Can the Tennessee Real Estate Commission require vacation rental management companies to post a $25,000 surety bond on top of the escrow requirements the Legislature already imposed?
Apply this to your situation
This page answers the general question as of 2012. Ezel answers yours: what it means for your facts, under current Tennessee law, with citations.
Subject
Opinion No. 12-24, Real Estate Commission Rulemaking Authority for Vacation Lodging Services, February 28, 2012
Plain-English summary
Chairman Northern asked the AG whether the Tennessee Real Estate Commission could require all vacation lodging service firms (and each of their designated agents) to post a one-year $25,000 surety bond. The Commission's idea was a consumer-protection measure aimed at long-distance vacation rental operators who collected credit-card deposits but were hard to track down if something went wrong.
The AG said no, walking through Tennessee's strict reading of administrative agency rulemaking authority.
The legal framework. Administrative agencies in Tennessee can only do what the Legislature has authorized either expressly or by necessary implication. Sanifill (Tenn. 1995); Tennessee Cable Television Ass'n (Tenn. Ct. App. 1992). Agency rules cannot conflict with the enabling statute. Holiday Inns v. Olsen (Tenn. 1985). And an agency cannot promulgate a rule that thwarts the legislative scheme. Tennessee Dep't of Mental Health v. Allison (Tenn. Ct. App. 1992).
The Real Estate Commission's authority. The Commission has broad general rulemaking power under Tenn. Code Ann. § 62-13-203(a): it can adopt bylaws, rules, and regulations "reasonably necessary" to carry out its statutory duties. That phrase covers a lot. But it does not cover rules that substitute for or expand on a specific legislative scheme.
The Legislature's existing scheme for vacation lodging financial accountability. Tenn. Code Ann. § 62-13-104(b)(3) prescribes three specific methods. The licensee must:
- Keep an escrow or trustee account for funds related to vacation lodging (§ 62-13-104(b)(3)(C)-(D)(i)); OR
- Submit an irrevocable letter of credit, approved by the Commission, in lieu of the escrow account (§ 62-13-104(b)(3)(D)(ii)); OR
- Provide "equivalent security" approved by the Commission, in an amount equal to the licensee's average advanced monthly deposits or a lesser amount the Commission reasonably determines (§ 62-13-104(b)(3)(D)(ii)).
The Commission can accept surety bonds within option 3 as "equivalent security." But the bond's amount has to be tied to average advanced monthly deposits, not a flat $25,000.
Why the proposed rule failed. A blanket $25,000 surety bond for every firm and every agent would (a) be in addition to, not in lieu of, the escrow option, (b) impose a flat amount untied to the firm's actual advanced-deposit volume, and (c) functionally replace the legislature's three-option scheme with the Commission's preferred fourth option. That is a substitution of agency preference for legislative design, which Tennessee law does not allow.
The escape hatch the Commission could use. Surety bonds can come into the regulatory mix through § 62-13-104(b)(3)(D)(ii)'s "equivalent security" path, but the bond must be tied to the firm's average advanced monthly deposits or a Commission-determined lesser amount. The Commission cannot make the bond mandatory; the licensee chooses among the three statutory options.
Currency note
This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
The Tennessee Real Estate Broker License Act has been amended multiple times since 2012. The rise of short-term rental platforms (Airbnb, VRBO) and subsequent statutory and regulatory responses may have substantially reshaped vacation lodging service regulation. Anyone working in this area today should pull current law and the Commission's current rules.
Background and statutory framework
The Tennessee Real Estate Broker License Act of 1973. Tenn. Code Ann. § 62-13-101; the Commission's authority is codified at §§ 62-13-201 to -209. Created the Real Estate Commission and gave it authority to regulate real estate brokerage and vacation lodging services. The Act's protective purpose is to "protect the public from irresponsible or unscrupulous persons dealing in real estate." Business Brokerage Centre (Tenn. 1994).
Agency rulemaking limits.
- Express or necessary implication. Sanifill (Tenn. 1995).
- Cannot conflict with the enabling statute. Holiday Inns (Tenn. 1985).
- Cannot supplant a legislative scheme. Tennessee Dep't of Mental Health v. Allison (Tenn. Ct. App. 1992).
Three-option financial accountability scheme. Tenn. Code Ann. § 62-13-104(b)(3)(C)-(D) gives vacation lodging service licensees three ways to demonstrate financial responsibility: escrow account, irrevocable letter of credit, or equivalent security (which can include a surety bond, in an amount tied to advanced monthly deposits).
