Tennessee HOA Budget Approval

Tennessee HOA Budget Approval

Key Findings

Tennessee places condominium budget authority with the board, not the membership. The key correction for anyone arriving with a UCIOA mental model: Tennessee omitted the negative-option ratification provision—the UCIOA § 3-103 equivalent—that full-UCIOA states carry.

  • The 2008 Act sets no statutory cap on annual assessment increases. Any cap must come from the declaration.
  • The 2008 Act requires a reserve study—but it stops short of mandating reserve funding. That separates Tennessee from states that compel boards to fund reserves to the study's recommendation.
  • No bill in the past 24 months has touched the Act's budget, assessment, or reserve provisions, and no appellate opinion in the past 36 months has squarely addressed them.

Details

Section 1: Overview — How HOA budgets are approved in Tennessee

Which framework governs a Tennessee community determines how its HOA budget gets approved—and for condominiums, the controlling rule is simpler than the model uniform act would suggest. Condominiums created on or after January 1, 2009 fall under the Tennessee Condominium Act of 2008, Tenn. Code Ann. § 66-27-201 et seq., a statute derived from the Uniform Condominium Act.1 Under that Act, the executive board adopts the annual budget and levies assessments, with no statutory step requiring owners to approve or ratify it.2,3 That is the headline correction for anyone arriving with a UCIOA mental model: Tennessee enacted the Uniform Condominium Act selectively and left out the negative-option budget-ratification provision found in the full Uniform Common Interest Ownership Act.4 The board adopts; owners do not affirmatively vote to approve, and the statute provides no rejection vote. Condominiums created before January 1, 2009 remain under the predecessor Horizontal Property Act, Tenn. Code Ann. § 66-27-101 et seq., though a defined set of 2008-Act provisions reaches them for events after January 1, 2009.5 Planned communities have no comprehensive Tennessee statute; their budgets follow recorded covenants, conditions, and restrictions, with corporate formalities supplied by the Tennessee Nonprofit Corporation Act, Tenn. Code Ann. § 48-51-101 et seq.6 Tennessee is a Uniform Condominium Act state with a modern 2008 statute for condominiums and a declaration-driven regime for everything else. The table and sequence below lay out the mechanics.

Section 2: The budget approval mechanism

2A. Quick-Reference Budget Mechanics Table

This table reflects the Tennessee Condominium Act of 2008 for condominiums created on or after January 1, 2009. Condominiums created before that date follow the Horizontal Property Act, and planned communities follow their recorded declarations.

Parameter Value
Governing statute section(s) Tenn. Code Ann. §§ 66-27-402(a)(2), 66-27-414 (Tennessee Condominium Act of 2008)2,3
Community types covered Condominiums created on or after January 1, 20095
Body that adopts the proposed budget The executive board (board of directors) of the unit owners' association3
Approval model Board adoption; the 2008 Act contains no owner-ratification step2,3
Budget summary distribution deadline Not applicable; the 2008 Act has no owner-ratification step. Annual-meeting notice (10 to 60 days) must state any budget changes on the agenda under § 66-27-4087
Ratification meeting notice window Not applicable; the 2008 Act has no ratification meeting2
Owner rejection threshold Not applicable; owners have no statutory vote to reject a board-adopted budget2
Quorum required to ratify Not applicable; no ratification vote occurs2
Effect of owner rejection Not applicable; owners cannot reject the budget by statute2
Statutory cap on assessment increase absent owner vote None; the 2008 Act sets no percentage cap3
Special assessment approval threshold Board may levy assessments at any time to preserve physical integrity or meet governmental requirements under § 66-27-414(g) without an owner vote; otherwise governed by the declaration3
Reserve study mandate (and frequency) Yes; § 66-27-403(g) requires a reserve study for boards overseeing common elements with an aggregate replacement cost exceeding $10,000, updated at least every five years8
Reserve funding mandate None; the 2008 Act mandates a reserve study but does not require a minimum reserve funding level8
Audit or financial review tied to budget cycle None; § 66-27-417 requires the association to keep financial records, and § 66-27-503 requires disclosure of the most recent balance sheet, income statement, and approved budget on request9,10
Provisions variable by declaration Many association powers under § 66-27-402 are "subject to the declaration"; for residential condominiums, § 66-27-204 bars varying or waiving the Act's requirements3,11

2B. The budget approval sequence under the 2008 Act

The mechanism is short because Tennessee put budget authority with the board. Under § 66-27-402(a)(2), the association may adopt and amend budgets for revenues, expenditures, and reserves and collect assessments for common expenses from unit owners.3 The operative budget rule sits in § 66-27-414(a): until the board makes a common expense assessment, the declarant pays all common expenses; after the first assessment, the board must make assessments at least annually, based on a budget the board adopts at least annually.2 The budget is set by board action. No statute requires the board to circulate a budget summary to owners within a set number of days, to call a ratification meeting, or to count owner rejections. Tennessee selectively enacted the Uniform Condominium Act and left out the negative-option ratification step.4

Once the board adopts the budget, it levies assessments against units in the proportions fixed by the declaration under § 66-27-414(b), which cross-references the common-expense allocations in § 66-27-307(a).2 That distinction matters in practice: adopting the budget is the board's internal fiscal decision, while levying the assessment is the act that creates each owner's payment obligation and, on nonpayment, supports the association's lien under § 66-27-415.12 The two happen in sequence but are legally distinct.

