What Is Tennessee Code 66-27? Ownership, Liens, and Disclosures

Tennessee Code Title 66, Chapter 27 is the state law that governs how condominiums are created, operated, and enforced in Tennessee. The chapter contains two main regulatory frameworks: the original Horizontal Property Act, which applies to condominiums whose founding documents were recorded before 2009, and the Tennessee Condominium Act of 2008, which applies to everything created on or after January 1, 2009. Which framework controls your building determines how assessments are collected, how insurance works, what a buyer must be shown at resale, and how disputes get resolved.

Which Act Applies to Your Condominium

The Tennessee Condominium Act of 2008, found in Parts 2 through 5 of Chapter 27, applies to every condominium created after January 1, 2009. Developments established before that date are governed primarily by the original Horizontal Property Act in Part 1.¹

The 2009 cutoff is not an absolute wall. Several provisions of the 2008 Act reach back and apply to pre-2009 condominiums for events occurring after January 1, 2009. These include the lien-for-assessments rules, tort liability provisions, the residential-unit protections in Part 5, and certain association governance requirements. The retroactive provisions do not override language already written into a master deed or bylaws on that date, with one narrow exception involving insurance deductible responsibilities.¹

So the first step for any owner, buyer, or board trying to figure out which rules control is checking the recording date of the master deed or declaration.

What You Actually Own

Condominium ownership has two layers. Each owner holds exclusive title to an individual unit and, at the same time, shares in the common elements with every other owner. Under the original Horizontal Property Act, an apartment owner has exclusive ownership of the apartment and a common right to share in the common elements in accordance with their intended purpose.²

Under the 2008 Act, “common elements” means everything in the condominium other than the units themselves.³ Foundations, roofs, hallways, and exterior grounds all qualify. Your percentage interest in the common elements cannot be sold or encumbered separately from the unit; any attempt to split them is void.⁴ Common elements also cannot be partitioned among co-owners.

Between the unit and the general common elements sits a third category: limited common elements. These are parts of the common elements reserved for the exclusive use of one or more specific units, but not all units.³ Balconies, assigned parking spaces, and patios are typical examples. The association generally remains responsible for maintaining limited common elements even though only one unit’s residents may use them. Perimeter windows and doors are also commonly treated as limited common elements, which means repair responsibility sits with the association unless the declaration says otherwise.

The declaration allocates to each unit a fraction or percentage of undivided interest in the common elements, a share of common expenses, and a portion of the votes in the association. It must state the formula used, and the formula cannot favor units still owned by the developer.⁴ Those allocations drive your financial obligations and voting power for the life of the condominium.

What the Association Can Do

The unit owners’ association runs the condominium’s day-to-day operations and has broad statutory authority to do it. Under the 2008 Act, the association can adopt and amend bylaws, adopt budgets, collect assessments, hire and fire managing agents, enter into contracts, regulate the use and maintenance of common elements, and bring or defend lawsuits on behalf of the community.⁵ The association can impose late charges on overdue assessments and, after notice and an opportunity to be heard, levy reasonable fines for rule violations.

For pre-2009 developments, the Horizontal Property Act requires that bylaws be recorded with or appended to the master deed, and those bylaws govern the building’s administration.⁶

Insurance the Association Must Carry

Starting no later than the first sale of a unit to someone other than the developer, the association must carry two types of insurance to the extent reasonably available. The first is property insurance on the common elements covering direct physical loss, with coverage equal to at least 80 percent of the replacement cost (excluding land and foundations). The second is liability insurance covering death, bodily injury, and property damage arising from the use or maintenance of common elements, in an amount set by the board.

In buildings where units have horizontal boundaries (stacked units rather than side-by-side townhomes), the property insurance must extend to the units themselves, though it does not need to cover improvements an individual owner installed. Each unit owner is treated as an insured person under the association’s liability policy, and the insurer waives any right to seek reimbursement from a unit owner or tenant. If the required coverage is not reasonably available, the association must promptly notify all owners in writing.

Insurance proceeds for a covered loss go to the association or a designated insurance trustee, not to any mortgage holder, and must be used to repair or restore the damaged property. Owners and lienholders share in the proceeds only if money remains after repairs are complete or the condominium is terminated.

