AN ACT to amend Tennessee Code Annotated, Title 66, relative to property owners' associations' responsibility to maintain fidelity bonds.
Summary
HB2338 amends Tennessee law governing homeowners' associations and other property owners' associations by requiring HOAs that collect assessments for common expenses to obtain and maintain a blanket fidelity bond or comparable insurance policy. The bond is intended to protect the association against losses caused by theft or dishonesty by officers, directors, employees, or managing agents, including employees of a managing agent.
The bill sets the required coverage amount at the association’s reserve balances plus one-fourth of its aggregate annual assessment income, with a minimum coverage floor of $10,000. It also allows the board of directors or the managing agent to purchase the bond or policy on behalf of the HOA. The act takes effect January 1, 2027.
Impact
The bill adds a new part to Title 66, Chapter 27 of the Tennessee Code Annotated and creates a statutory insurance/bonding requirement for homeowners' associations and unit owners' associations covered by the definition in the bill. It imposes a new compliance obligation on associations that collect assessments for common expenses, affecting HOA boards, managing agents, and association finances by requiring them to secure coverage tied to reserve funds and annual assessment income.
Sentiment
The available voting history shows strong support and no recorded opposition in committee, with unanimous or near-unanimous favorable recommendations in both the House Cities & Counties Subcommittee and the House State & Local Government Committee. No committee transcript is available, but the vote pattern suggests the bill was viewed as a routine consumer-protection or financial-safeguards measure rather than a controversial change.
Contention
No major contention is evident in the available record. The main policy issue is the cost and administrative burden of requiring fidelity bonds for HOAs, especially smaller associations that may need to purchase new coverage or increase existing coverage to meet the formula. Support appears to have centered on protecting association funds from theft or dishonesty and improving financial accountability for boards and managing agents.