Tennessee HOA and Condo Reserve Study Requirements (Tenn. Code § 66-27-403 Guide)

Big-picture overview of Tennessee reserve study law

Tennessee’s reserve study framework is centered on condominiums, not on every HOA in the state. The key rule is found in Tenn. Code Ann. § 66-27-403(g), part of the Tennessee Condominium Act of 2008.

For any condominium association whose board oversees common elements with an aggregate replacement cost exceeding 10,000 dollars, the board must ensure a formal reserve study exists and is renewed on a fixed five-year cycle. (Justia)

This requirement was created by Public Chapter 205 in 2023, based on Senate Bill 863 and House Bill 750. Lawmakers adopted it in the wake of high-profile building failures nationally, with the clear intent of forcing condo boards to plan ahead for major repairs rather than relying on last-minute special assessments.

Who exactly must comply? Condos versus HOAs

The statute applies to “unit owners’ associations” under the Tennessee Condominium Act of 2008, meaning most modern Tennessee condominiums created on or after January 1, 2009. (Kaman & Cusimano) 

If you sit on the board of a condominium association with shared roofs, façades, garages, elevators, or amenities, and the total replacement cost of those common elements is above 10,000 dollars (which is true for essentially every multi-unit building), you are within the law’s scope.

Older “horizontal property regime” condominiums formed under the Tennessee Horizontal Property Act may or may not be directly covered, depending on how they were structured and whether they subsequently adopted the 2008 Act’s provisions.

Boards of these legacy communities should obtain legal advice and often choose to follow the same reserve study practices to avoid falling behind best standards.

By contrast, most single-family HOAs and planned developments in Tennessee are governed by a patchwork of provisions in Title 66, Chapter 27 (Parts 6-8) and the Tennessee Nonprofit Corporation Act. There is still no explicit statute that commands these HOAs to commission reserve studies or maintain a particular reserve fund balance, even though industry and lender expectations increasingly assume they will.

What Tenn. Code Ann. § 66-27-403(g) actually requires

The condo reserve study rule contains several moving parts:

• Threshold for coverage: The association’s board must oversee “common elements with an aggregate replacement cost exceeding ten thousand dollars.” For any typical multi-unit condo, this threshold is effectively always met.
• Date-based triggers:
  
  • If your board had a reserve study conducted on or after January 1, 2020, you must commission an updated reserve study within five years of that study’s date and continue updating at least every five years.
  • If your board has not had a reserve study conducted on or after January 1, 2020, you must obtain a reserve study no later than January 1, 2025 and then update it at least every five years thereafter.
• Owner disclosure: The board must make a copy of the reserve study available to common interest owners either by email or by posting it on the community’s website.
• Ongoing oversight: Even between formal updates, the board must review reserve funding annually to determine whether contributions remain adequate in light of the reserve study and current conditions.
• Exemptions: The rule does not apply while the board is still controlled by the declarant, or where the condominium is titled to a single owner or a husband and wife as tenants by the entirety.
  
  

Separate legislative materials and practice commentary make clear that a “reserve study” is expected to be a structured analysis of the remaining useful life and estimated replacement cost of each major system and component of the common elements, not a quick internal spreadsheet. (BillTrack50)

Reserve study frequency and funding expectations

The five-year update requirement is the legal floor, not the ceiling. National reserve study guidance from engineering firms and community association institutes typically recommends a full study with site inspection every three to five years, with lighter annual updates in between.

Tennessee’s law aligns with the upper end of that range but adds the explicit obligation for the board to review funding every year.

Crucially, Tennessee does not fix a formula for “how much” you must keep in reserves. There is no percentage-of-budget rule or statutory funding target. Instead:

• The reserve study provides the technical forecast: remaining life, replacement costs, and a recommended funding trajectory.
• The board, acting under fiduciary duties of care and loyalty under nonprofit law and general association principles, must set contributions that reasonably follow that trajectory, or be prepared to justify deviations.
• Extremely low balances or repeated special assessments in the face of clear reserve study warnings can quickly become evidence that the board failed to act with reasonable care. (samgrayrealestate.com)

Implications for HOAs that are not expressly covered

Even though standard Tennessee HOAs do not yet face a direct reserve study mandate, the direction of travel is obvious. Nationally, more states are moving from “encouraged” to “required” reserve studies, particularly after structural failures and insurance market tightening.