What Happens When Assessments Go Unpaid

When an owner falls behind on assessments or owes fines, the association automatically holds a lien on that unit from the moment the amount becomes due. Recording the original declaration in the county land records serves as constructive notice of the lien, so the association does not need to record a separate document each time an owner misses a payment.⁷ The lien covers unpaid assessments, fines, interest, and reasonable attorney fees the association incurs collecting the debt.

Where the Association’s Lien Ranks

The association’s lien outranks most other claims on the unit, with three exceptions: liens and encumbrances recorded before the declaration itself, a first mortgage or deed of trust recorded before the assessment became delinquent, and government tax liens.⁷

Tennessee does grant the association a limited “super-priority” that reaches over even a first mortgage. When any party forecloses, the association can collect up to six months of regular assessments that accrued immediately before the foreclosure action was filed, capped at one percent of the first mortgage’s maximum principal balance.⁷ The super-priority is non-transferable and vanishes if the association assigns it to a third party. The association can also lose it if a mortgage holder has registered its contact information with the association and the association fails to notify that lender within 30 days of a six-month delinquency.

How the Association Forecloses

The default enforcement method is judicial foreclosure, meaning the association files a lawsuit. If the declaration specifically authorizes it, the association may instead foreclose in the same manner as a deed of trust with power of sale under Tennessee Code Title 35, Chapter 5, provided it first gives written notice to the owner and all recorded lienholders.⁷ An association foreclosure does not wipe out a prior first mortgage; the buyer at the foreclosure sale takes the unit subject to that mortgage. The lien expires entirely if the association does not start enforcement proceedings within six years of the date the lien became effective.

What a Buyer Is Entitled to See Before Closing

When a unit is resold, Tennessee law entitles the buyer to a disclosure package from the association covering both the community’s rules and its financial condition.⁸ It includes:

Copies of the recorded declaration, bylaws, articles of association, and all amendments and exhibits.
The most recent balance sheet, income statement, and approved budget, the amount held in reserves for repairs and replacements, any outstanding association debt secured by common elements, and the projected monthly assessment for the unit.
Minutes of all member and board meetings for the previous 24 months.
The current monthly and any special assessment on the unit, plus any delinquencies on that unit.
A certificate or statement describing the types of coverage, limits, and deductibles the association maintains.
Any unsatisfied judgments against the association and a description of pending lawsuits both against and by the association.
The total unpaid assessments across all units that are more than 60 days past due.

A community sitting on heavy delinquencies or thin reserves is a problem no home inspection will catch, so working through this package carefully before closing matters.

Ending the Condominium

Terminating a condominium requires the agreement of unit owners holding at least 80 percent of the association’s votes along with 80 percent of first-mortgage lenders on units representing that same 80 percent voting share. The declaration can set a higher threshold but generally cannot set a lower one, unless every unit in the condominium is restricted to nonresidential use. A lender is deemed to have approved the termination if the association sends notice to the lender’s last known address and receives no objection within 30 days. The signed termination agreement must then be recorded in every county where the condominium sits.

Other Parts of Chapter 27

Chapter 27 also contains three parts that apply to community types other than condominiums. Part 6 addresses dedicatory instruments, Part 7 governs homeowners’ associations (which are legally distinct from condominium associations), and Part 8 covers gated subdivisions.⁹ If you live in an HOA or a gated community rather than a condominium, the condominium provisions above are not the rules that apply to you; check the part that matches your community type.

1
Justia. Tennessee Code 66-27-202 – Applicability
2
Justia. Tennessee Code 66-27-106 – Owners Rights – Exclusive and Common
3
FindLaw. Tennessee Code 66-27-203 – Definitions for Parts 2-5
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Justia. Tennessee Code 66-27-307 – Allocation of Common Element Interests, Votes, and Common Expense Liabilities
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Justia. Tennessee Code 66-27-402 – Powers of Unit Owners Association
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Justia. Tennessee Code 66-27-111 – Administrative Bylaws Recorded
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Justia. Tennessee Code 66-27-415 – Lien for Assessments
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FindLaw. Tennessee Code 66-27-503 – Resale Certificate Contents
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Justia. Tennessee Code Title 66 Chapter 27 – Horizontal Property