66-27-404 - Transfer of special declarant rights. - Tennessee Statutes

66-27-404. Transfer of special declarant rights.

(a)  No special declarant right, created or reserved under part 2, part 3, this part and part 5 of this chapter may be transferred except by an instrument evidencing the transfer recorded in the register's office in every county in which any portion of the condominium is located. The instrument is not effective unless executed by the transferee.

(b)  Upon transfer of any special declarant right, the liability of a transferor declarant is as follows:

     (1)  A transferor is not relieved of any obligation or liability arising before the transfer. Lack of privity does not deprive the association or any unit owner of standing to maintain an action to enforce any obligation of the transferor.

     (2)  If a successor to any special declarant right is an affiliate of a declarant as defined by § 66-27-203, the transferor is jointly and severally liable with the successor for any obligations or liabilities of the successor relating to the condominium.

     (3)  If a transferor retains any special declarant right, but transfers other special declarant rights to a successor who is not an affiliate of the declarant, the transferor is liable for any obligations or liabilities imposed on a declarant by part 2, part 3, this part and part 5 of this chapter or by the declaration relating to the retained special declarant rights and arising after the transfer.

     (4)  A transferor has no liability for any act or omission or any breach of a contractual obligation arising from the exercise of a special declarant right by a successor declarant who is not an affiliate of the transferor.

(c)  Unless otherwise provided in a mortgage instrument or deed of trust, in case of foreclosure of a mortgage, tax sale, judicial sale, sale by a trustee under a deed of trust, or sale under the United States Bankruptcy Code, compiled in 11 U.S.C. § 101 et seq., receivership proceedings, or sale by the association pursuant to its declaration, of any units owned by a declarant or other real estate in a condominium subject to development rights, a person acquiring title to all the real estate being foreclosed or sold succeeds to all special declarant rights related to that real estate held by that declarant, unless the person acquiring title records an instrument within one hundred twenty (120) days following the foreclosure, in the register's office of every county in which any portion of the condominium lies, disclaiming any or all of such rights.

(d)  Upon foreclosure, tax sale, judicial sale, sale by a trustee under a deed of trust, or sale under the United States Bankruptcy Code, compiled in 11 U.S.C. § 101 et seq., receivership proceedings, or sale by the association pursuant to its declaration, of all units and other real estate in a condominium owned by a declarant:

     (1)  The declarant ceases to have any special declarant rights; and

     (2)  All special declarant rights continue in favor of the purchaser unless disclaimed by a recorded instrument within one hundred twenty (120) days following the foreclosure or sale as provided in subsection (c).

(e)  The liabilities and obligations of a person who succeeds to special declarant rights are as follows:

     (1)  A successor to any special declarant right who is an affiliate of a declarant is subject to all obligations and liabilities imposed on the transferor by part 2, part 3, this part and part 5 of this chapter or by the declaration;

     (2)  A successor to any special declarant right, other than a successor described in subdivision (e)(3) or (e)(4), who is not an affiliate of a declarant, is subject to all obligations and liabilities imposed by part 2, part 3, this part and part 5 of this chapter or the declaration:

          (A)  On a declarant who relates to the declarant's exercise or non-exercise of special declarant rights; or

          (B)  On the declarant's transferor, other than:

                (i)  Misrepresentations by any previous declarant;

                (ii)  Warranty obligations on improvements made by any previous declarant, or made before the condominium was created;

                (iii)  Breach of any fiduciary obligation by any previous declarant or the previous declarant's appointees to the board of directors; or

                (iv)  Any liability or obligation imposed on the transferor as a result of the transferor's acts or omissions after the transfer;

     (3)  A successor to only a right reserved in the declaration to maintain models, sales offices, and signs pursuant to § 66-27-315, if the successor is not an affiliate of a declarant, may not exercise any other special declarant right, and is not subject to any liability or obligation as a declarant, except the obligation to provide the information required by part 5 of this chapter, and any liability arising as a result of the obligation; and

     (4)  A successor to all special declarant rights held by the successor's transferor who is not an affiliate of that declarant and who succeeded to those rights pursuant to a deed in lieu of foreclosure or a judgment or instrument conveying title to units under subsection (c), may declare the successor’s intention within one hundred twenty (120) days after acquiring title, in an instrument recorded in every county in which any portion of the condominium lies, to hold those rights solely for transfer to another person. Thereafter, until transferring all special declarant rights to any person acquiring title to any unit owned by the successor, or unit recording an instrument permitting exercise of all those rights, that successor may not exercise any of those rights other than any right held by the successor’s transferor to control the board of directors in accordance with § 66-27-403(d) for the duration of any period of declarant control, and any attempted exercise of those rights is void. So long as a successor declarant has not or may not exercise special declarant rights under this subsection (e), the successor declarant is not subject to any liability or obligation as a declarant other than liability for the successor declarant’s acts and omissions under § 66-27-403(d).

(f)  Nothing in this section subjects any successor to a special declarant right to any claims against or other obligations of a transferor declarant, other than claims and obligations arising under part 2, part 3, this part and part 5 of this chapter or the declaration.

[Acts 2008, ch. 766, § 1.]