Tiny-home owners sue developer for $5 million over alleged ‘zombie HOA’ mismanagement

More than forty residents of three Tennessee tiny-home developments have taken legal action against developer Claude ‘Chip’ Hayes III, seeking $5 million in damages and control of HOA finances. The homeowners argue that Hayes continued to run the homeowners associations after the governing documents required him to relinquish authority, a situation they label a “zombie HOA.” Their complaint highlights that almost 80% of the Sunset Bluff HOA budget was allocated to lawn-care contracts awarded to a firm owned by Hayes, and that funds were allegedly used to finance a separate phase of the Deer Lick Falls project.

Additional grievances include two-year unpaid property taxes on common areas, lack of transparent financial records, and numerous promised amenities—such as a salt-water pool and waterfront access—that remain unfinished. Residents at Sunset Bluff voted to replace Hayes’s board, enabling homeowners to choose their own property managers. Hayes has largely remained silent, attributing delays to legal expenses, while continuing to pursue new projects like a 17-acre RV park at the Retreat at Whiskey Creek.