IL Supreme Court: Rental Housing Support surcharge collected by county recorders not unconstitutional 'fee office'

A fee paid by those recording the sale of land which has been credited with generating tens of millions of dollars annually to help low-income Illinois residents pay rent has survived a challenge before the state’s highest court.

On May 21, the Illinois Supreme Court overturned the ruling of a Lake County Circuit Court judge, who had found unconstitutional a $10 surcharge tacked on to all real estate transactions recorded with county recorders of deeds to create a funding source for the state’s Rental Housing Support Program.

Justice Anne M. Burke delivered the judgment and opinion, with the Court’s other justices concurring.

Jason S. Marks and Lauren Marks had filed the original complaint – later to become a class action suit – in May 2011 against Lake County and the Lake County Recorder of Deeds office, contending the surcharge, collected by the recorder per statute, violated the state constitutional prohibition against so-called fee offices, as well as the state constitution’s uniformity, due process and equal protection clauses.

In this instance, the Marks contended, by allowing the county recorders collecting the surcharge to keep $1 of every $10 surcharge, the law establishing the surcharge had created an illegal “fee office,” in which the state, to enable the collection of the surcharge, allowed the recorder to directly pay their office-related expenses from the surcharge.

Of the $10 surcharge, $9 went to the state for the Rental Housing Support Program and $1 to the county. Of the county’s dollar, 50 cents was placed in the county’s general fund and the remaining 50 cents was to cover the county’s purported cost of administering the surcharge and any other recorder expenditures.

The Rental Housing Support Program was enacted in 2005 to help provide affordable housing to low-income residents. The program provides rent assistance subsidies to eligible tenants renting from landlords who participate in the program. Landlords offering housing in Chicago participate in a separate program run by the city of Chicago.

The General Assembly amended the surcharge statute in March 2013 – while the Marks case was pending in court – lowering the surcharge to $9, with a separate $1 recording fee, of which 50 cents was still deposited in the general fund, but with the other 50 cents going into the recorder’s automation fund. The plaintiffs then amended their complaint to include the 2013 surcharge change. Their attorney was David A. Novoselsky, of Chicago.

In September 2013, Lake County Circuit Judge Christopher C. Starck ruled both versions of the surcharge statute were unconstitutional. The Lake County officials then appealed directly to the state Supreme Court, bypassing appellate court. Oral arguments were made in September 2014.

The Supreme Court held the statute did not run afoul of the fee office prohibition, because the statute directs the recorder to deposit the dollar with the county treasurer and sets forth how the county may spend the dollar. This denies the recorder discretion on how the money is spent. Rather, the recorder is merely a “conduit” to the county treasurer.

The Court also found the uniformity clause argument did not apply, as the surcharge was not unequally applied. The justices said there was a “reasonable relationship between the individuals subjected to the Rental Housing Support Program surcharge and the object of the legislation.”

Likewise, the Court was not receptive to the plaintiffs’ argument the surcharge flouted due process, in that the surcharge was “unsupportable and irrational.” The Court found the “statute bears a rational relationship to the legitimate goals of providing affordable rental housing and the maintenance and improvement of property values,” which are, in the Court’s view, “legitimate government interests.”

The Court also made quick work of the plaintiffs’ final claim the equal protection clause was breached, saying the uniformity clause is more stringent. If the surcharge is constitutional under the uniformity clause, which the Court found it was, it is constitutional under the equal protection clause.

The justices remanded the case to Lake County Circuit Court for further proceedings.