Don’t let the new collection policy catch you off guard

Several months ago, we informed our readers about an anticipated new law concerning Illinois condominium and community association collection policies and disclosures. This law was subsequently signed by Gov. JB Pritzker at the end of July as Public Act 104-0734 which has changed how condominium, homeowner and townhouse associations pursue delinquent assessments.

The new law becomes effective as of Jan. 1, 2027. Associations that wait risk a rushed process — reviewing existing policies, consulting counsel, adopting revisions and notifying owners — all before the deadline.

Under the new law, associations must adopt and follow a written collection policy before taking legal action to collect unpaid assessments. This policy must address:

• Assessment collection procedures and timelines

• The association's rights and remedies for delinquent accounts

• Payment processing and application practices

• Standards for payment plans

• Delinquency resolution efforts

• Thresholds for pursuing legal action

• Compliance with Illinois law and the association's governing documents

Importantly, the law does not ban collection efforts entirely for associations without a policy, but it does require a compliant policy to be in place before legal remedies can be pursued. Failure to do so may provide a delinquent owner with a valid defense to the collection action.

While the law specifies required topics, associations should not treat this as a generic template. Because the policy directly affects the association’s ability to pursue legal remedies, boards and managers should work with their association attorney to ensure its properly drafted, legally sound, and aligned with governing documents and actual practices.

This new law also requires associations to include their written collection policy in resale disclosure documents. This means the policy will be reviewed by everyone involved in a sale — buyers, lenders, attorneys, insurance underwriters, brokers, and management professionals — alongside paid assessment letters and lender questionnaires. In other words, the collection policy is no longer just an internal document; it becomes part of the association's public-facing transaction paperwork.

Since assessments fund most association operations, an inability to collect them could disrupt routine maintenance, vendor payments, reserve funding, and capital projects. Many associations currently lack a standalone written collection policy — or have one that doesn't meet the new requirements.

Not all current collection policies are equal. Some associations have policies missing key provisions required by the new law; others have informal procedures that were never formally adopted in writing. Because these policies directly affect an association's collection rights, boards should work with their community association attorney to review or draft a policy that aligns with:

• The association's governing documents

• Current collection practices

• Illinois state law

• Applicable local jurisdiction requirements

Associations that wait too long risk discovering compliance gaps right before the deadline, potentially losing their ability to pursue delinquent assessments in the interim. Boards need time to:

• Review governing documents and current collection practices

• Identify gaps against the new legal requirements

• Draft or revise a compliant policy

• Formally adopt it and communicate changes to owners

Review, drafting and adoption of the legally compliant policy may take up to 30 or 45 days. We strongly encourage boards to act promptly.

• Matthew Moodhe is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at condotalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.