In Tennessee specifically:

• Many HOAs are nonprofit corporations, meaning directors already owe duties of care, loyalty, and good faith in financial planning.
• Lenders and buyers increasingly look for evidence of a professional reserve study when evaluating a community’s financial health.
• TACIR and other policy bodies have highlighted risks where HOAs lack adequate reserves and long-term planning.

Practically, a Tennessee HOA board that ignores reserve planning altogether is taking a conscious risk, even if no statute explicitly spells out the obligation today.

Step-by-step compliance plan for Tennessee condo boards

For boards trying to translate the law into an action plan, a practical sequence looks like this:

Step 1: Confirm your status and applicability

Determine whether your community is a condominium under the Tennessee Condominium Act of 2008 and whether the common elements’ total replacement cost exceeds 10,000 dollars. If so, the reserve study law applies unless you are still under declarant control or fall into one of the narrow ownership exemptions.(Kaman & Cusimano)

Step 2: Check your current reserve study status

Identify whether a formal reserve study was conducted on or after January 1, 2020. If yes, note that date and schedule the update within five years. If no, plan to complete the initial study as soon as possible and no later than January 1, 2025.

Step 3: Engage a qualified reserve study professional

Tennessee’s legislative history and industry commentary point to using specialized reserve professionals, often licensed engineers or reserve specialists with relevant training. Using a reputable firm also provides board-level protection: you can point to independent expert recommendations if challenged.

Step 4: Complete the study and adopt a funding plan

Work with the preparer to inventory components, assess remaining life, and calculate replacement costs. Use the resulting funding plan as the backbone of your annual and multi-year reserve contributions, updating assessments as needed rather than postponing increases and relying on emergency special assessments.

Step 5: Communicate clearly with owners

Once the study is complete or updated, comply with the statute by sharing it via email or on the community website, and explain how it impacts assessments over the next several years.Transparency reduces pushback and helps owners understand why steady, predictable contributions are preferable to surprise bills.

Step 6: Build an annual review and five-year update cycle

Create a standing board agenda item each year to review reserve funding against the study and adjust contributions where needed. Also, calendar the five-year update deadline well in advance so you are not scrambling at the last minute.

How PropFusion supports Tennessee boards and managers

PropFusion offers two layers of help for Tennessee communities:

• Reserve study provider network: The PropFusion marketplace connects boards with established reserve study companies that understand Tennessee’s legal requirements, construction costs, and building types, making it easier to obtain compliant studies and competitive proposals.
• Ongoing planning and compliance: Once a study is in place, PropFusion’s platform lets boards and managers track funding levels, run what-if contributions scenarios, plan upcoming projects, and store the study and related documents in a central, easily accessible place.

For portfolio managers overseeing multiple Tennessee condos and HOAs, this unified view is particularly valuable: you can see at a glance which communities are compliant with the five-year reserve study cadence, which are approaching deadlines, and where underfunded reserves could jeopardize future projects.

Key takeaways for Tennessee boards

• Condos under the Tennessee Condominium Act of 2008 with common elements over 10,000 dollars in replacement cost must obtain and update reserve studies on a five-year cycle, share them with owners, and review funding annually.
• Traditional HOAs are not yet under the same statutory mandate but still face strong practical and fiduciary reasons to follow similar practices.
• Boards that take reserve studies seriously are far more likely to avoid disruptive special assessments, litigation risk, and depressed property values.
• Platforms like PropFusion and its Tennessee-focused provider network can dramatically reduce the friction of staying compliant and making reserve funding decisions that owners can understand and support.