Owners are not absent from the process, but their role is informational rather than a veto. The association must hold a meeting at least once each year under § 66-27-408, with notice sent not less than 10 nor more than 60 days in advance.7 That notice must state the agenda, including any budget changes and any proposed amendment to the declaration or bylaws.7 The 10-to-60-day window is the general meeting-notice window, not a budget-ratification window, and it does not convert the board's budget into something owners approve. No quorum requirement attaches to budget adoption because no owner vote on the budget occurs. Special assessments work the same way: § 66-27-414(g) gives the board power, for residential units and notwithstanding any contrary declaration provision, to levy assessments at any time to preserve the physical integrity of the condominium or to comply with governmental requirements—in a single assessment or as reserve installments—again without an owner vote.3

2C. Reserves, older condominiums, and variation

The reserve question was Tennessee's defining uncertainty—and it is now settled. The 2008 Act as originally enacted carried no reserve mandate. A 2023 amendment (Public Chapter 205, Senate Bill 863 / House Bill 750, signed by Governor Bill Lee on April 23, 2023, effective January 1, 2024) added § 66-27-403(g), which requires a reserve study, not reserve funding.8,13 A board overseeing common elements with an aggregate replacement cost exceeding $10,000 that had a study on or after January 1, 2020 must update it within five years and at least every five years after that; a board without such a study had to obtain one on or before January 1, 2025, then update every five years.8 The board must make the study available to owners by email or on the community website.8 The amendment requires the study to come from a reserve specialist credentialed through the Community Associations Institute or a similarly recognized organization, or a licensed engineer or architect, and it exempts declarant-controlled boards, single-owner condominiums, and condominiums owned by spouses as tenants by the entirety.13 Nothing in the Act sets a minimum reserve balance or compels funding to the study's recommendation, so the budget consequence is informational discipline rather than a funding floor.

Determining which act governs turns on the creation date. Condominiums created before January 1, 2009 remain under the Horizontal Property Act, Tenn. Code Ann. § 66-27-101 et seq., while those created on or after that date follow the 2008 Act.5 A defined set of 2008-Act sections—including the assessment and lien provisions (§§ 66-27-414, 66-27-415)—applies to older condominiums for events after January 1, 2009 under § 66-27-202.5 Planned communities have no comparable statute; their budgets are creatures of the recorded declaration, supported by the Nonprofit Corporation Act for corporate formalities.6 On variation, residential condominium provisions generally cannot be waived or varied under § 66-27-204, while many association powers under § 66-27-402 are expressly subject to the declaration.11,3

Section 3: Budget-adjacent obligations

A. Reserves in the budget

Condominiums under the 2008 Act must obtain and update a reserve study at least every five years where common elements exceed $10,000 in aggregate replacement cost, under § 66-27-403(g), but the Act does not require funding the budget to the study's recommendation.8 Planned communities have no statutory reserve obligation and follow their declarations.

B. Special assessments

For 2008-Act condominiums, the board may levy assessments at any time under § 66-27-414(g) to preserve physical integrity or meet governmental requirements, without an owner vote; other special assessments follow the board-adopted-budget model or the declaration.3 For planned communities, special assessments are governed entirely by the recorded declaration.

C. Assessment increase limits

The 2008 Act imposes no statutory cap on how much the board may raise assessments from one year to the next; any cap must come from the declaration.3 Tennessee has no Davis-Stirling-style percentage ceiling.

D. Financial review, audit, and disclosure tied to the budget cycle

The 2008 Act requires the association to keep financial records sufficiently detailed to comply with the disclosure statutes and to make them reasonably available to owners and lenders under § 66-27-417.9 On request, the association must disclose the most recent balance sheet, income statement, and approved budget (or projected budget) under § 66-27-503.10 The Act does not mandate an independent audit or annual financial review. Planned communities have no equivalent statutory disclosure duty and depend on their declarations and the Nonprofit Corporation Act.

Section 4: Recent legislative and judicial activity

A. Recent bills

No bill enacted in the past 24 months (June 2024 to June 2026) has amended the budget, assessment, or reserve provisions of the Tennessee Condominium Act of 2008. The most recent substantive amendment is the 2023 reserve-study law, Public Chapter 205 (Senate Bill 863 / House Bill 750), which falls just outside that window but remains the operative recent change to the Act's reserve provisions.

