AN ACT to amend Tennessee Code Annotated, Title 66, relative to property owners' associations' responsibility to maintain fidelity bonds.
Summary
SB2326 requires homeowners' associations in Tennessee that collect assessments for common expenses to obtain and maintain a blanket fidelity bond or equivalent insurance policy. The bond is intended to protect the association against losses caused by theft or dishonesty by officers, directors, employees, or a managing agent and that agent's employees. The bill defines key terms such as "homeowners' association," "board of directors," and "declaration" for purposes of the new part added to Title 66, Chapter 27.
The required coverage amount must equal the association's reserve balances plus one-fourth of its aggregate annual assessment income, with a minimum coverage floor of $10,000. The board of directors or managing agent is authorized to obtain the bond or insurance on behalf of the HOA. The act takes effect January 1, 2027, giving associations time to prepare for compliance.
Impact
The bill amends Tennessee Code Annotated, Title 66, Chapter 27, by adding a new part imposing a statewide bonding requirement on HOAs that collect common-expense assessments. It creates a statutory duty for these associations to carry fidelity coverage at a level tied to reserves and annual assessment income, which may increase administrative costs and insurance expenses for associations and indirectly affect homeowners through dues or assessments. The law also standardizes terminology for HOAs and related governing documents within the chapter.
Sentiment
The available legislative history shows strong, unanimous support for the bill. It was recommended for passage by the Senate Commerce and Labor Committee by a 9-0 vote and then passed both floor votes without opposition, including final passage by a 90-0 vote. The lack of recorded committee discussion suggests the measure was viewed as a straightforward consumer-protection or financial-safeguard bill rather than a controversial policy change.
Contention
No significant opposition is reflected in the provided record. The main policy issue implicit in the bill 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 statutory formula. Support appears to have centered on protecting association funds from theft or dishonesty, while any concerns would likely come from HOA boards, managing agents, or homeowners sensitive to increased operating costs.