More than 40 Tennessee tiny home owners seek $5m in HOA lawsuit

More than 40 homeowners in three tiny-home communities in Tennessee have initiated a lawsuit against developer Claude 'Chip' Hayes III, demanding $5 million in damages and control over homeowners association (HOA) funds and records. The case involves three developments, Retreat at Deer Lick Falls, Retreat at Sunset Bluff, and Water’s Edge, where residents accuse Hayes of maintaining undue influence over HOAs long after the period permitted by the communities’ governing documents. The legal battle began more than two years ago when residents of the Retreat at Deer Lick Falls filed a lawsuit against Hayes, alleging he had not transferred control of the HOA as required and had mismanaged its funds. The dispute has since expanded to include homeowners at Water’s Edge and Sunset Bluff. According to the communities’ covenants, conditions, and restrictions, Hayes was granted temporary control of the HOAs during the construction phase. This control included oversight of builders, common areas, amenities, and other association matters. However, the documents stipulated that Hayes must relinquish control either five years after the first lot was sold to a non-developer or once 75% of the lots had been sold to non-developers, whichever occurred first. Residents at Deer Lick Falls argue that Hayes should have stepped down from control in 2021. They contend that he extended his authority by expanding the Deer Lick community and using that as justification to retain control. In response, homeowners sued Hayes in 2024, seeking to reclaim control of the HOA. The conflict intensified when residents at Water’s Edge joined the legal challenge, citing unpaid property taxes on common areas for over two years and allegations that the developer-controlled HOA had failed to maintain accurate financial records. They further claimed that the HOA engaged in transactions that favored the developer at the expense of homeowners. In 2026, the dispute reached a new level at Sunset Bluff. Hayes attempted to obtain a temporary restraining order after learning that residents intended to hold a meeting to vote on taking control of the HOA. Despite this, residents voted overwhelmingly to remove Hayes from leadership and elected their own board of directors. The newly formed board implemented changes, including allowing homeowners to select their own property managers instead of relying on the developer’s rental management company. Following these developments, residents at Sunset Bluff filed a counterclaim against Hayes and his affiliated companies. In July, 40 residents joined a lawsuit accusing Hayes of self-dealing, violating his fiduciary duties, overcharging for services, and illegally retaining control of the community’s finances. The group is seeking $5 million in damages. A central issue in the lawsuit revolves around how HOA funds were spent. Plaintiffs allege that nearly 80% of the HOA budget at Sunset Bluff was allocated to lawn care services. They further claim that these contracts were awarded to another company owned by Hayes. Additionally, the lawsuit asserts that HOA funds from Sunset Bluff were improperly used, raising serious concerns about financial transparency and accountability. The ongoing legal proceedings highlight deep-seated issues within the management of these HOAs, with homeowners expressing frustration over perceived misuse of funds and lack of democratic governance. As the case unfolds, the outcome will likely set a precedent for similar disputes involving developers and HOAs in residential communities. The situation underscores the importance of clear contractual terms and transparent financial practices in such arrangements. The next steps in the litigation remain uncertain, but the stakes for both sides continue to rise.