On March 21, 2006, Lake Forest voters approved a referendum that allowed the City to impose a real estate transfer tax on the sale of real estate within the City. Revenues generated from the transfer tax fund infrastructure improvements (repairs to streets, sewers, bridges, etc.) that would otherwise be postponed or eliminated. The Lake Forest City Council believes that well-maintained streets, sewers, etc. help support and preserve community character and property values.
Who pays the tax and when?
The Lake Forest City Council approved an ordinance specifying that the tax be applied as follows:
The transfer tax be levied on the buyer of any residential or commercial real estate in The City of Lake Forest.
The transfer tax be imposed on all transactions which close on or after July 5, 2006.
A rebate of the transfer tax owed in an amount up to $2,000 will be given to Lake Forest residents who move between residences within Lake Forest.
Individuals refinancing their home or changing a name on their deed must apply for an exemption stamp. This is required by the Lake County Recorder’s Office. Submit the completed application and fee of $50.00 to The Finance Department at Municipal Services, 800 N Field Dr (8:00am - 4:30pm, Mon - Fri). Please allow 1-2 business days for processing after submission of the completed application.
Purchasers of real estate in Lake Forest need to pay the tax at Municipal Services (800 N. Field Drive) during regular business hours. The transfer tax stamp for a real estate purchase must be paid with cash or a certified check (made payable to The City of Lake Forest) prior to the property closing date. Cash, personal check, MasterCard, Visa, or Discover Card are acceptable for exempt transactions only.
The forms required for purchase of the real estate transfer tax stamp can be downloaded from this site. This allows purchasers to print out and complete the necessary forms prior to coming to Municipal Services to report a real estate transaction.
What is the real estate transfer tax rate?
The rate is $4.00 per $1,000 of full actual consideration; tax rounded to the next $5.00, paid by the buyer prior to closing. Levied on residential and commercial real estate transactions at the time of sale, this translates to $3,600 on a property with a $900,000 value.
What forms are needed?
When purchasing or selling real estate in Lake Forest, a number of steps must be taken before the transfer tax stamp can be issued. A Seller/Buyer checklist has been developed to provide a quick overview of actions required by the buyer and seller.
Downloadable forms are available as follows:
Prior to closing, purchasers must complete a Real Estate Transfer Tax Application Form and pay the required tax due. The PTAX-203 form must also be submitted with the application. This form is generally completed by the seller's attorney. Tax must be paid with cash or certified funds (payable to The City of Lake Forest).
Exempt transactions must complete a Real Estate Transfer Tax Exempt Application Form and pay the required fee. A complete list of exemptions is available.
Lake Forest residents who sell and purchase a residence in Lake Forest within a year can apply for a rebate by completing the Real Estate Transfer Tax Rebate Form. Unless applied for within one year, a rebate of the paid Real Estate Transfer Tax will not be given.
For more information, please contact Laronda Haines at (847) 810-3620
Need for Real Estate Transfer Tax Referendum
Note: The following Real Estate Transfer Tax information can be downloaded. (146k - 3 pages)
Preserve Community Character
The first and most important priority in Lake Forest is to preserve community character. Well-maintained infrastructure (streets, sewers, street lighting, etc.) is critical to the community and has a direct impact on property values. In order to maintain a balanced budget in light of rising costs, The City of Lake Forest has reduced operational expenses, postponed capital projects, and deferred infrastructure maintenance. By deferring maintenance, the City has fallen one year behind in the street repair program, three years behind in the sidewalk replacement program, and is unable to fund needed street light improvements throughout the community.
To maintain our aging infrastructure, what annual level of funding is required?
The City Council projects approximately $1.6 to $1.8 million is needed annually to maintain the City’s streets, sewers, sidewalks, street lighting, municipal buildings, trees, etc.
What additional funding sources has the City Council considered?
The City Council has analyzed a number of alternate revenue sources to provide funding, including a:
2% restaurant tax ($440,000 estimated annual revenue);
additional 0.5% sales tax ($700,000 estimated annual revenue);
non-retail business employee (head) tax ($290,000 estimated annual revenue); and
real estate transfer tax ($1.4 million estimated annual revenue).
