The new Illinois collection policy establishes requirements for both homeowners associations and condominiums. It puts forth a prerequisite for pursuing legal action against delinquent owners. Failure to comply with this new law can render the association’s collection efforts void and expose it to legal risks.
What’s the New Illinois Collection Policy?
The Illinois Legislature recently passed a new law requiring HOAs and condominiums to establish a written collection policy before using legal means to collect delinquent dues.
Senate Bill 3527, now Public Act 104-0734, amends both the Illinois Common Interest Community Association Act and the Illinois Condominium Property Act. According to this new law, associations must formally adopt and enforce a written collection policy before they can pursue legal action to collect unpaid dues.
The new collection law applies to all associations that operate under the ICICA and the ICPA. It was signed by the Governor on July 31, 2026, and takes effect on January 1, 2027.
What are the New Illinois HOA Collection Policy Requirements?
In Illinois, HOAs and condominiums are forbidden from pursuing legal action to collect delinquent dues unless they have enacted and implemented a formal collection policy.
Under the new law, collection policy requirements for Illinois HOAs and condos must explain:
- When owners must pay their dues,
- When dues become delinquent,
- Late fees and interest,
- Returned-check fees,
- When and how owners may enter payment plans,
- When a delinquent account can be sent to an attorney,
- How payments are applied to the account, and
- What legal remedies are available.
Moreover, the new law requires associations to disclose the collection policy during a sale.
When a homeowner sells their unit, they must provide the buyer with a resale certificate (supplied by the association). Associations must now include a copy of the collection policy in the resale package. This way, buyers can review how the association handles delinquencies, including late fees, payment plans, and potential legal action.
How Should HOA Boards Respond to the New Illinois Collection Policy Law?
Association boards must comply with the new Illinois law by updating their existing policies, enacting a new one (if necessary), hiring a legal expert, and educating residents. Let’s discuss each one below.
1. Update Existing Policies
Many associations have formal collection policies already in place, but this does not mean they are in compliance with Public Act 104-0734. The new law explicitly lays out the new requirements for condos and HOAs. Existing policies may not align.
Board members must review their current collection policy and amend it as necessary. All provisions must coincide with the new Illinois collection policy law.
2. Enact a New Policy
Some associations have yet to establish a written collection policy, relying on informal practices instead. This not only creates room for doubt and selective enforcement but also conflicts with the new Illinois condo collection policy law.
Board members must enact a collection policy that aligns with the new law. It is mandatory to put it in writing, especially considering the resale disclosure requirement.
3. Hire a Legal Expert
Board members rarely have the legal background to create an airtight policy that withstands scrutiny under state laws and governing documents. Generally, associations must hire an attorney or HOA management company to assist with writing or revising the association’s collection rules.
4. Educate Residents
After establishing a standard policy, the board must then distribute it to residents for awareness. An association cannot expect its members to comply with a policy that they don’t know about. It may also help to schedule a meeting to clarify the provisions or craft an explainer to answer frequently asked questions.
Why Should HOAs Plan Early for Compliance With Public Act 104-0734?
Board members must start the review and revision process in advance to avoid bottlenecks, ensure a smooth cash flow, and have enough time to address issues as they arise.
The new Illinois collection policy law does not take effect until January 1, 2027. While the date is still a few months away, association boards must act early to prevent problems.
Compliance with the new law follows a long process. Board members must review their current collection policy, identify provisions that require revision, and draft amendments. From there, the board must vote on the change, enforce the new policy, and distribute copies to residents.
What Happens if an HOA Fails to Comply?
Noncompliance, or late compliance, can lead to consequences, including losing the legal authority to collect unpaid dues, stifling cash flow, and crippling the reserve fund. Let’s discuss the following.
1. No Legal Authority to Collect
The new law prohibits associations from pursuing legal action against delinquent owners without a written collection policy. Noncompliance strips an HOA or condominium of its authority to collect unpaid dues using lawsuits, liens, and foreclosure. Essentially, board members can expect more challenges when trying to lower delinquency rates.
2. Impedes Cash Flow
Without the authority to collect unpaid dues using legal means, an HOA or condo may experience cash flow problems. Revenue halts, expenses go unpaid, and operations stall.
An association must plan ahead and revise its collection policy to ensure continuity. Dues are the lifeblood of a planned community. Without them, routine maintenance, capital improvement projects, insurance, and reserve funding are all impacted.
3. Cripples Reserves
Regular dues don’t just cover operating expenses — they also fund the association’s reserves. A high delinquency rate reduces reserve contributions, impairing an HOA’s ability to cover major capital repairs and replacements.
Underfunded reserves force an association to seek alternative funding sources, such as special assessments or loans. Some raise dues significantly over a short period. Meanwhile, others defer major repairs and replacements, resulting in deterioration or breakdowns.
The Right Move
The recently passed Illinois collection policy establishes new requirements for both HOAs and condo associations. While the law doesn’t take effect until January 1, 2027, compliance efforts should begin as early as possible to avoid falling behind. Associations must seek help from an attorney or HOA management company when creating or revising their collection policies.
Hillcrest offers HOA management services to communities in Chicago. Call us today at 630-627-3303 or contact us online to request a proposal!
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