observed them using the strip and never raised an issue. Nationwide filed suit against the Pobudas, seeking a declaratory judgment that the Pobudas’ use of the strip amounted to trespass and the Pobudas’ counterclaimed, alleging that they enjoyed a prescriptive easement to travel over the strip.

According to the Court,  for the Podudas’ to establish an easement by prescription, “the use of the way in question must have been—for a 20-year period—adverse, uninterrupted, exclusive, continuous, and under a claim of right. Nationwide argued to the Court that the Podudas were required to prove that they “exclusively used” the easement property and “altogether dispossessed” the titleholder for the 20-year period. The concept of adverse possession is often confused with the concept of prescriptive easement. Adverse possession is when a party acquires ownership of land after meeting certain requirements, including  possession of the land of another, denoting physical control over the property. Therefore, when it comes to adverse possession, two people cannot possess the same thing. An easement is only one party’s limited right to use the servient land – there is not an element of ownership or control. The Court in Nationwide held that that for a prescriptive easement to exist, there is a lesser interest at stake, and therefore, two parties can simultaneously use the same strip of property over the 20-year period, and the property owner does not have to be totally deprived of possession in order for a prescriptive easement to arise or exist.

The outcome of Nationwide has various implications on real estate law and the practical issues which may arise in the purchase or sale of property, not only for residential properties but for commercial and industrial properties as well. Perhaps the most important of which is that a purchaser of property should investigate whether or not there could be a prescriptive easement (and for that matter, an implied easement) which may affect the land it wishes to purchase. While express easements may be recorded and be revealed in a title commitment, an implied easement or a prescriptive easement may exist due to practice, custom, or fulfillment of a prescriptive easement’s requirements, which may only be ascertained by visiting the property and/or speaking with the current property owners and/or neighboring property owners directly.

If you have any questions or concerns relating to easements in connection with real estate, or if you are interested in purchasing or selling property for residential, commercial or industrial purposes and would like to discuss legal issues relating to that purchase or sale, please contact:

Eli Korer at: ekorer@lgattorneys.com or 312-368-0100

or

Jeffrey M. Galkin at: jgalkin@lgattorneys.com or 312-368-0100

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