The 2017 session of the 110th Tennessee General Assembly adjourned last week in Nashville. As usual, much legislation and discussion touched on real estate. Great news: Nothing detrimental to our industry passed or was signed into law. Here, from Russ Farrar of Farrar and Bates, is a summary of key issues. We will have more to share on these and other developments a bit later.
1. We passed the statute of limitations for our appraisal members. The law will now require any court action to be brought within one year after discovering an issue with an appraisal, and no later than five years after the appraisal. Thus, the effective limitation is five years. Further, a complaint can only be brought against an appraiser within three years of the alleged wrongdoing. This is significant because in the past, there was no statute of limitations for appraisers—they could be sued 20 or 30 years later.
2. We successfully negotiated a satisfactory result on a bill that would have allowed LLCs to sell their own properties. (Read our article featuring Rep. Mark Pody HERE.) If LLCs could do this, everyone would be an LLC, costing our members thousands of dollars in sales for LLCs
3. Short-term rentals were debated the entire session, with competing bills and ~15 amendments. In one scenario, a taxing structure would have required businesses such as AirBNB and HomeAway to collect taxes, receive a percentage, and pay the taxes to the Dept. of Revenue, which would then remit it to the cities. After word got out that Nashville was discussing banning short-term rentals, amendments were filed to prohibit municipalities or local governments from doing so. On the last day of session, that bill died in the Finance Committee. Bottom line: The governance of short-term rentals remains the same, and local governments still have complete control over regulation and zoning.
4. The effort to phase out the Professional Privilege Tax is one we have worked hard to support. Several bills passed through committees easily, until each got to the Finance Committee, where they are parked until at least next year. We will work with the sponsors to see what we can do to get these bills moved next year.
5. The Design Elements bill would have prohibited a local government from not approving new construction, regardless of materials used. So, in a subdivision of all-brick homes, the legislation would have prohibited the city from requiring new homes to be all brick, and materials such as vinyl and wood could have been used. This bill died on the Senate floor.
6. Although not strictly a real estate bill, we watched with great interest the proposed de-annexation legislation. An amended form of the bill passed the Senate. It did not move in the House, but it is still alive and could move next year. The bill would permit people living in an area annexed after 1998 to petition for a referendum on whether or not they could de-annex. In the past, the legislation would have only allowed those living in the area to vote in the referendum. As amended, the bill would allow every eligible voter in the entire municipality to vote. The result of the vote would end the matter. If the vote to de-annex was successful, the city would have a period of time to provide the services that the annexed area is being taxed for, and the de-annexation would not take place. If the city failed to provide those services, the area would be eligible to be de-annexed.
7. The “Donut Hole” annexation legislation that passed this year could affect our members regarding non-contiguous annexation. Until now, the only areas that could be annexed were those that touched another area of the city. This bill will allow an area that belongs to the county to sit between an area annexed by a city. Thus, there could be a city limit and another area belonging to the city with three miles of county land in between them. This will be particularly helpful in the commercial arena when offices and industries want city services. This is a big change from current law.