Other Tennessee agencies that do require surety bonds. The AG noted that other agencies validly require surety bonds, but in each case (a) the enabling statute expressly authorizes the bond, or (b) no preexisting legislative scheme already prescribed financial accountability methods. Examples in the opinion: Athletic Commission (Tenn. Comp. R. & Regs. 0145-01-.03(8), keyed to Tenn. Code Ann. § 68-115-204(f)); Auctioneer Commission (Tenn. Comp. R. & Regs. 0160-01-.25(2)(c), keyed to Tenn. Code Ann. § 62-19-128(b)); Division of Commercial Vehicle Enforcement (keyed to Tenn. Code Ann. § 65-15-110(a)).
Common questions
Q: I run a vacation rental management firm in Tennessee. Do I have to post a $25,000 bond?
A: Per this opinion, no, not as a blanket Commission requirement. The Legislature gives you three options: escrow account, letter of credit, or equivalent security (which can include a surety bond, in an amount tied to your firm's average advanced monthly deposits). Current statutes and rules may differ; check today's law.
Q: Can the Commission still require any kind of bond from me?
A: The Commission can accept a surety bond as "equivalent security" under § 62-13-104(b)(3)(D)(ii), if you elect that option instead of escrow or a letter of credit. The amount is keyed to your average advanced monthly deposits or a lesser amount the Commission determines.
Q: Why does the Commission's general rulemaking authority not allow the bond rule?
A: Because Tennessee courts read agency rulemaking authority against the backdrop of any specific legislative scheme. When the Legislature has already designed a financial-accountability mechanism, the agency cannot replace or supplement it through a "necessary and proper" rule. The agency must work within the scheme the Legislature designed.
Q: Could the Legislature authorize the bond requirement?
A: Yes. The Legislature can amend Tenn. Code Ann. § 62-13-104 to require a bond, or to give the Commission broader power. The constraint the AG identified is statutory, not constitutional.
Q: Are my customer deposits protected without the bond?
A: They are intended to be, through the escrow/letter-of-credit/equivalent-security regime. The protection is only as strong as the Commission's enforcement of those options. Practical consumer remedies vary; consult counsel for specific disputes.
Citations and references
Statutes:
- Tenn. Code Ann. § 62-13-101 (Tennessee Real Estate Broker License Act of 1973)
- Tenn. Code Ann. §§ 62-13-201 to -209
- Tenn. Code Ann. § 62-13-104(b)(3)(A), (C), (D)(i), (D)(ii)
- Tenn. Code Ann. § 62-13-203(a)
Cases:
- Business Brokerage Centre v. Dixon, 874 S.W.2d 1 (Tenn. 1994)
- Sanifill of Tennessee, Inc. v. Tennessee Solid Waste Disposal Control Bd., 907 S.W.2d 807 (Tenn. 1995)
- Holiday Inns, Inc. v. Olsen, 692 S.W.2d 850 (Tenn. 1985)
- Tennessee Cable Television Ass'n v. Public Service Commission, 844 S.W.2d 151 (Tenn. Ct. App. 1992)
- Brown v. Tennessee Title Loans, Inc., 328 S.W.3d 850 (Tenn. 2010)
- Tennessee Department of Mental Health v. Allison, 833 S.W.2d 82 (Tenn. Ct. App. 1992)
Source
- Landing page: https://www.tn.gov/attorneygeneral/opinions.html
- Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2012/op12-024.pdf
Original opinion text
Real Estate Commission Rulemaking Authority for Vacation Lodging Services
QUESTIONS
Lbl1. Does the Tennessee Real Estate Commission have the authority to implement rules
requiring vacation lodging service licensees to acquire and maintain a surety bond?
Lbl2. If the answer to the above question is yes, can the Commission implement rules
requiring a separate surety bond for each vacation lodging service firm and its designated agent?
OPINIONS
Lbl1. No. While the question is not without doubt, a court would likely find that the
Commission cannot require licensees to post and maintain a surety bond because this would
supplant the Legislature's existing financial viability measures expressly set forth in the statutes
governing vacation lodging services.
- This question is pretermitted by the answer to Question 1.
ANALYSIS
The question posed is whether the Tennessee Real Estate Commission may promulgate
rules to require vacation lodging service providers to obtain a surety bond pursuant to the
Commission's statutory authority to license and regulate the business of providing management,
marketing, booking, and rental services related to vacation lodging in Tennessee.
