Legislative battle pits homeowners' associations against absentee corporations

Question: We all believe that property owners have the right of disposition regarding their property, correct? The default answer to that is an obvious, “Yes.” And parties to a legal covenant have the right to expect that they — and others bound to it — will conduct themselves in accordance with it, correct? Another yes.

So far, so good. The hair-splitting comes when disputants to a property matter each claim the white horse and the good guy’s role, and each further appropriates the role of Everyman seeking to be free of undue exploitation and/or control.

Something like that is the issue in House Bill 1290 (Senate Bill 1429), which pits members of homeowners' associations against corporate property managers. The question is whether the former have the right to amend their bylaws so as to prevent long-term rentals by the latter. Homeowners' associations are now fighting the proposed legislation, which would prevent them from altering their requirements on long-term rentals.

On the other hand, corporate firms — like American Homes 4 Rent, a serious player in the Nashville suburban market — want to prevent that possibility, and see the legislation as their best means of doing so.

The issue was joined recently in a subcommittee of the Tennessee House Local Committee, and joined again in the full Local Committee, where HB1290 was passed on to the House Calendar and Rules Committee, presumably for consideration later this week and floor action next week. Meanwhile, the companion measure, SB1429, is on Tuesday’s calendar of the Senate Commerce and Labor Committee.

Lawyer Doug Jones, who represents the homeowners’ associations in the dispute, contends that the real issue is an effort by large national corporations to convert residential areas into sources of commercial profit. As he put it last week to House Local members: “This isn’t Mom and Pop. This is Wall Street coming in here with billions of dollars. They want a competitive market for only them.”

The “Wall Street” note was sounded last year in an article in — appropriately — The Wall Street Journal. The article, titled “Meet Your New Landlord: Wall Street,” was based substantially on real estate developments in Spring Hill, Tenn., where there has been a significant conversion of residential homes into long-term rental addresses.

State Rep. Bob Freeman (D-Nashville) also opposed the measure. The homeowners’ associations, he said, exist “to protect property rights” and should have the right to amend their bylaws to that end. “Large firms are coming in, buying homes and renting them long-term," said Freeman. "We should have the right to regulate them.” Freeman would go on to suggest that residential rights were one thing, commercial rights another. (Freeman's father Bill co-owns FW Publishing, the Post's parent company.)

That point of view was visibly backed up by several rows of homeowners’ association members sporting red “H O A” T-shirts.

The bill’s House sponsor, Rep. Andrew Farmer (R-Sevierville), was unyielding in defense of those who owned the homes, be they corporate or otherwise. “They can’t just change the rules of the game once you’ve bought," said Farmer. "You’re grandfathered in as a homeowner." Farmer acknowledged that any change in bylaws might properly oblige new owners, but not existing ones.

”It’s only fair to that property owner to be able to continue to have the same bylaws that they bought from,” Farmer said. “It’s not fair to tell you what to do with your property after you’ve bought the property. I hold property rights to a standard above bylaws. I’m here to protect property rights.”

Rick Tillis (R-Lewisburg) weighed in after acknowledging that he'd "had a lot of feedback from people who wear red shirts the last day or two.” He said: “An investment company could come in at a buy-in price and flip them as investments somewhere down the road. Ninety percent drops down to 50 or 60 percent. The property value goes down.”

There was more back and forth, and finally, acting chairman Dave Wright (R-Corrytown) — subbing for chair John Crawford (R-Kingsport), who is currently hospitalized — granted a call for the question and perceived enough ayes in the voice-vote response to send the bill on to Calendar and Rules.

But it seems likely that Jones and other opponents are not ready to give up the fight. Tuesday’s hearing in the Senate is likely to see another audience full of onlookers seeing red.

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