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Tennessee HOA Fidelity Bond Law: What Boards Must Do by January 1
CJ Hutsenpiller
Tennessee HOA Fidelity Bond Law: What Boards Must Do by January 1
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Does a Tennessee HOA need a fidelity bond? Yes. Under Public Chapter 731 (SB 2326 / HB 2338), every Tennessee homeowners' association that collects assessments must carry a blanket fidelity bond starting January 1, 2027. The bond must equal the association's reserves plus 25% of its annual assessment income, with a $10,000 minimum.
What Public Chapter 731 requires
Public Chapter 731 adds a new part to Tennessee Code Annotated, Title 66, Chapter 27. Governor Bill Lee signed it on April 23, 2026. It passed with bipartisan sponsorship, carried by Sen. Yarbro and Rep. Hemmer.
The law has three core rules:
- A bond is mandatory. Any HOA collecting assessments for common expenses must obtain and maintain a blanket fidelity bond.
- The amount follows a formula. Coverage must equal reserve balances plus one-fourth of aggregate annual assessment income. The floor is $10,000.
- The board or manager can buy it. Either the board of directors or the managing agent may obtain the bond on the association's behalf.
The law accepts a "bond or insurance policy." That means a commercial crime policy written for the association can satisfy the requirement if the limits and covered parties match.
Who must comply
The law applies to any HOA that collects assessments for common expenses. That covers most Tennessee subdivisions with dues, amenities, or shared maintenance.
- Single-family HOAs: incorporated or unincorporated associations run by the property owners
- Condo associations: the definition expressly includes unit owners' associations organized under T.C.A. § 66-27-401
- Townhome communities: included when owners pay assessments to an association
Size does not matter. A 20-lot neighborhood with $15,000 in annual dues falls under the same rule as a 600-home master-planned community.
Who the bond must cover
The bond must protect the association against theft or dishonesty by anyone who touches the money. The statute names five groups:
| Covered party | Why it matters |
|---|---|
| Officers | Treasurer and president often sign checks |
| Directors | Board members approve spending and vendor contracts |
| Association employees | Staff who collect dues or pay bills |
| Managing agent | The property management company itself |
| Managing agent's employees | The bookkeeper or community manager handling your account |
The last two rows are where many existing policies fall short. A basic crime policy may only cover the association's own employees. Boards that use a management company should confirm the bond names the manager and its staff.
Your board's checklist before January 1, 2027
The deadline is January 1, 2027. Bonds take time to underwrite, so start now.
- Ask your manager or insurance agent if the HOA already has a fidelity bond or crime policy
- Pull your current reserve balance and total annual assessment income
- Calculate the required limit: reserves + (annual assessments x 0.25), minimum $10,000
- Compare that number to your current limit
- Confirm the policy covers officers, directors, employees, the managing agent, and the agent's employees
- Add the bond premium to your 2027 budget
- Set a yearly reminder to recheck the limit as reserves grow
That last step matters. Your required limit changes every time reserves or dues change. A bond that complies in January can fall short by year end.
Frequently asked questions
When does the Tennessee HOA fidelity bond law take effect?
January 1, 2027. Public Chapter 731 was signed on April 23, 2026.
What is the minimum fidelity bond for a Tennessee HOA?
$10,000. Most associations will need more, because the limit equals reserves plus 25% of annual assessments.
Do condo associations need a fidelity bond in Tennessee?
Yes. The law includes unit owners' associations organized under T.C.A. § 66-27-401.
Can a crime insurance policy satisfy the requirement?
Yes, if the limit meets the formula and it covers all required parties. The statute allows a "bond or insurance policy."
Who is responsible for buying the bond?
The board of directors or the managing agent may obtain it on the HOA's behalf.
Does the bond protect against the property manager stealing?
It must. The law requires coverage for the managing agent and the managing agent's employees.
Get a free HOA compliance check
Not sure if your association is covered? Hutsenpiller Insurance will review your current policies against Public Chapter 731 at no cost. We'll tell you if your limit meets the formula, whether your manager is covered, and what it takes to close any gap before January 1.
Request your free compliance check
Hutsenpiller Insurance has served Middle Tennessee since 1992, with our headquarters being in Mt. Juliet, TN.