Is there any other single source of revenue that would generate a level of funds similar to the real estate transfer tax?
Yes, the City Council could increase property taxes to generate sufficient funds for the continued maintenance of our streets, sewers, sidewalks, bridges, and street lighting improvements.
What nearby communities have a real estate transfer tax and in what amount?
Highland Park $5.00/$1,000
Fort Sheridan (Highwood) $5.00/$1,000
Who will pay the real estate transfer tax and at what rate?
The City Council has determined that the rate will be $4.00 per $1,000 of value, paid by the buyer at the time of closing. This translates to $3,600 on a property with a $900,000 value. Based on projected real estate sales and projected rebates (see below), this rate would generate $1.4 million to address the City’s long-term infrastructure needs. The tax would be levied on residential and commercial real estate transactions at the time of sale.
Now that the real estate transfer tax has been approved, can the City increase the rate of the tax at any time?
No, voter approval of a referendum is required for any additional increase. The City Council can, however, lower the rate by ordinance if the tax generates more revenue than is needed for infrastructure improvements.
Will there be any exemptions to the proposed real estate transfer tax?
The City Council has determined that a rebate of the transfer tax owed in an amount up to $2,000 would be given to Lake Forest residents who purchase and sell a residence within Lake Forest. A number of other North Shore communities have enacted a real estate transfer tax, but no other communities currently offer such a rebate. Other exemptions would include governmental entities, not-for-profit organizations, and transfer of deed transactions.
On November 17, 2008, the City Council amended the Real Estate Transfer Tax Ordinance by extending the $2,000 refund opportunity from one to two years after a resident first sells his or her home and then buys another home within Lake Forest.
Note: As of November 18, 2010 transactions revert to one year after a resident first sells and buys another home within Lake Forest to apply for the rebate.
Sales and purchases taking place between November 17, 2008 through November 17, 2010 will still have the two year period to request the $2,000.00 refund.
How will the real estate transfer tax revenue be used?
The City Council adopted an ordinance on February 17, 2005 requiring that, if approved, these tax revenues will only be used for infrastructure improvements (e.g., roads, sewers, bridges, street lights, sidewalks).
What are the advantages of a real estate transfer tax?
A real estate transfer tax:
is a sustained, single source of revenue that would generate sufficient funds to help preserve property values and community character by maintaining Lake Forest’s aging infrastructure;
diversifies the City’s revenue sources, thereby reducing dependency on property taxes;
would have a significant impact on Lake Forest’s long-term financial stability by helping to maintain a balanced budget;
shifts some of the tax burden from current Lake Forest residents to non-residents (approximately 70-75% of real estate purchasers are non-Lake Forest residents); and
has been successfully implemented in other North Shore communities (Highland Park, Wilmette, Mettawa, etc.) as a supplementary revenue source.
What are the disadvantages of a real estate transfer tax?
A real estate transfer tax:
would impact only those buying property so it is a relatively narrow-based tax (approximately 4-5% of Lake Forest’s housing stock turns over each year); and
is not deductible on state or federal income tax returns. The amount of the real estate transfer tax ordinarily increases the cost basis of the purchased residence. Residents should refer to their tax advisor on this matter.
Will the imposition of a real estate transfer tax discourage individuals from purchasing a home in Lake Forest?
The real question is what impact (if any) a real estate transfer tax or higher property taxes would have on a buyer’s decision. Whether or not the imposition of a real estate transfer tax or an increase in property taxes impacts an individual’s decision, the City Council believes the quality of the City’s infrastructure has the greatest bearing on property values and community character.
If the real estate transfer tax referendum is approved, how will it affect Lake Forest?
Revenues generated from the transfer tax will be used to fund infrastructure improvements that would otherwise be postponed or eliminated. Well-maintained streets, sewers, etc. help support and preserve community character and property values.
Whether a real estate transfer tax is approved or property taxes are increased, the City Council will continue to look for ways to control operating and capital expenses to maintain a balanced budget and pursue outside funding sources (partnerships, grants, etc.) and modifications to City services (outsourcing, etc.).