Real estate tax laws for homeowner and condominium associations can be confusing. These laws vary extensively by state. Although condo and homeowner associations are closely related as community associations, Tennessee real estate tax laws treat each one differently. It’s important for your Board members to understand the difference to avoid double taxation.
Condominium associations have general common elements, and homeowner associations have common areas. Although the elements and areas may include some of the same parts (roofs, lobbies, etc.), Tennessee real estate tax laws treat them differently. Many people use common elements and common areas interchangeably, and this adds to the confusion. It’s easier to make the distinction when you think of them differently.
Unit owners are responsible for general common elements real estate taxes in Tennessee condominium associations. The general common elements are collectively owned and linked to each unit’s title. However, there is no separate tax identification number for the general common elements. The condo association is responsible for maintaining the general common elements, but the association should not be paying real estate taxes.
On the other hand, a Tennessee homeowner association owns its common areas. As the owner of record, the association pays real estate taxes and is responsible for maintaining these areas.
Review your bylaws and governing documents to make sure that they are correct. Tax season is the ideal time to communicate the real estate tax responsibilities to your homeowners.
Refer to the Horizontal Property Act (Tenn. Code 66-27-120) and the Condominium Act of 2008 (Tenn. Code 66-27-205) for more details on real estate taxes in Tennessee.
Wise Property Solutions is a property management company serving East Tennessee with offices in Knoxville, TN and the Tri-Cities, TN-VA. Specializing in Condominium Association Management, Home Owners Association Management, HOA Management and Gated Community Association Management.
Tri-Cities, TN-VA: 423-926-7373
Knoxville, TN: 865-643-8989