The statutory authority creating the Tennessee Real Estate Commission and granting it
the authority to promulgate rules and regulations governing the real estate industry in general and
the vacation lodging services industry specifically is codified at Tenn. Code Ann. §§ 62-13-201
to -209. The Real Estate Commission "shall have the power to do all things necessary and
proper for carrying out this chapter not inconsistent with the laws of this state," including
promulgating and adopting "bylaws, rules and regulations that are reasonably necessary for such
purposes." Tenn. Code Ann. § 62-13-203(a). The Tennessee Real Estate Broker License Act of
1973, 1 which created the Commission, "is designed to protect the public from irresponsible or
1 Tenn. Code Ann. § 62-13-101 states: "This chapter shall be known and may be cited as the Tennessee Real Estate
Broker License Act of 1973."
Page 2
unscrupulous persons dealing in real estate.” Business Brokerage Centre v. Dixon, 874 S.W.2d
1, 3 (Tenn. 1994). Specific to the vacation lodging services industry, the Commission is
empowered to grant licenses to only those vacation lodging service firms that “bear a good
reputation for honesty, trustworthiness, integrity and competence to transact the business of
providing vacation lodging services in a manner to safeguard the interest of the public.” Tenn.
Code Ann. § 62-13-104(b)(3)(A) (emphasis added).
While regulatory agencies, such as the Real Estate Commission, have historically been
granted broad discretion to promulgate rules, such discretion must necessarily remain consistent
with the governing statutory authority. It is a well established legal principle that administrative
agencies must have statutory authority for the rules they promulgate. Tennessee Cable
Television Ass’n v. Public Service Commission, 844 S.W.2d 151, 161 (Tenn. Ct. App. 1992);
Knox County ex rel. Kessel v. Knox County Personnel Bd., 753 S.W.2d 357, 360 (Tenn. Ct. App.
1988). Agency rules must be grounded in either an express statutory grant of authority or must
arise by necessary implication from such a grant. Sanifill of Tennessee, Inc. v. Tennessee Solid
Waste Disposal Control Bd., 907 S.W.2d 807, 810 (Tenn. 1995). Accordingly, any analysis
pertaining to whether a suggested rule is within the authority of the regulating agency begins
with an examination of the relevant enabling statutes and the rule sought to be promulgated.
The rule at issue would require all vacation lodging services firms to post a one-year
surety bond in the amount of $25,000 for each office location and for each designated agent.
The stated purpose of this rule is to protect the public from irresponsible and unscrupulous
vacation lodging service providers. The opinion request observes that many vacation lodging
service providers are often located out of state or in parts of Tennessee that are a considerable
distance from the actual lodging location. Modern electronic commerce makes it relatively easy
for these merchants to obtain credit card or other electronic payments via telephone or on-line
transactions. Thus, traditional fixed brick-and-mortar locations are no longer essential in
operating such businesses, and therefore the Commission has experienced difficulty in tracking
down and regulating irresponsible businesses. The Commission has stated that unscrupulous
vacation lodging providers may take advantage of consumers because of the long-distance nature
of the transactions. The suggested rule requiring substantial surety bonds would therefore ensure
that vacation lodging service firms and their designated agents adhere to Tennessee law
governing the industry and provide a ready means of recovery for their customers.
The enabling statutes empowering the Commission to regulate the vacation lodging
service industry are silent as to surety bonds; the statutes neither expressly provide for such
bonds nor prohibit them. However, other financial accountability measures for vacation lodging
service providers are established at Tenn. Code Ann. § 62-13-104(b)(3)(C). Each vacation
lodging service is required to keep an escrow or trustee account of funds “deposited with the firm
and relating to vacation lodging services” and to maintain specific records regarding this
account. No funds “shall be distributed from the escrow/trustee account until the customer‟s stay
is complete, unless the distribution is in accordance with terms disclosed to the renter in
writing.” Tenn. Code Ann. § 62-13-104(b)(3)(D)(i). A vacation lodging service provider is
exempt from the escrow account requirements if the provider submits an irrevocable letter of
credit approved by the Commission. Tenn. Code Ann. § 62-13-104(b)(3)(D)(ii). In lieu of the
irrevocable letter of credit, the Commission is authorized to accept equivalent security. Tenn.
unscrupulous persons dealing in real estate." Business Brokerage Centre v. Dixon, 874 S.W.2d
1, 3 (Tenn. 1994). Specific to the vacation lodging services industry, the Commission is
empowered to grant licenses to only those vacation lodging service firms that "bear a good
reputation for honesty, trustworthiness, integrity and competence to transact the business of
providing vacation lodging services in a manner to safeguard the interest of the public." Tenn.
