Enjoying its status as an “it city,” Nashville has been growing rapidly. With its economy in full flux, new businesses and residents arrive in Nashville constantly, and nowhere is this more evident than in residential neighborhoods. Once dicey, urban neighborhoods are now being rapidly gentrified as Nashville’s economy grows and young professionals invest in property.
As neighborhoods change and Nashville becomes more densely populated, many legal real estate issues are being forced to the surface. One such issue is that of horizontal property regimes (or HPRs).
Horizontal Property Regimes: Setting The Scene
In many Nashvillian neighborhoods, you will see single homes being torn down to make room for two separate new homes. Indeed, in many of these cases, the zoning of the properties permits two separate dwellings. You will often see the word “duet” used to describe properties that fall into this category. These sorts of zoning policies were likely intended to allow the emergence of duplexes, but in Nashville we are instead seeing two houses occupying single properties. But is that even okay? How does this work?
In order to build a subdivision (the legal classification for two houses on one property), you will usually need to record a "plat." Plats are essentially just maps of properties, usually drawn as construction-oriented blueprints. In order to record a plat, you have to hire a surveyor, who will then have to petition the local zoning authority to allow the land to be subdivided. Usually, in order to do this, a public hearing has to be held. This is where things get complicated.
At these public hearings, it is often the case that neighbors come out of the woodwork in opposition of your proposed subdivision. They will complain that the presence of an extra house on their street will block their views, ruin their property values, and deal a crushing blow to their overall quality of life. However ludicrous the complaints may or may not be, they will all have to be dealt with before the subdivision can become reality. If the subdivision is approved, it will then have to be approved by various other city departments as well. It’s quite a process.
This is where horizontal property regimes can help.
What Is A Horizontal Property Regime?
A horizontal property regime is, essentially, an effective legal way to bypass these sorts of hindrances. Traditionally, horizontal property regimes only allow for the development of condos, in which units are stacked on top of one another, but Tennessee state law has a slightly different approach. In the state of Tennessee, horizontal property regimes are defined in a way that will, additionally, allow property owners to build two new houses on pieces of land that originally only had one house. However, the legal infrastructure supporting horizontal property regimes can be quite complicated.
How Do Horizontal Property Regimes Work?
If you want to establish a horizontal property regime, your first step is to find a good real estate lawyer. This is something that you absolutely cannot do alone. That lawyer will draft a master deed to establish the HPR.
In Nashville, it has become popular to enact “zero lot line” HPRs. In these cases, the real estate attorney who drafts the master deed must attach to it a certification that it adheres to all relevant Tennessee state statutes. In HPRs, both homeowners will be part of a single tax bill, so it is very important that boundaries are established within the property. To that end, the real estate attorney will also need to attach a diagram of the property that clearly outlines all of the following:
- The parts of the property are shared by the two proposed homes. This would normally include things like sidewalks.
- The elements of the property that are limited common, such as yards.
- The part of the property that are private elements. This would generally only include what on the plot where the structures are built.
Horizontal property regimes usually require the creation of a homeowner’s association, because the residents of the two respective structures will become joint-owners of the same property. The homeowner’s association will define the legal obligations and rights of each party. Additionally, it will give legal recourse to each respective party in the event that the other party fails to live up to their end of the bargain.
If incorporated, the annual state-filing fee in Tennessee will amount to $100. This can often cause problems, as homeowners often forget to pay this fee. If they forget to pay, their homeowners association will, legally, be dissolved. However, if and when the property owners wish to sell their houses, they will have to re-incorporate.
In certain circumstances, it is possible (but almost never advisable) to set up a homeowner’s association without incorporating, but this comes with trade-offs. The advantage of not incorporating is that you will not need to pay the $100 annual filing fee to the Tennessee Secretary of State. The disadvantage of going this route is that your subdivision will have to be set up as a “planned unit development” (PUD) rather than a horizontal property regime. In effect, the difference between PUDs and HPRs is that PUDs introduce additional layers of legal complications that are often confusing down the line. Homeowners who have done this will often run into financial problems with lenders and appraisers due to these complications.
Have Questions About Horizontal Property Regimes In The Nashville Area?
We have the experience and expertise you need in order to make the right decisions.To learn more about HPRs, download our ebook The Tennessee Horizontal Property Regime