This is the third in a series of blog posts on Tennessee’s Real Estate Infrastructure Development Act one year after enactment. In our first post, we discussed the importance of educating municipal decision-makers. In our second post, we addressed the questions municipalities most frequently ask about Infrastructure Districts. Today, we turn to a topic that often receives far less attention than it deserves: disclosure of the assessment to homebuyers.

When municipalities evaluate a proposed Infrastructure District, one concern almost always emerges during the approval process:

“How will future homebuyers know they are purchasing property subject to an additional assessment?”

It is a fair question. After all, one of the foundational principles of REIDA is that infrastructure costs are borne by the property owners who benefit from the improvements. If that assessment will continue for years after a home is sold, municipalities want confidence that purchasers are not surprised after closing.

Fortunately, the answer is straightforward—but it requires planning long before the first home is sold.

Tennessee’s Disclosure Framework Today

Unlike some states with mature assessment district programs, Tennessee currently does not have a statutory disclosure form specifically addressing Infrastructure District assessments.

There is no Tennessee equivalent of the detailed assessment district disclosure packages commonly used in states such as Texas, Florida, or Colorado. The REIDA statute establishes the mechanism for creating Infrastructure Districts and levying assessments, but it does not presently prescribe a mandatory disclosure form that must be delivered to prospective purchasers.

That statutory silence does not mean disclosure is unimportant. In fact, it often makes disclosure more important.

In our experience, municipalities considering a new Infrastructure District frequently ask how purchasers will be informed about the assessment obligation. City councils and BOMA members understandably want assurance that homeowners fully appreciate the nature of the assessment and the role it plays in financing the infrastructure serving their community.

The Best Time to Address Disclosure is Before the First Sale

Developers often focus on the district formation process, the service plan, assessment methodology, and bond financing. Those are all critical issues.

But a developer should also be asking a simpler question:

“What will the purchaser sign?”

The answer should be clear, direct, and incorporated as an exhibit into the project’s purchase and sale agreement from the outset.

Waiting until homes are under contract to address disclosure creates unnecessary risk. By contrast, incorporating robust assessment disclosures into the purchase and sale agreement provides certainty for everyone involved:

• The purchaser receives clear notice.
• The municipality gains confidence that buyers are informed.
• The developer reduces the risk of future disputes.
• Title companies and lenders have a consistent framework to follow.

Most importantly, the disclosure becomes part of the contractual relationship between the developer and the purchaser.

What Should the Disclosure Cover?

Every project is different, and developers should work with counsel to develop disclosures tailored to their district. At a minimum, however, purchasers should understand:

• That the property is located within an Infrastructure District.
• That the property is subject to an additional assessment.
• That the assessment is separate from ordinary property taxes.
• The expected duration of the assessment.
• How the assessment is collected.
• That the assessment secures financing used to construct public infrastructure benefiting the district.
• Where purchasers can obtain additional information about the district and its financing.

None of these concepts are particularly complicated. The challenge is making sure they are communicated consistently and clearly. In a pinch, look to the statutorily required disclosures from other states as a starting point.

Transparency Builds Trust

One of the themes that has emerged repeatedly during REIDA’s first year is that transparency creates momentum.

Municipalities become more comfortable when they understand how a district works.

Developers gain support when they explain the economics of the project clearly.

And purchasers are far more likely to embrace an assessment when they understand exactly what they are paying for and why it exists.

The most successful Infrastructure Districts will not be the ones with the most complicated financing structures. They will be the ones that create confidence among municipalities, residents, lenders, and developers alike.

Strong disclosure provisions in a purchase and sale agreement are one of the simplest and most effective ways to build that confidence.