TLDR
Tennessee enacted SB 863 (signed April 23, 2023, effective January 1, 2024), explicitly citing Surfside, requiring condo associations with common elements costing more than $10,000 to replace to conduct reserve studies every five years. The mandate covers roof, load-bearing walls, floor, foundation, fire protection, plumbing, electrical, waterproofing, balconies, elevators, and items over $10,000. SB 863 does NOT require associations to actually fund reserves based on the study. HOAs (non-condo) are not covered.
Tennessee’s Homeowners Association Act provides a governance framework for planned communities but leaves many financial management details to board discretion. For the thousands of self-managed communities in Nashville, Memphis, and Knoxville, the quality of financial governance depends on what individual board members understand about their fiduciary obligations.
Nashville’s growth is the dominant context for HOA compliance in Tennessee. The metro area added substantial new residential development in Williamson, Rutherford, Wilson, and Davidson counties over the past decade, producing communities whose volunteer boards are managing HOA finances for the first time. BoardStack gives first-time volunteer treasurers a structured starting point for reserve fund planning, budget management, and financial recordkeeping, without requiring expertise in property law or accounting.
Memphis and Knoxville have different profiles. Memphis has a mix of established communities with aging infrastructure and newer developments in Shelby County’s suburban areas. Knoxville has significant HOA activity around the University of Tennessee and in the retirement communities of eastern Tennessee. In both markets, the self-managed board treasurer typically works without dedicated tools. QuickBooks for operating expenses and a spreadsheet for reserve tracking, with no mechanism to flag when contributions fall behind the pace needed to fund future capital needs. That gap is the compliance risk that organized reserve fund management addresses.
SB 863 (2023): Mandatory Reserve Studies for Condos (TCA §66-27-403(g))
SB 863 (signed April 23, 2023, effective January 1, 2024) requires condominium associations with common elements costing more than $10,000 to replace to conduct reserve studies every five years. The bill explicitly cited the Surfside condominium collapse as motivation. Required components include: roof, load-bearing walls, floor, foundation, fire protection systems, plumbing, electrical systems, waterproofing, balconies, elevators, and any item over $10,000 to repair or replace.
Informational Only: No Funding Mandate
SB 863 requires the reserve study to be conducted but does NOT require associations to actually fund reserves at the level the study recommends. Tennessee is one of the few states with a study mandate but no corresponding funding mandate. Boards should document their funding decisions relative to the study's recommendations to support a fiduciary defense.
HOAs (Non-Condo) Are Not Covered by SB 863
SB 863 applies only to condominium associations, not to HOAs governing planned communities. HOAs remain subject to the general fiduciary duty standard under the Tennessee Homeowners Association Act (T.C.A. §66-27-201 et seq.) but have no statutory reserve study requirement.
Financial Records and Member Access (T.C.A. §66-27-215)
Tennessee HOA boards must maintain books of account and make them available to members upon request under T.C.A. §66-27-215. Records include bank statements, invoices, contracts, and financial statements. Boards that maintain records informally, in personal spreadsheets or email, risk noncompliance with the statute's accessibility requirements.
Fiduciary Duty of Tennessee HOA Board Members
Tennessee courts apply a fiduciary duty standard to HOA board members consistent with the state's general nonprofit corporation law. This duty includes prudent financial management. Boards that ignore known reserve deficiencies or impose surprise special assessments without documented prior planning face heightened liability exposure.
Fannie Mae Reserve Allocation Requirement
Fannie Mae Lender Letter LL-2026-03 sets two deadlines: (1) The Limited Review process for condo projects is retired effective August 3, 2026. (2) The minimum reserve allocation increases from 10% to 15% for Full Review loan applications dated on or after January 4, 2027. Associations below the 15% threshold will be classified as non-warrantable, preventing conventional mortgage lending on units in the community.
| Metro Area | Est. HOA Communities | Primary Compliance Risk |
|---|---|---|
| Nashville Metro | ~3,500+ | Rapid growth, reserve planning gaps |
| Memphis | ~1,800+ | Financial recordkeeping, fiduciary duty |
| Knoxville | ~1,200+ | Capital planning, fund segregation |
| Chattanooga | ~700+ | Budget adoption, records access |
Q&A
Does Tennessee require reserve studies for condo associations?
Yes. SB 863 (signed April 23, 2023, effective January 1, 2024) requires condominium associations with common elements costing more than $10,000 to replace to conduct reserve studies every five years. The study must cover roof, load-bearing walls, floor, foundation, fire protection, plumbing, electrical, waterproofing, balconies, elevators, and items over $10,000. The study is informational only; Tennessee does not require associations to fund reserves at the study's recommended level.
Q&A
Are Tennessee HOAs subject to SB 863 reserve study requirements?
No. SB 863 applies only to condominium associations governed by TCA §66-27-403(g). HOAs governing planned communities are not subject to the reserve study mandate but remain subject to fiduciary duty obligations under the Tennessee Homeowners Association Act.
Q&A
What is the Fannie Mae reserve allocation requirement for Tennessee associations?
Fannie Mae requires associations to allocate at least 10% of their annual budget to reserves. Fannie Mae Lender Letter LL-2026-03 sets two deadlines: the Limited Review process is retired effective August 3, 2026, and the minimum reserve allocation increases to 15% for Full Review loan applications dated on or after January 4, 2027. Non-warrantable classification blocking conventional mortgage lending. This applies to all Tennessee associations regardless of SB 863 coverage.
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