DEERFIELD NEWS CONNECTION
October 11, 2023
Tennessee Laws Governing HOAs
As a community transitions from developer to owner control, it is important for new board members and property owners to understand the laws that govern homeowner associations (HOAs), and the legal documents required under the law to guide the operation of HOAs. Below is a description of the Tennessee laws governing HOAs, with links to the actual statues for further reading. Following the Nonprofit Corporation Act section is a brief listing of the types of documents that guide the design, development, and operation of HOAs.
Tennessee Nonprofit Corporation Act
The purpose of homeowner association communities is to ensure the collective rights and interests of owners and maintain common areas. In Tennessee, these types of communities are not subject to formal government regulations designed specifically for single-family residence neighborhoods. Tennessee HOA’s are generally incorporated as nonprofit corporations, and therefore subject to Tennessee Nonprofit Corporation Act (Tenn. Code § 48 – 51-68, et seq.).
The Tennessee Nonprofit Corporation Act describes HOA’s as mutual benefit corporations. These types of corporations are formed to serve the mutual interests of members (property owners) who receive beneficial use of shared property within the community; and therefore, are required to bear the responsibility for maintaining this property. To support the operation of the HOA and maintain shared community properties generally referred to as “common areas”, an HOA’s financial resources are collected from its members via fees/assessments. For more information, below are links to the Tennessee Nonprofit Corporation Act and the specific section describing mutual benefit corporations.
Types and Hierarchy of HOA Documents
HOAs are governed by a hierarchy of laws and legal documents. It is important for both board members and owners alike to have a clear understanding of the types of HOA documents, and which documents take precedence over others. Each document listed below builds upon the previous one to create a comprehensive framework to preserve neighborhood quality of life and protect property values. While federal, state, and local laws set the baseline legal requirements, plat maps define the physical boundaries of the community, articles of incorporation establish the association's status as a legal entity, CCRs provide specific property use and maintenance guidelines, bylaws outline the internal governance procedures, and rules and regulations offer further guidance for specific matters generally outlined in the CCRs. The types of HOA documents briefly described below are listed in order of importance.
A. Federal, State, and Local Laws: Federal, state, and local laws establish the regulations and the mechanisms through which subdivisions are filed and corporations (HOAs) are formed. Generally, the higher the level of government, the greater the precedence. However, in some cases, laws may be written in such a way to defer to HOA governing documents. Federal laws include regulations concerning property rights, fair housing, taxation and more. State laws provide the framework within which HOA’s operate, and local ordinances dictate zoning and building regulations, noise ordinances, and many other standards.
B. Recorded Map, Plan or Plat: The recorded plat map or subdivision map is a legal document that illustrates the boundaries, lots, and common areas within a community. It is reviewed and approved by local public officials, and then recorded at the county register’s office. It is a graphical representation of the physical layout of the neighborhood and serves as a reference for property boundaries. This document establishes the location of common areas, and therefore identifies the maintenance responsibilities of the HOA.
C. Articles of Incorporation: This document, filed with the state, brings the corporation into existence, and includes basic information about the HOA, including its name, location, registered agent, and purpose. Articles of Incorporation document the creation of a new business to let the state know that the business has been created and that it is applying to be a corporation operating in that state.
D. Declaration of Covenants, Conditions & Restrictions (CCR): The CCR document is a legally binding document that outlines the rights and responsibilities of homeowners within a community and is recorded in the county register’s office. It creates the administrative framework for the operation and management of the HOA, including but not limited to establishing standards for property use, architectural guidelines, stipulations associated with assessment obligations, maintenance responsibilities, protective standards, neighborhood property restrictions, restrictions on certain activities, and enforcement authority. CCRs are crucial to maintaining a harmonious and cohesive living environment. CCRs are binding and “run with the land”. This means that anyone who buys the land agrees to abide by the covenants and accepts the restrictions that exist when they take title to the property.
E. Bylaws: This document addresses governance matters and provides a framework for decision-making and administrative processes. The bylaws stipulate how to operate the HOA, such as the conduct of meetings, the process for holding meetings, and voting rights. This document also outlines the procedures for electing board members and adopting rules, stipulates as to the number of board members, and the duties and responsibilities for the board and its officers. Bylaws are not required to be recorded at county register’s office.
F. Rules and Regulations: Various documents and policies formalize rules and regulations focusing on the day-to-day aspect of operations. These policies are formally adopted by the board through resolution, and provide greater detail related to owners’ rights and obligations, architectural guidelines, enforcement, collection procedures, operation of facilities, etc. In other words, providing greater detail as to how the CCRs are interpreted and implemented. Board policies and community rules are derived from the authority granted in the CCRs, Articles, or Bylaws. Rules may not create new use restrictions for owners and can never contradict rights or restrictions in any of the documents mentioned above.
Understanding these documents and their priority structure is vital for homeowners and association boards to maintain community standards. Each document serves a unique purpose, contributing to the overall governance of the HOA community. Under Tennessee law, HOA documents and records should be made reasonably available to association members during regular business hours within five (5) days of a written request.