Welcome to Tennessee
With about 4,800 condos, HOAs, and co-ops, the state of Tennessee has a growing number of common interest reality associations. According to CAI, an estimated 690,000 Tennessee residents live in a community association today.
Interest in HOAs is on the raise in Tennessee and many are taking notice. Tennessee legislators are considering bill SB405 that will create more structure for and govern the management and operations of homeowners' associations in Tennessee.
By 2040 the community association housing model is expected to become the most common form of housing in Tennessee.
Currently, Tennessee residents pay $19.1 million a year to maintain their communities and 23,300 Tennesseans serve as volunteer leaders in their community associations.
Before you read anything on this page about the laws governing Condo and HOA collections in Tennessee, make sure you have read the governing documents for your association. The governing documents may be stricter than the state laws, and in those cases, the governing documents take precedence.
As a general rule, neither your management company nor board members should attempt to make contact with delinquent homeowners in an attempt to collect the debt, beyond the initial courtesy letters. You need an attorney or a licensed collection agency to collect on your behalf.
Tennessee Collection Laws
Yes, Tennessee has state laws pertaining to HOA and condo associations.
To better understand the laws for Tennessee HOAs, please refer to:
- The Tennessee Homeowners’ Association Act - Tennessee legislators are considering bill SB405 that would govern the management and operations of homeowners' associations in Tennessee. Because the law is still working its way through the legislature, Tennessee homeowners' associations are currently not subject to any state regulations. However, if an association is organized as a non-profit, as is the case with most Tennessee associations, it will be governed by the Tennessee Nonprofit Corporation Act.
To better understand the laws for Tennessee Condos, please refer to:
Unlike most states, Tennessee depends on the Federal Fair Debt Collection Practices Act (FDCPA) as Tennessee does not have its own statutes regarding collections. State law only requires that collectors register and obtain a license from the state.
No, but that does not mean that a management company cannot be in violation of the collection statutes. Collections are heavily regulated and anybody who attempts to collect debts should know what they are doing.
An HOA can collect as much as is legally owed to them in fees, violations, special assessments, administrative costs, and legal fees - as outlined in the governing documents of the association.
Tennessee laws place no restrictions on what you can do with the money your association collects in past-due assessments. As long as the money is accounted for in the budget, aligns with the governing documents, and/or is approved by the board of directors it can be spent on any improvements or maintenance that is required by the association.
An association should always contact a delinquent owner to advise them regarding what is owed. Every owner is entitled to see their ledger and know how much they are owed. An owner may request their ledger at any time and an HOA should be willing and able to provide it to them.
An association that publicly publicizes information about a homeowner's unpaid assessments potentially violates the federal Fair Debt Collections Practices Act which forbids disclosure of information to third parties relating to a debt (which includes HOA assessments).
Yes. Once a property has gone through probate and the court has decided who is the legal owner, all the past due fees are due and payable to the HOA unless the governing documents have a provision that says the debt rolls over to the association. Going forward, after probate has been settled, the new owner must pay their fair share.
Yes. Tennessee is a super lien state. An HOA’s assessment lien on a lot in Tennessee has priority, up to a specified amount, over the liens created by a lender’s earlier-filed first mortgage. This is referred to as a “super priority lien” and references the fact that in the event of a foreclosure sale, the super priority portion of the assessment lien must be paid to the HOA from the sale proceeds before satisfying the lien amount of an earlier-filed lender’s mortgage.
When faced with a foreclosure proceeding, a lender may offer to pay off the super priority lien amount on behalf of the delinquent lot owner in order to prevent the foreclosure and thereby protect its mortgage or deed of trust.
Finally, a bank foreclosure does not extinguish the debt that is owed to the association and the association has the right to pursue the old owner in court for a monetary judgment to recover this debt. It may not be a secured debt but it is surely collectible unless the governing documents say that the debt owed to the association rolls over to the membership.
Yes. Foreclosure should be the last desperate attempt to recover the association’s money. An HOA should consider a merit-based collection agency to recover it’s delinquent money before moving to put people out of their homes. Notices should be given to a delinquent before any action is taken.
The traditional way to collect is to have the management company send a few courtesy letters to a delinquent owner and then send the file to the attorney for foreclosure. Tennessee is considered a non-judicial foreclosure state, which means that the bank foreclosure process happens outside of the courtroom without a redemption period.
The best way to handle collections for HOAs is to engage the owners and be armed with all the information you can acquire. Know the equity in the unit, read and understand the governing documents, find out where the owner is, and then begin to engage in the collection efforts. Once again, this is a very heavily regulated industry so this should be done by professional and licensed companies. Once you engage with an owner, you may be surprised to see that most of them will cooperate and come to the table. You just have to ask them and be willing to work with them.
Yes. The board of directors has a fiduciary duty to collect these assessments and if the individual is not in bankruptcy there is nothing legally stopping them from the collection of delinquent assessments.
6 years. The statute of limitations periods for HOA claims are different for every state. In Tennessee consumer debt such as HOA & Condo fees have a statute of limitations of 6 years. Tennessee Code Title 28. Limitation of Actions § 28-3-109.
Yes. Tennessee does not differentiate between an in-state and out-of-state owner from a collections perspective.
Yes. In Tennessee, an HOA or Condo must be a properly registered corporation and up to date on all of their state and federal filings.
It depends. Tennessee law does not limit the fines that can be imposed by single-family HOAs and older condominiums, but for condominiums developed after January 1, 2009, the law requires the fines to be “reasonable”. Refer to your organization's governing documents for more information.
If the file has not gone to the attorney it is advisable to contact the manager or treasurer of the association to get a copy of the delinquent ledger. Then review the ledger and if you can prove that you made payments that were not applied properly, advise the management company. If the file has been sent to a collection agency the law requires that the collection agency give the debtor 30 days to dispute the debt.
Axela Technologies provides no cost and no risk collections for community associations using best practice collections strategies, advanced proprietary technology, and highly trained customer service representatives. We are licensed in every state and compliant with the Fair Debt Collections Practices Act (FDCPA).
We are a specialized collections service which means a great deal in the community association industry. Understanding the nuances of how people fall behind in their maintenance fee payments and how to resolve their issues is a science and an art. At Axela Technologies we have what it takes to “move the needle” and recover 100% of what is owed to the association and the best part is that we are totally merit based. IF WE DON’T RECOVER YOUR MONEY WE DON’T GET PAID. A pretty simple concept but a bold promise at the same time.
Our proprietary software is second to none and we have the ability to keep the management and board of directors informed in real time 24/7. Our system never sleeps. The technology is fantastic and is only equaled by the people who will service your delinquent members and work with them to resolve their delinquency issues.