Property Management Laws And Regulations In Tennessee

Tennessee regulates third-party property management through several authorities at once, and the rules that matter most to a management company are the ones covering your license, your client trust accounts, and the money you hold on behalf of owners and tenants. This guide covers those rules for professional managers, with the statute or agency regulation behind each one.

Everything below is sourced to Tennessee's own statutes, agency rules, and court materials rather than to secondhand summaries. Specific dollar amounts and deadlines do change; the citations do not, so you can always open the authority and confirm the current text before you act on it.

Licensing Requirements For Property Managers

Tennessee licenses real estate brokers under the Real Estate Broker License Act of 1973, administered by the Tennessee Real Estate Commission. Anyone who falls within the statutory definition of a broker, which covers property-management activities performed for compensation, must be licensed unless a specific exemption applies. An owner exemption covers an owner (including a corporation, LLC, or LLP) only for property that entity itself owns or leases, and only exempts the owner itself, not its agents, officers, or employees; a narrower corporate exemption does not apply if the person doing the work is paid based on the property's value, which rules it out for most fee-based property managers.

• Any person who falls within the statutory definition of "broker" must be licensed by the Tennessee Real Estate Commission unless one of the exemptions applies. (Tenn. Code Ann. §§ 62-13-102(4), 62-13-103, 62-13-104, 62-13-301)
• The "owner exemption" covers an owner of real estate, including a corporation, LLC, or LLP, only with respect to property that entity itself owns or leases, and it exempts only the owner itself, not the owner's agents, officers, or employees. (Tenn. Code Ann. § 62-13-104(a)(1)(A))
• A separate "corporate exemption" lets a corporation act through an authorized officer for transactions incident to managing, leasing, or selling real estate the corporation owns, but this exemption does not apply if the person's compensation is tied to the property's value, which excludes most commission-based property managers. (Tenn. Code Ann. § 62-13-104(a)(1)(F))

Client Trust Account Rules

TREC's Rules of Conduct require every principal broker to keep client trust money in a dedicated escrow or trustee account, separate from firm operating funds, with rent-related property-management trust money held in its own account apart from sales-transaction escrow. Commingling is expressly banned and defined, deposits must be made promptly, and the principal broker is personally responsible for the account at all times, including for money handled by affiliated brokers.

• Each principal broker must maintain a separate escrow or trustee account for any trust money received in a fiduciary capacity. (Tenn. Comp. R. & Regs. 1260-02-.09(2))
• Trust money relating to a property lease, meaning property-management rent money, must be held in one or more separate escrow or trustee accounts apart from sales-transaction escrow accounts. (Tenn. Comp. R. & Regs. 1260-02-.09(12))
• Commingling of funds within firm accounts is expressly prohibited, and is defined as a licensee keeping other people's money in the same bank account as the licensee's own personal or business funds. (Tenn. Comp. R. & Regs. 1260-02-.09(1)(a), (13))
• An affiliated broker must pay over all trust money to the principal broker immediately upon receipt, and the principal broker is responsible at all times for trust money accepted by the firm or its affiliated brokers. (Tenn. Comp. R. & Regs. 1260-02-.09(3), (4))
• Trust money must be deposited promptly upon acceptance of the offer or contract, unless the agreement itself specifies a different deposit deadline. (Tenn. Comp. R. & Regs. 1260-02-.09(11))
• Real estate licensees must keep transaction records, including trust-account records, for three years following consummation of the transaction. (Tenn. Code Ann. § 62-13-312(b)(6); Tenn. Comp. R. & Regs. 1260-02-.40)

Trust account rules are where Tennessee management companies get into trouble fastest, because a shortage is a licensing problem and not just a bookkeeping problem. The Tennessee Real Estate Commission can call for the trust account records as part of an audit, so keeping the trust ledger audit-ready matters more than being able to reconstruct it later. The habits that keep you clean are the boring ones: deposit on time, never let operating money and client money mix, reconcile every account every month, and keep a per, property record you could hand to an auditor without preparing it first. Our guide to preparing for a trust account audit walks through what examiners actually ask for.

Fair Housing Obligations

Housing discrimination in Tennessee is governed by the Tennessee Human Rights Act; the Civil Rights Enforcement Division within the Tennessee Attorney General's Office currently investigates and prosecutes violations. Beyond the federal Fair Housing Act's classes, Tennessee law separately protects against discrimination based on creed and age.

• The Tennessee Human Rights Act's housing provisions bar discrimination based on race, creed, color, religion, sex, age, national origin, disability, and familial status. (Tenn. Code Ann. § 4-21-601 et seq.)
• Creed and age are protected under Tennessee's state housing-discrimination law beyond the classes covered by the federal Fair Housing Act. (Tenn. Code Ann. § 4-21-601 et seq.)
• A landlord's obligations regarding assistance, service, or emotional-support animals in rental housing are addressed separately in the landlord-tenant code. (Tenn. Code Ann. § 66-28-406)

Recent Changes Worth Tracking

These are the Tennessee changes most likely to affect a management company's procedures. Confirm the effective date against the source below before you update a lease template or a policy.

• Effective September 23, 2025: TREC's Rules of Conduct (Chapter 1260-02) were amended, including rules on supervision of affiliated brokers, termination of affiliation, closing statements, civil penalties, gifts and prizes, and death or extended absence of the principal broker; several other rules were repealed in the same revision. (Tenn. Comp. R. & Regs. ch. 1260-02, filed June 25, 2025)

Staying Compliant Without Guessing

Most Tennessee compliance failures are not decisions, they are drift: a deposit that sat too long, a reconciliation that got skipped in a busy month, a lease template that never got updated after a statute changed. Build the calendar first. Monthly trust reconciliations, an annual review of your lease and disclosure packet against current statutes, and a documented process for deposits and refunds cover the large majority of what an examiner will ask about.

This guide is a starting point for professional managers, not legal advice. For a specific dispute, a novel fact pattern, or anything with real money at stake, work with a Tennessee attorney, and confirm the current text of any statute cited above with the Tennessee Real Estate Commission or the Tennessee legislature.

Sources

Every fact above is drawn from one of the official sources below.

• Tenn. Code Ann. §§ 62-13-102(4), 62-13-103, 62-13-104, 62-13-301, Tennessee Attorney General, Opinion No. 19-15 (Sept. 16, 2019)
• Tenn. Comp. R. & Regs. 1260-02-.09(2), Tennessee Secretary of State, Rules of the Tennessee Real Estate Commission, Chapter 1260-02
• Tenn. Code Ann. § 4-21-601 et seq., Tennessee Attorney General, Civil Rights Enforcement Division