Top Legal Mistakes East Tennessee HOAs Make And How to Avoid Them

Running a homeowners association isn’t exactly a walk through a manicured neighborhood. Even the most well-intentioned board members can stumble into legal trouble, sometimes without realizing it until it’s too late. Laws governing HOAs in East Tennessee can feel like a maze, and while most communities do their best, mistakes happen. The problem is that these mistakes can be costly, both financially and in terms of trust among homeowners.

Below are some of the most common legal missteps HOAs make and what can be done to sidestep them before they grow into bigger issues.

1. Mishandling HOA Funds

Money tends to be where disputes flare up first. HOA boards manage budgets, collect dues, and pay for community upkeep. If financial records aren’t transparent or properly maintained, accusations of misuse are almost inevitable.

Some boards unintentionally blur the line between operational funds and reserve funds, dipping into long-term savings for short-term problems. That might solve the moment, but it creates larger headaches when major repairs pop up. On top of that, failing to keep accurate records can put the entire board at risk of liability.

The fix? Clear processes for budgeting and expense tracking. Regular audits. Open communication with homeowners about where money is going. And, in many cases, bringing in a property manager who knows how to separate accounts, track payments, and keep the financial side above board.

2. Ignoring or Misinterpreting Governing Documents

Every HOA is guided by bylaws, covenants, and other documents that set the rules. The challenge is that many of these were written years ago, sometimes decades, and may not reflect current needs. Boards often fall into the trap of assuming these documents are either set in stone or so flexible that they can bend them at will. Neither is true.

For example, enforcing a rule inconsistently can create legal exposure. Selectively applying parking rules or architectural guidelines is a quick way to invite lawsuits. Another common mistake is failing to update governing documents when state or federal laws change.

Avoiding this pitfall starts with a careful review of existing documents and a clear enforcement policy. When things feel outdated, consult legal professionals who specialize in HOA law. Yes, it takes time and money, but it prevents bigger problems later.

3. Violating Fair Housing Laws

Fair Housing Act violations are surprisingly common, often because boards simply don’t realize they’re stepping over a line. Something as small as denying a homeowner’s request for a reasonable accommodation, or posting discriminatory language in community communications, can lead to serious legal trouble.

It’s not just about avoiding lawsuits; it’s about fairness and trust within the community. Still, the laws are detailed and not always intuitive. What seems like a straightforward “no” to one request could actually be illegal.

Training for board members is key here. A knowledgeable property manager can also help ensure policies are written and enforced in compliance with federal and state laws.

4. Poor Handling of Disputes and Enforcement

Rules are necessary, but how they’re enforced can make or break a community. Too often, HOAs either swing the hammer too hard or avoid confrontation altogether. Sending overly aggressive violation letters is one mistake. Ignoring issues altogether is another. Both approaches can land the board in legal trouble.

Courts tend to look closely at whether the HOA acted reasonably and consistently. Was the homeowner given notice? Was there an opportunity to be heard? Skipping those steps can void enforcement actions and erode homeowner confidence.

Boards should create a written enforcement policy and stick to it. Discretion is fine, but it has to be applied fairly. Sometimes it helps to have a neutral third party, like a property manager, step in and handle enforcement communications. That buffer can lower tensions and reduce the risk of mistakes.

5. Failing to Maintain Common Areas

This one seems obvious, but it comes up often. If a playground, pool, or walking trail falls into disrepair and someone gets hurt, the HOA could face liability. Even if no one is injured, homeowners can take legal action if they feel their dues aren’t being used responsibly.

Neglect is often not intentional. Boards get overwhelmed, or maintenance projects are postponed because of budget constraints. Still, regular inspections and timely repairs are non-negotiable. Skipping them is like inviting legal trouble in through the front gate.

6. Lack of Proper Meeting Procedures

Board meetings might not feel like high-stakes events, but they are. State laws and governing documents usually dictate how meetings must be announced, conducted, and recorded. Failing to follow those procedures can invalidate decisions, opening the door to lawsuits.

A common misstep is not giving homeowners adequate notice of meetings, or failing to record accurate minutes. These might sound like small details, but in the legal world, they matter.

The best approach is consistency. Post notices in multiple places. Keep detailed records of votes. Stick to agendas. These habits not only reduce legal risk but also build credibility with the community.

7. Not Seeking Legal Guidance Early Enough

Perhaps the most avoidable mistake is waiting until a lawsuit looms before seeking legal advice. Many boards hesitate to involve attorneys because of cost, but a single consultation early on can prevent a far more expensive problem later.

Think of it like preventive care. You don’t wait for a toothache to turn into an emergency root canal. HOAs should view legal guidance the same way.

Finding Balance

The reality is that HOA boards are often made up of volunteers doing their best. Mistakes are rarely malicious; they’re usually the result of being underinformed, overworked, or both. Recognizing these common pitfalls and creating systems to avoid them is half the battle.

The other half is knowing when to ask for help. Property managers, legal professionals, and financial advisors can provide expertise that board members simply don’t have the time to master on their own.

If your East Tennessee HOA wants to avoid these legal headaches and build a stronger, more transparent community, consider working with Wise Property Solutions. Our team helps boards navigate the complex mix of rules, laws, and daily operations so that neighborhoods can thrive.