Tennessee exempts club-membership fees from its transfer fee ban
Tennessee exempts club-membership fees from its transfer fee ban
2026-09-19 · Tennessee · Legislation
A fee a buyer or seller has to pay to purchase, reissue or transfer a club membership attached to a Tennessee home is no longer a “transfer fee covenant” under state law. The change arrived through Public Chapter 727 of 2026 and applies to the definition at the heart of Tennessee's 2011 ban on private transfer fees.1
It is a one-sentence amendment, and it passed without a recorded no vote in either chamber. It also carves out a category of charge that lands on a closing statement in exactly the kind of community — golf, lake, marina, club-amenity developments — where an association and a club sit side by side.
What the ban does, and what just came out of it
The Prohibition of Covenants Providing for Transfer Fees Act of 2011 sits at Title 66, Chapter 37. It makes a covenant obliging a transferor or transferee to pay a fee to a third person on each transfer of the property unenforceable, and it carries a list of exceptions — among them one-time fees under a purchase contract, lender assumption fees, real estate commissions, and fees charged by an association for a service rendered at the time of the transfer.
Public Chapter 727 adds a new subdivision (E) to the definitional exceptions at section 66-37-102(4):
“Any provision of a document requiring a transferor or transferee to pay a fee, charge, assessment, dues, contribution, deposit, or other amount to purchase, issue, reissue, maintain, or transfer a club membership that is related to the real property or the community in which the property is sited.”
The list of covered payments is deliberately wide: fee, charge, assessment, dues, contribution, deposit “or other amount.” So is the list of triggering events: purchase, issue, reissue, maintain, or transfer. The only limit on the face of the text is the link to the property — the membership has to be “related to the real property or the community in which the property is sited.”
The bill that passed is not the bill that was filed
SB 2273, filed by Senator Briggs, and HB 2495, filed by Representative Farmer, contained none of this when they were introduced. The bill as filed ran to two sentences and made a single numerical change to an unrelated section of Title 66.2
Senate Amendment 1 (SA0584), offered in Senate Commerce and Labor by Senator Bailey, deleted all language after the enacting clause and substituted the club-membership exception.3 The Senate adopted it and passed the amended bill 32–0 on March 19, 2026; the House passed it 94–0 with one member present and not voting on April 1, 2026. A competing House amendment was withdrawn.
Why the exception matters where it matters
In a club community the money at a closing can travel along two separate channels. One is the association's: assessments, arrears and lien payoffs, plus whatever the association charges for producing a resale or estoppel package. The other is the club's: an initiation or membership-purchase amount, a reissue or transfer charge, sometimes a refundable deposit.
Before this amendment the second channel sat in an uncertain position. Chapter 37's existing exception for association charges is tied to “a service rendered” at the time of the imposition, which fits a resale certificate and fits an initiation fee less comfortably. A membership charge obligating every successive buyer, recurring on each transfer, and payable to a club rather than to the association has the shape the 2011 Act was written to reach.
Subdivision (E) removes the question. A club-membership amount tied to the property is outside the definition, which means it is outside the ban, whoever collects it and however many times the property changes hands.
What the exception does not do
Taking a charge out of Chapter 37 is not the same as making it enforceable. The Act's ban is one obstacle among several, and the amendment removes only that one.
The charge still has to be created by an instrument that binds the buyer — a recorded declaration, a club plan incorporated by reference, a membership agreement the buyer signs. Nothing in Public Chapter 727 creates an obligation where the documents do not, and nothing in it changes how a Tennessee court construes a covenant that is said to run with the land.
The amendment is also silent on amount. There is no cap, no reasonableness standard, no disclosure requirement and no obligation to itemise the charge before closing. Tennessee's condominium disclosure regime under Part 5 of Title 66, Chapter 27 governs what a declarant must give a residential purchaser; the resale of an existing home in a club community is governed by the contract and by whatever the association's own documents require.
The definition it did not touch
“Club membership” is not defined anywhere in the new subdivision or elsewhere in Chapter 37. The text reaches a membership “related to the real property or the community in which the property is sited,” which is a relational test rather than a description of the entity.
On its face that language does not distinguish between a golf club operated by an unaffiliated company, a club owned by the developer, and an amenity entity controlled by the association itself. Whether an association-affiliated amenity entity charging a membership amount at each transfer falls inside subdivision (E) is a question the text leaves open, and no Tennessee court has construed it.
What to watch next
The act took effect on becoming law, so it already governs. Public Chapter 727 was the third of four measures the 114th General Assembly enacted that reach covenanted Tennessee communities, alongside the charging station act and the fidelity bond mandate.
The pattern across all three is the same: narrow, unopposed, single-subject amendments. No broader revision of Tennessee's transfer fee law was filed in the 114th General Assembly, and the legislature adjourned sine die on April 23, 2026. The 115th General Assembly convenes in January 2027.
Related Tennessee HOA Topics
- SB 2273 / HB 2495 bill history, votes and amendments — Public Chapter 727 (Tennessee General Assembly) ↩
- SB 2273 as filed, 114th General Assembly (Tennessee General Assembly) ↩
- Senate Amendment 1 (SA0584) to SB 2273 — the enacted text (Tennessee General Assembly) ↩
- Tenn. Code § 66-37-102, Prohibition of Covenants Providing for Transfer Fees Act of 2011 — chapter definitions ↩
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