When multiple individuals own property jointly, they often organize under the homeowner association laws of the state in which they live. In Tennessee, these laws are found in Title 66, Chapter 27 of the Tennessee Code. They are called the Horizontal Property Act and the Tennessee Condominium Act, and they govern homeowner associations in the state.
These laws permit owners of certain property to be members of homeowners' associations and require certain legal documents to form a Board of directors.
What Is a Homeowner's Association?
Many families in the United States are impacted by homeowners associations (HOAs). There are over 350,000 HOAs that impact more than 40 million households nationwide. In Tennessee alone, some 800 HOAs govern the property of some 968,000 Tennessee residents.
But what exactly is a homeowner's association?
Many modern residential developments have amenities, usually those common features in line with community standards, such as clubhouses, swimming pools, gyms and other gathering places that belong to all residents of a housing development.
These facilities do not belong to any one resident or owner; they are common areas and require everyone’s help to maintain. The property owners can agree to covenants about the use of these areas and also about individual units.
This management is often accomplished through homeowners associations (HOAs). HOAs are given authority to enforce covenants agreed to by the homeowners. Homeowners associations are in many ways like small, private governments with authority to tax members by setting annual dues, as well as having the ability to place a lien on a property or even foreclose on it if necessary to collect amounts owed.
Setting and Enforcing HOA Rules
HOAs can also set rules that apply to all residents, ranging from the tiny details of life, such as when residents can take out their trash, to the designs and colors of all furnishings inside a unit that are visible from the outside. This power often includes the right to issue cease and desist orders and to impose financial penalties to those who do not follow the rules.
The Attorney General of Tennessee has determined that HOAs can restrict political speech without violating the First Amendment. But, at their best, HOAs are "government-among-friends," where rules are interpreted with good faith and generosity between neighbors, helping the community thrive.
Tennessee HOA Laws
Tennessee has laws that apply to residential communities. Two primary laws are the Horizontal Property Act and the Tennessee Condominium Act, both found in the Tennessee Codes Title 65, Chapter 27. The first law regulates condominium associations formed prior to January 1, 2009; the second, to condominiums formed after that date.
These laws describe an HOA as a "unit owners' association." The laws require that this association be organized by the time the first unit in the condominium project is conveyed. Membership in the association is limited by law to unit owners. If the condominium is terminated, all former unit owners or their heirs or successors are entitled to distributions of any association assets.
In Tennessee, an HOA can be organized as a for-profit corporation or a nonprofit corporation. It can also be organized as a limited liability company or, in the case of a condominium with four or fewer units, as an unincorporated association.
Appointing HOA Board Members
The association board of directors in Tennessee can either be elected by the members or appointed by declaration. Whether they are elected or appointed, the board members must exercise ordinary and reasonable care and exercise fiduciary care.
Any member of the board can be removed with a vote of two-thirds of the members of the association. Generally, Tennessee courts do not disturb a decision by an HOA unless it is shown that the association acted unreasonably or in bad faith.
What Does It Take to Start an HOA?
In Tennessee, unit owners' associations exist to promote the joint interests of owners. Associations must respect the property rights of all owners as long as they observe all by-laws, charters, rules and regulations.
To this end, duties and responsibilities of the associations include:
- Adopt bylaws, rules and regulations.
- Adopt budgets and collect assessments.
- Hire managing agents.
- Litigate proceedings on behalf of the community association.
- Make contracts.
- Incur liabilities.
- Regulate common property.
- Acquire appropriate insurance coverage.
What Are Bylaws?
Homeowner and unit owners' associations create a set of governing laws called bylaws. Those by-laws must include:
- Accurate description of the number, titles, qualifications, elections and powers of board members.
- Process of delegating board powers to agents.
- Method of amending the by-laws.
- Procedure for calling membership meetings.
- Manner of collecting assessments from members.
- Property surveillance.
HOAs must also create another necessary document, the Declaration of Covenants, Conditions and Restrictions (CC&Rs), governing individual properties.
Federal Laws for HOAs in Tennessee
While other states cannot make laws that apply to Tennessee HOAs, the federal government can. Federal laws apply in all states, and, in this case, they apply to limit the operation and management of condominium and homeowners’ associations in the state of Tennessee.
For example, the federal Disability Rights Act and the federal Fair Housing Act apply in Tennessee to prohibit housing discrimination based on race, color, creed, religion, sex, disability, familial status or national origin. Tennessee has enacted its own laws providing state-level protections similar to these federal laws.
Victims of housing discrimination can file a complaint with the Tennessee Human Rights Commission or with the federal HUD within one year from the date of the discriminatory act. Victims may also file a private lawsuit in federal district court within two years of the discriminatory act.
Federal Debt Collection Practices Act
Another federal law that impacts HOAs is the Federal Debt Collection Practices Act. This also applies in Tennessee and protects residents against abusive, unfair or deceptive debt collection practices.
Victims of harassment or unfair debt collection practices can file a complaint against a debt collector with the FTC. Under this law, victims have the right to sue a debt collector in state or federal court within one year from the date of the violation.
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.