Loudon County seeks change in real estate law

Legislators representing Loudon County will go back to the drawing board to work on changes in real estate law that could affect the disposition of tax-delinquent properties across the state.

The issue in Loudon came to a head last October when 293 tax-delinquent properties in Tellico Village were removed from public auction because the county would have been liable for hundreds of thousands of dollars in ongoing property owners association fees.

The proposed changes to the law would exempt county governments from paying property owners association assessments after acquiring the properties in tax-delinquency sales. Under current law, counties are responsible for paying such assessments if they acquire the property.

Making changes to the law has been a controversial process, said state Rep. Jimmy Matlock, R-Lenoir City.

“It has nationwide ramifications. It might turn upside down 150 years of real estate law,” he said.

Proposed changes to the law were presented in January via Senate Bill 990 by Sen. Randy McNally, R-Oak Ridge. The bill was eventually taken off the calendar after meeting opposition from lobbyists for property owners associations.

McNally said he wants to keep working on the changes because two innocent parties, the POA and the county, are being hurt by the actions of a third party. Under existing law, the third party gets off scot free and one or both of the innocent parties ends up being hurt, he said.

“As HOAs become more common, we’re going to be seeing this a lot more,” McNally said.

Matlock told the Loudon County Commission on Monday that he and McNally would form a committee during the summer to study the issue and try to come to a compromise with the opposition. “Our goal is to have the new legislation ready to drop in January 2014,” Matlock said.

County Commissioner Don Miller, a resident of Tellico Village, said that the issue has been contentious partly because it reflects the volatile real estate market in parts of Tennessee and across the country.

“We have people walking away from property. That increases the amount the other property owners have to pay,” Miller said.

Property owners associations have a responsibility to protect the interests of their members, Miller said. Under the current law, the assessments are legally attached to the property and become the responsibility of the new property owner. The county wants to put the delinquent properties back in private hands and back on the tax rolls, he said.

The TVPOA also wants to see the properties return to private owners and is eager to work with the committee, said spokesman John Cherry. Tellico Village General Manager Winston Blazer will participate in the committee with Matlock and McNally, Cherry said.

Assessments on the 293 lots will add up to about $270,000 per year of lost revenue to the POA, he said. The loss of the potential revenue has already been accounted for in the village budget, Cherry said.

Loudon, Cumberland, Murray and Moore counties are facing similar challenges, Matlock said. He said the legislation failed to gain support because POAs across the state opposed it.

“We have to work this out in a way that doesn’t harm the POAs,” he said.

Loudon County wants a good relationship with Tellico Village because the community is an important source of revenue, generating about 27 percent of the county property taxes, Matlock said.