Tennessee developers continue to rely on the Horizontal Property Act (“HPA”) as a familiar framework for condominium ownership. The Tennessee Condominium Act of 2008 (“Condominium Act”) introduced a more modern alternative, offering expanded governance, financing, and consumer-protection tools. Both Acts remain in effect and may be used for new projects, but they reflect different approaches to regulation and project administration.
Applicability
The HPA remains fully operative. It was Tennessee’s original statutory authority for creating condominium ownership and continues to provide a valid framework for new developments. The Condominium Act did not repeal or replace the HPA. Instead, it established an updated and more detailed alternative structure. Developers may elect to organize a project under either statute depending on the project’s design, scale, and financing objectives.
In practice, most modern developments should favor the Condominium Act because it reflects current expectations for governance, disclosure, and consumer protection. Projects formed under the HPA typically involve simpler or smaller ownership structures—or follow historic documentation models already used within a particular jurisdiction.
Practical Differences
The Condominium Act provides a comprehensive roadmap for the creation, governance, and management of a condominium regime. It defines declarant rights, association powers, turnover obligations, lien priorities, and disclosure obligations. These features promote predictability and consistency across projects and are widely recognized by lenders and title companies.
The HPA is more limited. It lacks many of the governance and financial provisions that have become standard practice under the Condominium Act. Developers using the HPA may encounter more interpretive gaps and must often rely on custom drafting or local practice to achieve the same clarity available under the Condominium Act.
Use of Deposits For Construction
In 2025, the General Assembly amended the Condominium Act to permit limited use of purchaser deposits for construction. Under the revised statute, developers may access escrowed deposits to pay verified construction costs if buyers provide written acknowledgment and adequate security—such as a surety bond or letter of credit—is maintained. These amendments align Tennessee practice with modern condominium financing standards in several other states.
Although the amendment appears in the Condominium Act, the amendment is applicable to condominiums created under either statute when those developments meet the definition of a condominium. Thus, developers using the HPA cannot assume exemption from the deposit‑for‑construction or escrow‑handling requirements that now apply statewide. Careful compliance review is warranted to ensure that deposit practices meet the standards of the new rules for the use of deposits.
Choosing the Right Path
While both Acts remain available, the Condominium Act is the more complete and predictable structure for contemporary development, including mixed-use, high-rise, mid-rise, and townhome projects. It aligns more closely with lender expectations, clarifies and reinforces declarant and association rights, and provides well‑defined procedures for governance, reserves, and disclosure. The HPA may be suitable for smaller or single‑phase projects, but it provides less direction and offers fewer tools for management and financing. Developers should evaluate both options deliberately—recognizing that the Condominium Act generally offers clearer statutory guidance, stronger market acceptance, and more comprehensive protections for all parties involved.