Illinois Condo and HOA Boards Should Prepare for New Collection Policy Requirements

A recently passed Illinois bill, SB3527, would add a new requirement before condominium, homeowner (HOA), and townhome community associations can pursue any legal action to collect delinquent assessments. Illinois associations would be required to adopt and follow a written collection policy containing due dates, late fees, payment plans, referral thresholds, payment application, etc.. SB3527 is expected to take effect on January 1, 2027.

Perhaps most importantly, the proposed legislation would prevent an association from pursuing any legal collection remedies if it has not adopted a compliant written collection policy. 

While January 1, 2027 may seem distant, compliance efforts often require significant planning and implementation. Illinois associations that delay may encounter the following challenges:

• Potential Impact on Association Finances: Delays or interruptions in assessment collection efforts can affect an the community’s cash flow and ability to meet ongoing financial obligations. Timely assessment recovery is often critical to funding day-to-day operations and maintaining financial stability.
• Pressure on Reserve Funding: When delinquent assessments remain outstanding for extended periods, associations may experience additional challenges funding reserve accounts and planning for future repair and replacement projects.
• Increased Collection Challenges: Associations that do not adopt and follow a compliant collection policy may face additional challenges when pursuing delinquent owners. Clear, consistent collection procedures can help reduce disputes and support enforcement efforts.
• Last-Minute Compliance Concerns: Associations that wait too long may find themselves scrambling to review existing policies, work with the association’s attorney, adopt necessary revisions, communicate changes to owners, and implement new procedures before the effective date.

What Must Be Included in a Collection Policy Based on This New Illinois Law?

The legislation received unanimous support in both chambers of the Illinois General Assembly, passing the Senate by a vote of 54-0 and the House by a vote of 108-0. The bill amends both the Illinois Condominium Property Act and the Common Interest Community Association Act. 

The legislation would prohibit an Illinois community association from taking legal action to collect unpaid assessments unless the association has first adopted and follows a written collection policy.

Under SB3527, a formal written collection policy would need to address several key collection practices, including:

• Establishing clear assessment collection procedures and timelines
• Defining the association’s rights and remedies when assessments become delinquent
• Addressing payment processing and application practices
• Establishing standards for payment plans
• Outlining delinquency resolution efforts
• Identifying when legal collection action may be pursued
• Ensuring collection practices comply with applicable Illinois law and the association’s governing documents

While the legislation identifies specific subjects that must be addressed, associations should avoid treating the collection policy as a simple form document.

Because the policy will directly impact the association’s ability to pursue legal collection remedies, boards and managers should work with their association attorney to ensure the policy is properly drafted, legally compliant, and consistent with the association’s governing documents and collection practices.

Illinois community associations that do not adopt a compliant policy are likely to face delays and owner’s legal challenges when attempting to pursue legal collection remedies.

Unit Sales Face an Additional Legal Requirement

The bill also proposes changes for associations subject to the Illinois Condominium Property Act and the Common Interest Community Association Act. Community associations would be required to include a copy of their formal collection policy as part of the resale disclosure documents provided to prospective purchasers.

Every time an owner is selling a home or condominium unit, parties involved in the transaction will request and review the association’s formal collection policy. These third parties include purchasers, lenders, attorneys, insurance underwriters, brokers, and management professionals.

As a result, the collection policy will become more than just an internal operating document. It will become part of the association’s formal resale disclosure process along with paid assessment letters and lender questionnaires.

Accordingly, the policy should be professionally prepared and legally compliant.

What Steps Can Illinois Associations Take Now?

Since assessments are the primary source of funding for most community associations, the inability to pursue delinquent assessments could affect:

• Routine maintenance
• Vendor payments
• Reserve funding
• Capital improvement projects

Many associations do not currently have a standalone written collection policy, or one that is compliant with all of the new requirements under the proposed law. Boards will need time for a review of their governing documents, management practices, and current collection procedures. Associations that delay implementation risk discovering compliance issues shortly before the law becomes effective which would keep them from taking any action to collect assessments.

Taking proactive steps to adopt and implement a legally compliant formal collection policy can help Illinois associations protect their financial stability and continue providing the services and amenities owners expect.

How Can the Association’s Attorney Assist Board Members and Managers?

Not all collection policies are created equal. Some associations may already have collection policies in place, but those policies may not contain all of the provisions required by the proposed legislation. Other associations may have collection procedures that have evolved over time but were never formally adopted as a written policy.

Because collection policies directly impact an association’s ability to recover assessments, boards should work with an experienced community association lawyer to review existing policies or prepare new policies that comply with applicable legal requirements.

An attorney who regularly represents condominium, homeowner (HOA), and townhome associations can help ensure that the policy is consistent with the association’s governing documents, collection practices, the requirements of Illinois law and the individual requirements of local jurisdictions.

To help Illinois community associations prepare for SB3527, KSN has developed CLEAR or Community Legal Evaluation for Assessment Recovery.

Through CLEAR, KSN attorneys can assist Illinois association board members and managers by:

• Determining whether a formal written delinquent assessment collection policy already exists
• Identifying any procedural and legal inconsistencies between the association’s current collection practices and governing documents
• Preparing legally compliant collection policies and association documents
• Satisfying the requirements of the proposed legislation in anticipation of the January 1, 2027 effective date

Contact KSN to Start Your Collection Policy Review Today

Legal Resource

With SB3527 expected to take effect on January 1, 2027, Illinois community associations should begin evaluating their collection procedures now rather than waiting until the last minute.

A compliant collection policy requires more than simply adopting a document. It must be consistent with the association’s governing documents, current collection practices, and applicable Illinois law.

Through CLEAR (Community Legal Evaluation for Assessment Recovery), KSN attorneys can help boards and managers identify potential compliance issues, develop legally compliant collection policies, and implement procedures that preserve the association’s ability to collect delinquent assessments.

Early legal review can help reduce risk, avoid owner challenges, and ensure associations are prepared before the new requirements become effective.

Questions about this proposed law, delinquent assessment collection, owner disputes, or other legal issues?

Please call 855-537-0500 or visit www.ksnlaw.com.

Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.

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