Status Signed
⌾ Last verified June 16, 2026
Docket

SB 863 / HB 750 · Act: Public Chapter 205 · 2023 Regular Session

Effective
Jan 1, 2024
Sunset
N/A
Reserve study requirements for condominium associations — adding § 66-27-403(g)
Synopsis

Governor Bill Lee signed Senate Bill 863 into law on April 23, 2023, adding § 66-27-403(g) to the Tennessee Condominium Act of 2008. The amendment requires boards that oversee common elements with an aggregate replacement cost exceeding $10,000 to obtain a reserve study and update it at least every five years. The study must come from a credentialed reserve specialist or a licensed engineer or architect, and the board must make it available to owners by email or on the community website. The law mandates the study—not a funding level—distinguishing Tennessee from states that require boards to fund reserves to the study's recommendation.[8][13]

Operational impact
What this means, by role
Property managers Confirm each condominium client has a reserve study dated on or after January 1, 2020—or commissioned by January 1, 2025—with a five-year update schedule and owner-accessible posting.
HOA board members The board must obtain and update the reserve study and post it for owners, but the law does not require funding reserves to the study's number.
Community association attorneys The study mandate sits in § 66-27-403(g) and applies to boards overseeing common elements exceeding $10,000 in aggregate replacement cost.
Homeowners Owners gain access to the reserve study by email or on the community website but still have no statutory vote on the budget itself.

B. Recent appellate rulings

No Tennessee appellate opinion in the past 36 months has squarely interpreted the 2008 Act's budget or assessment provisions. The closest recent decision is a covenant-enforcement dispute touching condominium dues.

Status Final
⌾ Last verified June 16, 2026
Case

Renegade Mountain Community Club, Inc. v. Cumberland Point Condominium Property Owners Association, Inc.

Court of Appeals of Tennessee, at Knoxville · No. E2024-00213-COA-R3-CV
Decided
May 2, 2025
Court
Tenn. Ct. App.
Synopsis

Renegade Mountain is a planned residential community of 1,362 properties in Cumberland County. The court affirmed a Chancery Court judgment holding that a March 26, 1987 supplemental declaration obligated the condominium owners' association to collect and remit master-association dues "which are all a part of the common expense," and that the association breached that duty when it stopped collecting them. The court decided the case on contract interpretation of the recorded declarations and on corporate standing under the Nonprofit Corporation Act—not on the 2008 Act's assessment or budget sections. The opinion confirms that Tennessee courts treat recorded declarations as contracts and seat dues disputes in Chancery.[14]

Operational impact
What this means, by role
Property managers Read inter-association dues-collection duties in the recorded declarations literally; a duty to collect for a master association is enforceable.
HOA board members A board cannot unilaterally stop collecting dues the declaration directs it to collect, even when it disputes the arrangement.
Community association attorneys Tennessee courts treat declarations as contracts and resolve dues disputes on covenant interpretation, with covenant matters seated in Chancery.
Homeowners Dues obligations embedded in recorded declarations bind owners and associations until the declaration is amended.

C. Active legislative debates

Condominium bills filed in the 2025–2026 session, including Senate Bill 1079 and House Bill 871, address declarant access to purchaser deposits rather than budget, assessment, or reserve rules. Tennessee still has no comprehensive planned-community statute under active consideration.15

Section 5: National positioning and related coverage

Tennessee sits among the states that enacted the Uniform Condominium Act for condominiums but declined the full Uniform Common Interest Ownership Act, and it diverges from the UCIOA template on the one mechanic operators most expect to find. Full-UCIOA states that adopted the 2008 version—including Connecticut, Delaware, Vermont, and Washington—carry the negative-option budget ratification in which a board-adopted budget stands "whether or not a quorum is present" unless a majority of owners reject it. Tennessee does not, leaving budget adoption with the board alone.4,16 Tennessee also lacks California's Davis-Stirling increase cap, so no percentage ceiling limits annual assessment increases. On reserves, Tennessee joined the post-Surfside group of reserve-study-mandate states in 2023—its law was driven by the Community Associations Institute's Legislative Action Committee in response to the June 24, 2021 Champlain Towers South collapse in Surfside, Florida—but it mandates the study, not a funding level.13 For a multi-state operator entering Tennessee, the practical implication is clear: the board controls the condominium budget without an owner ratification vote, and planned communities are governed entirely by their declarations.

