NASHVILLE — A bill weakening homeowners associations' ability to ban rentals of corporation-owned houses cleared a Tennessee Senate panel Tuesday despite questions about whether it violates the state and U.S. constitutions.
Following more than an hour of sometimes heated testimony and debate, Commerce and Labor Committee members approved the bill, sponsored by Sen. Mike Bell, R-Riceville, on a 6-1 vote with one member abstaining.
Bell, who unsuccessfully sought to strike a compromise on the bill last fall, told colleagues that "we were not able to see eye to eye on all issues, but we were able to make it a better amendment."
The "right to rent your home is a property right inherent with owning your home," Bell said.
But Sen. Bo Watson, R-Hixson, Bell's friend and often ally, said the bill raised issues for him. "I've really struggled with where constitutionally guaranteed rights conflict with each other."
One is property rights guaranteed under the state and U.S constitutions, Watson said. The other is a Tennessee constitutional provision, which says "that no retrospective law, or law impairing the obligations of contracts, shall be made."
He said as a result "I'll be voting no today because I think there are constitutional problems with this legislation moving forward."
The measure, Senate Bill 1429, wades into a battle between Tennessee homeowner associations and absentee corporate landlords over rentals. Homeowners associations are organizations in a subdivision, planned community or condominium that make and enforce rules for the properties and their residents.
Homeowners associations charge that large Wall Street corporations are scarfing up houses in Tennessee homeowners associations' communities and renting them, sometimes on a month-by-month basis, to tenants who flout association rules, sometimes committing crimes.
At the same time, critics also say some companies refuse to make repairs or keep up with required maintenance provisions. Out-of-state executives are often hard to reach, they say.
Some homeowners associations across the state are scrambling to change association rules to prevent rentals of corporation-owned homes. Doing so has posed difficulties for some homeowners associations because they have rules setting a high percentage of homeowners required to agree to the rules. That can range as high as 75% or more. With some corporations owning 30% or more of the homes in the community, no rules could be changed unless they agree.
Homeowners association attorneys say associations seeking to restrict corporate rentals wouldn't apply to individual homeowners who wish to rent.
Bell said his amendment would bar corporations' rentals for 30 days at a time going forward, extending the minimum rental time to 180 days.
Attorney Doug Jones, who represents homeowners associations, cast doubt on the practicality of that, saying corporations can "play shell games" and "flip" ownership to a limited liability corporation.
"There's no way to monitor that," Jones said. "Remember, no other state has done that."
He urged Bell to delay going forward and cited a formal request by Rep. Bob Freeman, D-Nashville, of Tennessee Attorney General Herbert Slatery to opine on whether the bill violates the Tennessee and U.S. Constitution.
"The attorney general needs to rule on whether it's constitutional," Jones said.
Bell called for a vote and the bill was approved.
The bill goes to the three-person Senate Calendar Committee, where two Commerce and Labor Committee members who voted for the measure are members. According to the General Assembly's website, the House bill has cleared all committees but one, the lower chamber's Calendar and Rules Committee.