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A Guide to Homeowners Associations (HOAs) and the Responsibilities, Stewardship, and Fiduciary Duties of HOA Board Members in Tennessee: Legal Obligations, State Laws, and Federal Regulations

Updated: Mar 14

Homeowners Associations (HOAs) play a vital role in maintaining the quality, safety, and value of communities. HOA board members hold positions of trust, requiring them to balance responsibilities, exercise good stewardship, and fulfill fiduciary duties.


I have recently had the opportunity to serve as a board member for our Homeowners Association (HOA). This experience has given me a deeper understanding of the essential role HOAs play in maintaining and enhancing the quality of life within our community and the specific nuances of being a board member in the State of Tennessee. It has also highlighted the responsibilities and duties that come with serving on an HOA board. Inspired by this, I decided to write this article to share valuable insights about HOAs, the services they provide, and the critical responsibilities board members uphold to ensure the success and well-being of the communities they serve and specifically in my home state of Tennessee.

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This article outlines the expectations of HOA board members in Tennessee, explains applicable state and federal laws, and highlights court cases that influence these roles.





Responsibilities of HOA Board Members in Tennessee

HOA board members manage and oversee the operations of the association. Their primary duties include:


1. Governance and Policy Implementation

Board members are responsible for developing and enforcing rules, policies, and governing documents, including:

  • Covenants, Conditions, and Restrictions (CC&Rs)

  • Bylaws

  • Architectural guidelines

These policies must align with Tennessee laws, such as the Tennessee Nonprofit Corporation Act (TCA Title 48) and the Tennessee Condominium Act of 2008 (TCA Title 66, Chapter 27).


2. Financial Management

Sound financial management is critical. Responsibilities include:

  • Preparing budgets

  • Collecting assessments and dues

  • Managing reserve funds for repairs and emergencies

  • Conducting financial audits

The board must ensure compliance with financial reporting requirements under the Tennessee Nonprofit Corporation Act and IRS regulations for nonprofit entities.


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3. Maintenance of Common Areas

HOA board members oversee the upkeep of shared spaces such as:

  • Clubhouses

  • Pools

  • Landscaping

  • Roadways

Proper maintenance not only ensures safety but also maintains property values.


4. Communication

Clear communication with homeowners is vital. Board members must:

  • Announce meetings and decisions promptly

  • Provide financial statements

  • Issue newsletters or updates about community affairs


5. Conflict Resolution

Disputes among homeowners or between homeowners and the association must be handled fairly and efficiently. This involves mediating disputes while adhering to CC&Rs and applicable laws.


Stewardship in HOA Governance

Stewardship refers to the responsible management of resources and fostering trust within the community. It includes:

1. Transparency

Providing homeowners with access to records such as meeting minutes, budgets, and financial reports fosters trust and prevents conflicts.

2. Accountability

Board members must be answerable for their actions and decisions. This includes attending meetings, staying informed, and acting in the community’s best interests.

3. Sustainability

Decisions should prioritize long-term financial and structural health, such as maintaining reserve funds and planning for future repairs or upgrades.


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Fiduciary Duties of HOA Board Members

Fiduciary duties are legal obligations to act in the association's best interest. In Tennessee, these include:

1. Duty of Care

Board members must make informed decisions. This involves:

  • Reviewing relevant information before voting

  • Seeking professional advice when necessary

  • Attending and actively participating in meetings

2. Duty of Loyalty

Personal interests must never interfere with the association’s interests. Board members must:

  • Disclose conflicts of interest

  • Abstain from votes that could benefit them personally

3. Duty to Act Within the Scope of Authority

Board members must adhere to governing documents and applicable laws. Acting outside these bounds can result in personal liability.