Recommendations

  • Immediate (managers and boards): Confirm each condominium client's creation date to fix the governing act, then verify a compliant reserve study exists (dated on or after January 1, 2020, or commissioned by January 1, 2025) with a five-year update calendar and posted access for owners. The trigger that changes this step is whether common elements exceed $10,000 in aggregate replacement cost; below that, § 66-27-403(g) does not apply.
  • Annual cycle: Treat budget adoption as a board action documented in board minutes, and treat assessment levy as a separate recorded step that supports the § 66-27-415 lien. Do not build owner-ratification or rejection-vote procedures into condominium bylaws expecting them to be statutorily required; they are not, though a declaration may add them.
  • Drafting and review (attorneys): Because the statute sets no increase cap and no funding floor, any owner protection on those points must go into the declaration. For planned communities, the declaration is the entire budget framework; audit the CC&Rs for collection duties of the kind enforced in Renegade Mountain.
  • Threshold to revisit: Re-evaluate if the General Assembly enacts a comprehensive planned-community statute, adds a budget-ratification or assessment-cap provision to the 2008 Act, or if the Court of Appeals or Supreme Court issues an opinion construing §§ 66-27-414 or 66-27-415. None of these conditions is met as of June 16, 2026.

Caveats

  • This page states a finding that contradicts a common assumption: Tennessee's 2008 Act, though Uniform Condominium Act-derived, does not contain the negative-option budget-ratification mechanism. That conclusion rests on the absence of a ratification provision in §§ 66-27-402, 66-27-403, 66-27-406, 66-27-408, and 66-27-414, and on the affirmative text vesting budget adoption in the board. If a future codification adds such a provision, this page must change.
  • Statutory text was verified against the 2024 Tennessee Code as mirrored on Justia and FindLaw; the official Tennessee Code publishes through the Lexis portal linked by the Administrative Office of the Courts and requires click-through. Editors should confirm against that official source before publication.
  • The Renegade Mountain opinion is reported as final and was located through tncourts.gov and Justia; a Westlaw or Lexis citator check is advisable to confirm no Tennessee Supreme Court Rule 11 review altered its status and to supply the exact 2025 WL number.
  1. Baker Donelson, The Tennessee Condominium Act of 2008 (Oct. 3, 2008) (signed by Gov. Bredesen Apr. 21, 2008; first revision to the Horizontal Property Act since 1963) ↩
  2. Tenn. Code Ann. § 66-27-414 (Assessments for common expenses), 2024 Tennessee Code (Justia) ↩
  3. Tenn. Code Ann. § 66-27-402 (Powers of unit owners' association), 2024 Tennessee Code (Justia) ↩
  4. Tenn. Advisory Comm'n on Intergovernmental Relations (TACIR), HOA Report, app. C: Uniform Condominium Act Sections Not in the Tennessee Condominium Act of 2008 (Jan. 2015) ↩
  5. Tenn. Code Ann. § 66-27-202 (Applicability), Tennessee Code (Justia) ↩
  6. FirstService Residential, The Tennessee Horizontal Property Act: A Guide for Your Association (citing §§ 66-27-101 et seq., 66-27-201 et seq., and Title 48 Nonprofit Corporation Act) ↩
  7. Tenn. Code Ann. § 66-27-408 (Meetings; not less than ten (10) nor more than sixty (60) days' notice), 2024 Tennessee Code (Justia) ↩
  8. Tenn. Code Ann. § 66-27-403(g) (Board of directors and officers; reserve study), FindLaw, as amended by 2023 Tenn. Acts ch. 205 (SB 863 / HB 750; signed Apr. 23, 2023; eff. Jan. 1, 2024) ↩
  9. Tenn. Code Ann. § 66-27-417 (Association records), 2024 Tennessee Code (Justia) ↩
  10. Tenn. Code Ann. § 66-27-503 (Information to be provided; most recent balance sheet, income statement, and approved budget), FindLaw ↩
  11. Baker Donelson/Lexology, The Tennessee Condominium Act of 2008 (residential provisions may not be varied or waived; § 66-27-204) ↩
  12. Nolo, Tennessee HOA Laws, COA Laws, and Foreclosure Rules Explained (Tenn. Code Ann. § 66-27-415, lien for assessments) ↩
  13. FirstService Residential, New Tennessee Law Impacts Condominium Reserve Study (Apr. 23, 2023) (Gov. Bill Lee signed SB 863 / HB 750; eff. Jan. 1, 2024; Community Associations Institute Legislative Action Committee; Surfside response) ↩
  14. Renegade Mountain Cmty. Club, Inc. v. Cumberland Point Condo. Prop. Owners Ass'n, No. E2024-00213-COA-R3-CV (Tenn. Ct. App. May 2, 2025) (Justia) ↩
  15. Tennessee H.B. 871, 114th Gen. Assemb., 2025–2026 Reg. Sess. (Tenn. 2025), amending TCA Title 66 (TrackBill) ↩
  16. Cmty. Ass'ns Inst., Uniform Common Interest Ownership Act (UCIOA) (2008 version adopted by Connecticut, Delaware, Vermont, and Washington) ↩
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