While regulatory agencies, such as the Real Estate Commission, have historically been
granted broad discretion to promulgate rules, such discretion must necessarily remain consistent
with the governing statutory authority. It is a well established legal principle that administrative
agencies must have statutory authority for the rules they promulgate. Tennessee Cable
Television Ass'n v. Public Service Commission, 844 S.W.2d 151, 161 (Tenn. Ct. App. 1992);
Knox County ex rel. Kessel v. Knox County Personnel Bd., 753 S.W.2d 357, 360 (Tenn. Ct. App.
1988). Agency rules must be grounded in either an express statutory grant of authority or must
arise by necessary implication from such a grant. Sanifill of Tennessee, Inc. v. Tennessee Solid
Waste Disposal Control Bd., 907 S.W.2d 807, 810 (Tenn. 1995). Accordingly, any analysis
pertaining to whether a suggested rule is within the authority of the regulating agency begins
with an examination of the relevant enabling statutes and the rule sought to be promulgated.
The rule at issue would require all vacation lodging services firms to post a one-year
surety bond in the amount of $25,000 for each office location and for each designated agent.
The stated purpose of this rule is to protect the public from irresponsible and unscrupulous
vacation lodging service providers. The opinion request observes that many vacation lodging
service providers are often located out of state or in parts of Tennessee that are a considerable
distance from the actual lodging location. Modern electronic commerce makes it relatively easy
for these merchants to obtain credit card or other electronic payments via telephone or on-line
transactions. Thus, traditional fixed brick-and-mortar locations are no longer essential in
operating such businesses, and therefore the Commission has experienced difficulty in tracking
down and regulating irresponsible businesses. The Commission has stated that unscrupulous
vacation lodging providers may take advantage of consumers because of the long-distance nature
of the transactions. The suggested rule requiring substantial surety bonds would therefore ensure
that vacation lodging service firms and their designated agents adhere to Tennessee law
governing the industry and provide a ready means of recovery for their customers.
The enabling statutes empowering the Commission to regulate the vacation lodging
service industry are silent as to surety bonds; the statutes neither expressly provide for such
bonds nor prohibit them. However, other financial accountability measures for vacation lodging
service providers are established at Tenn. Code Ann. § 62-13-104(b)(3)(C). Each vacation
lodging service is required to keep an escrow or trustee account of funds "deposited with the firm
and relating to vacation lodging services" and to maintain specific records regarding this
account. No funds "shall be distributed from the escrow/trustee account until the customer's stay
is complete, unless the distribution is in accordance with terms disclosed to the renter in
writing." Tenn. Code Ann. § 62-13-104(b)(3)(D)(i). A vacation lodging service provider is
exempt from the escrow account requirements if the provider submits an irrevocable letter of
credit approved by the Commission. Tenn. Code Ann. § 62-13-104(b)(3)(D)(ii). In lieu of the
irrevocable letter of credit, the Commission is authorized to accept equivalent security. Tenn.
Page 3
Code Ann. § 62-13-104(b)(3)(D)(ii). Either the irrevocable letter of credit or equivalent security
“shall be” in an amount equivalent to the licensees‟ average advanced monthly deposits or “other
lesser amount reasonably determined by the commission to protect the renters and owners.”
Tenn. Code Ann. § 62-13-104(b)(3)(D)(ii). Thus, the Legislature has expressly stated that
vacation lodging service providers may meet the State of Tennessee‟s financial accountability
mandates by electing to comply with one of three options: (1) maintaining an escrow account, (2)
posting an irrevocable letter of credit, or (3) providing equivalent security.
The question thus presented is whether the Legislature‟s establishment of specific
financial viability requirements for vacation lodging service providers preempts the Commission
from adopting additional requirements. In this Office‟s opinion, the Legislature‟s action here
likely would be found to have foreclosed the Commission from creating different or additional
financial viability measures.
Our review of this issue is guided by well-established principles of statutory construction and
administrative law. The primary objective in reviewing these statutes is to determine and implement
the Legislature‟s intent without limiting or expanding the statutes‟ coverage beyond what the
Legislature intended. Brown v. Tennessee Title Loans, Inc. 328 S.W.3d 850, 855 (Tenn. 2010);
Shelby County Health Care Corp. v. Nationwide Mutual Insurance Corp. 325 S.W.3d 88, 92 (Tenn.
2010). An administrative agency‟s authority must be based on an express grant of statutory
authority or must arise by necessary implication therefrom. Wayne County v. Tennessee Solid
Waste Disposal Control Bd., 756 S.W.2d 274, 282 (Tenn. Ct. App. 1988); Tennessee Pub. Serv.
