# Tennessee HPRs: A Practical Guide for Buyers, Realtors, and Lenders ## The Bottom Line Up Front **Buyers:** You're buying a house. It just happens to have a formal agreement with your neighbor about some shared stuff. That's it. **Realtors:** You're explaining homeownership in great locations at accessible prices. The HPR structure is just what made it possible. **Lenders:** You're underwriting a PUD. Don't overthink it. Same guidelines, same profitability, same secondary market execution. ## Quick Definitions **HPR (Horizontal Property Regime):** A legal way to divide one piece of property into multiple individually-owned homes that sit side-by-side. Think townhomes or twin homes, not condos. Tennessee law treats these as Planned Unit Developments (PUDs). **Master Deed:** The document that creates the HPR. It's like a rulebook that says who owns what and how neighbors share common areas like driveways. Once recorded at the courthouse, it legally transforms one property into multiple ones. Now let's dig into the details for each of you... ## For the Buyer: "What am I actually buying?" Let me make this simple: You're buying a house. The HPR part is just the legal structure that made it possible to build your house where it sits. Think of it like this—imagine a parking garage where you actually buy and own your specific parking space forever. You own Space #42 completely. Your neighbor owns Space #43 completely. Neither of you owns any part of the other's space. But you both contribute to maintaining the garage entrance and the lightbulbs in the stairwell. That's an HPR. You own your house outright—nobody else has any claim to it. Your neighbor owns their house outright. The only thing you "share" is the responsibility for maintaining maybe a driveway or a small strip of common grass—just like those parking space owners share the cost of keeping the garage entrance working. Here's what's critical to understand: You do NOT own anything jointly with your neighbor. There's no "we" ownership like when married couples buy a house together. Your "Private Elements" (your house and usually the land under it) are yours exclusively. In practical terms, it operates exactly like any home you own—you decide when to mow, what color to paint your bedroom, and whether to get a dog. **IMPORTANT: The board is not some far-away group of people who sit in a conference room—they ARE the owners of Unit A and Unit B. That's you and your neighbor!** **Here's what you own:** - Your house (100% yours) - Your lot/land (either 100% yours OR exclusive use rights—check your Master Deed) - Your yard, patio, deck (100% yours to use) - A 50% stake in the HOA that owns any shared stuff **Real-world example: The Tree Decision** Let's say there's a dying tree on the common element portion of the property between your units. Here's what happens: - You and your neighbor (the entire "board") must both agree it needs to come down - You split the removal cost 50/50 - If you disagree? The tree stays. No majority vote can override you—it takes both of you - This is why choosing good neighbors matters in a 2-unit HPR! **How do you know what common elements are?** Look at Exhibit B of the Master Deed—it's the plat (map) that shows exactly what areas are common vs. private. **Insurance reality check:** - You need standard homeowners insurance (HO3 policy)—NOT condo insurance (HO6) - Your policy covers your entire structure, not just "walls-in" - Each owner has their own separate policy—no shared master policy - Tennessee homeowners pay around $2,500-$2,850 annually for insurance - The HPR/HOA might carry liability insurance for common areas (ask to see the policy) **The neighbor factor:** With only 2 units, your "HOA" is just you and your neighbor. No board meetings, no busybody committees. Just two people agreeing to keep the place nice and split the cost when the shared driveway needs repaving. **Money talk:** - Usually NO monthly HOA fees - Maybe $100/year for state filing (many don't even collect it) - Shared repairs on common elements split 50/50 (like driveways or tree removal—NOT your kitchen remodel) - Everything inside your unit and on your private property is 100% your responsibility **Why choose an HPR?** Location, location, location. These homes pop up in neighborhoods where traditional houses cost twice as much. You're trading a little bit of "I'm the king of my castle" for "I can walk to work and still afford it." ## For the Realtor: "How do I explain this to my client?" Here's your script: "This is a house with a built-in good neighbor agreement." Now, legally speaking, the specifics depend on how the Master Deed is written. Some create true separate ownership of the land, others create shared ownership with exclusive use rights. But here's the thing—for your client's daily life, it doesn't matter. They live in it like they own it, because they do. **Key talking points:** - "It's just a house with a built-in good neighbor agreement" - "Think of it like owning half of a parking garage—you own your parking space completely, but share maintenance of the entrance" - "The board isn't some mysterious