Tennessee HOA-Related Laws

Several Tennessee statutes guide the responsibilities and actions of HOA board members:

1. Tennessee Nonprofit Corporation Act

Applicable to most HOAs incorporated as nonprofit organizations, this Act governs:

  • Board meetings

  • Record-keeping

  • Member rights

2. Tennessee Condominium Act of 2008

This law applies to condominium associations created after January 1, 2009, and outlines:

  • Duties of board members

  • Reserve fund requirements

  • Voting procedures

3. Tennessee Human Rights Act

Aligned with federal Fair Housing laws, this Act prohibits discrimination based on race, color, religion, sex, disability, familial status, or national origin.

4. Senate Bill 2150 (2023) TCA Title 66, Chapter 27, Part 7

Effective July 1, 2024, this law requires:

  • A two-thirds membership vote for special assessments related to nonessential amenities

  • Prohibiting foreclosure for unpaid assessments on nonessential amenities

  • Providing financing options for special assessments


Applicable Federal Laws

Federal regulations also impact HOA operations:

1. Fair Housing Act

HOAs must not discriminate based on protected characteristics when enforcing rules or approving housing applications.

2. Americans with Disabilities Act (ADA)

While primarily applicable to public accommodations, the ADA may require HOAs to make reasonable accommodations for residents with disabilities.


Relevant Court Cases

Several court cases provide legal precedents for HOA governance:

1. Cornell et al. v. HOA Management, Inc. et al.

This case emphasized fiduciary responsibilities, particularly the duty of care in financial oversight.

2. Sproul v. O'Brien (Tenn. Ct. App. 2004)

Highlighted the importance of acting within the scope of authority and following governing documents.

3. Bradshaw v. Carr (Tenn. Ct. App. 2006)

This case underlined the duty of loyalty, holding board members accountable for conflicts of interest.


Summary of Duties

Here is a concise list of HOA board member responsibilities with explanations:


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  • Governance and Policy Implementation: Create and enforce rules that align with laws and governing documents.

  • Financial Management: Ensure transparent budgeting, collection, and reserve management.

  • Maintenance of Common Areas: Oversee upkeep to maintain safety and property value.


  • Communication: Keep homeowners informed about decisions and finances.

  • Conflict Resolution: Resolve disputes impartially and in accordance with the rules.

  • Transparency: Provide access to records and decisions to build trust.

  • Accountability: Be responsible for all board actions and decisions.

  • Sustainability: Plan for long-term financial and operational health.

  • Duty of Care: Make informed and prudent decisions.

  • Duty of Loyalty: Prioritize the association’s interests over personal gain.

  • Duty to Act Within the Scope of Authority: Stay within the legal and governance boundaries.


Conclusion


HOA board members in Tennessee carry immense responsibility, from governance and financial management to fostering transparency and resolving conflicts. By adhering to state and federal laws, such as the Tennessee Nonprofit Corporation Act and Senate Bill 2150, and honoring their fiduciary duties, board members can create thriving, harmonious communities.


Understanding these roles not only benefits the community but also protects board members from legal liabilities. Informed and ethical governance ensures trust, stability, and a high quality of life for all residents.


References and Legal Citations

Tennessee State Laws

  1. Tennessee Nonprofit Corporation Act: TCA Title 48, Chapters 51-68

  2. Tennessee Condominium Act of 2008: TCA Title 66, Chapter 27, Part 3

  3. Tennessee Human Rights Act: TCA Title 4, Chapter 21

  4. Senate Bill 2150 (2023): Codified in TCA Title 66, Chapter 27, Part 7

Federal Laws

  1. Fair Housing Act: 42 U.S. Code §§ 3601-3619

  2. Americans with Disabilities Act (ADA): 42 U.S. Code §§ 12101-12213

Court Cases

  1. Cornell et al. v. HOA Management, Inc. et al.

  2. Sproul v. O'Brien, 145 S.W.3d 362 (Tenn. Ct. App. 2004)

  3. Bradshaw v. Carr, 201 S.W.3d 657 (Tenn. Ct. App. 2006)

References

 

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