group—it's literally just you and your neighbor making decisions together" - "The HPR structure made homes affordable in expensive neighborhoods by avoiding subdivision costs" - "You'll get standard homeowners insurance, just like any house—not condo insurance" **Use the tree example:** "If a tree on shared property needs to come down, you and your neighbor decide together and split the cost. It's that simple. No bureaucracy, no committees—just two neighbors making decisions." **Address the concerns upfront:** - "No, it's not a condo"—you own actual land - "No, it's not a duplex"—you own your side completely - "Yes, you can get a regular mortgage" - "Yes, you build equity just like any house" - "The HOA board? That's just you and your neighbor" **What to show them:** 1. The Master Deed (look for "Private Elements"—that's what they have exclusive use of) 2. The plat (point out their boundaries) 3. Any shared areas (usually minimal) 4. The HOA docs (emphasize how simple they are) **Documentation review:** - HPRs often appear on the tax card as "condo"—but don't trust the tax card! - Tax assessors frequently mislabel HPRs as condos (they're not) - Some show as PUD, some as single-family, some as condo (it's a mess) - The Master Deed is your source of truth, not the tax card - Look for "Private Elements" in the Master Deed (that's what your client owns/uses exclusively) - Check if they own the land outright or have exclusive use rights - The HOA exists mainly for legal structure - That $100 state filing isn't always collected or current **How to explain insurance:** "You'll need regular homeowners insurance, not condo insurance. Even though the tax card might say 'condo,' this is a house with land. You insure the whole structure, just like any house. The premium will be similar to other homes in the area—around $2,500-$2,850 per year in Tennessee. The HOA might have a small liability policy for common areas, but each owner carries their own full homeowners policy." ## For the Lender: "How do I underwrite this?" Short answer: Like any PUD. Tennessee law says so. Per Tennessee Code Annotated § 66-27-103(b), once an attorney certifies that all requirements have been met, "a planned unit development shall be deemed to have been properly organized and constituted under Tennessee law." That's it—by statute, your HPR is a PUD. **Your checklist:** □ Select "PUD" in your system (never "Condo") □ Standard PUD guidelines apply □ Regular mortgage products work (Conv/FHA/VA/USDA) □ Standard homeowner's insurance (not walls-in) □ No condo questionnaire needed □ No reserve study required **Quick verification:** 1. HOA registered with Tennessee? (Usually yes, but not always current) 2. Master Deed recorded? (Yes, or title wouldn't insure) 3. Insurance adequate? (Each owner has their own policy) 4. Any litigation? (Rare with only 2 units) **Common questions from processors:** *"The title says HPR—is this different?"* No. HPR = type of PUD in Tennessee. Process as PUD. *"Do I need HOA financials?"* Not usually. With 2 units, they just split bills as they come. The "board" is just the two neighbors. *"What about reserves?"* Two-unit HPRs rarely have reserves. Owners handle repairs as needed. **Insurance verification:** - Confirm each unit has standard homeowners (HO3) insurance - No master policy or "walls-in" coverage—each owner insures their entire structure - Check if HOA carries liability insurance for common areas - Standard coverage requirements apply (dwelling, liability, etc.) - Tennessee average: $2,500-$2,850 annually - Process exactly like single-family home insurance **Appraisal notes:** - Comp as PUD, not condo - Plenty of HPR sales in most Tennessee markets - Subject to same market conditions as other PUDs **Why lenders like HPRs:** - Simple structure - Clear ownership - Good title insurance - Strong market acceptance - Standard processing - No exotic guidelines **Red flags (very rare):** - Unrecorded Master Deed - No HOA registration - Weird insurance setup - More than 4 units (gets more complex) Remember: Whether the legal structure creates divided ownership or shared ownership with exclusive rights doesn't change the practical reality. People live in these homes, pay their mortgages, build equity, and enjoy homeownership just like any other house. The HPR designation is just Tennessee's way of fitting nice homes into good neighborhoods. Don't let the terminology complicate what's actually a simple transaction. Questions? Vanderpool Law has closed thousands of these and drafted many Master Deed documents. We can answer almost any question you have about HPRs. --- **Important Disclaimer:** What I'm describing here applies to the majority of HPR properties, but characteristics can vary significantly based on how the Master Deed was drafted and the role defined for each property owner. Every HPR is unique. If you have questions about a specific property, you should contact Vanderpool Law or hire an attorney for a legal opinion. This is just a generic informational guide and may not reflect your specific situation at all. When in doubt, get professional legal advice.