Comm'n v. Southern Ry., 554 S.W.2d 612, 613 (Tenn. 1977). If an administrative agency or
board is statutorily authorized to make rules and regulations, the rules and regulations
promulgated by the agency or board may not be inconsistent with the enabling statute. Holiday
Inns, Inc. v. Olsen, 692 S.W.2d 850, 853 (Tenn. 1985). An administrative agency, created by the
Legislature, cannot by promulgation of a rule thwart the direct will of the Legislature. Tennessee
Department of Mental Health v. Allison, 833 S.W.2d 82, 85-6. (Tenn. Ct. App. 1992). Thus,
imposing a regulatory requirement that is overbroad, inconsistent with, or that impermissibly
expands upon a requirement expressly provided by the Legislature necessarily exceeds an
agency‟s rulemaking authority and renders such a rule invalid. Holiday Inns, Inc., 692 S.W.2d at
853; Cady v. Tennessee Board of Veterinary Medical Examiners, No. M2008-02551-COA-R3-
cv, 2009 WL 2707398 at 10 (Tenn. Ct. App. Aug. 27, 2009).
Applying these principles to the issue presented, this Office is of the opinion that the
suggested rule requiring all vacation lodging service firms and agents to obtain a $25,000 surety
bond would effectively substitute the Commission‟s financial viability measures for the existing
financial viability standards established by Tenn. Code Ann. § 62-13-104(b)(3)(C). Such an
action is contrary to the legislative directive on how Tennessee is to hold vacation lodging
service providers financially accountable. The Legislature has expressly set forth three ways in
which the Commission may hold licensees financially accountable. A blanket surety bond
requirement for all firms and brokers is not one of the Legislature‟s expressly prescribed
accountability measures. Accordingly, the proposed rule to impose a $25,000 surety bond on all
vacation lodging service firms and all of their designated agents is overbroad and amounts to an
impermissible expansion of the Commission‟s delegated authority. Thus it is the opinion of this
Office that the rule, as proposed, exceeds the Commission‟s rulemaking authority. Of course,
the Commission has been granted the authority to accept surety bonds as “equivalent security” as
Code Ann. § 62-13-104(b)(3)(D)(ii). Either the irrevocable letter of credit or equivalent security
"shall be" in an amount equivalent to the licensees' average advanced monthly deposits or "other
lesser amount reasonably determined by the commission to protect the renters and owners."
Tenn. Code Ann. § 62-13-104(b)(3)(D)(ii). Thus, the Legislature has expressly stated that
vacation lodging service providers may meet the State of Tennessee's financial accountability
mandates by electing to comply with one of three options: (1) maintaining an escrow account, (2)
The question thus presented is whether the Legislature's establishment of specific
financial viability requirements for vacation lodging service providers preempts the Commission
from adopting additional requirements. In this Office's opinion, the Legislature's action here
likely would be found to have foreclosed the Commission from creating different or additional
Our review of this issue is guided by well-established principles of statutory construction and
administrative law. The primary objective in reviewing these statutes is to determine and implement
the Legislature's intent without limiting or expanding the statutes' coverage beyond what the
Legislature intended. Brown v. Tennessee Title Loans, Inc. 328 S.W.3d 850, 855 (Tenn. 2010);
Shelby County Health Care Corp. V. Nationwide Mutual Insurance Corp. 325 S.W.3d 88, 92 (Tenn.
2010). An administrative agency's authority must be based on an express grant of statutory
authority or must arise by necessary implication therefrom. Wayne County V. Tennessee Solid
Waste Disposal Control Bd., 756 S.W.2d 274, 282 (Tenn. Ct. App. 1988); Tennessee Pub. Serv.
Comm'n v. Southern Ry., 554 S.W.2d 612, 613 (Tenn. 1977). If an administrative agency or
board is statutorily authorized to make rules and regulations, the rules and regulations
promulgated by the agency or board may not be inconsistent with the enabling statute. Holiday
Inns, Inc. v. Olsen, 692 S.W.2d 850, 853 (Tenn. 1985). An administrative agency, created by the
Legislature, cannot by promulgation of a rule thwart the direct will of the Legislature. Tennessee
Department of Mental Health v. Allison, 833 S.W.2d 82, 85-6. (Tenn. Ct. App. 1992). Thus,
imposing a regulatory requirement that is overbroad, inconsistent with, or that impermissibly
expands upon a requirement expressly provided by the Legislature necessarily exceeds an
agency's rulemaking authority and renders such a rule invalid. Holiday Inns, Inc., 692 S.W.2d at
853; Cady v. Tennessee Board of Veterinary Medical Examiners, No. M2008-02551-COA-R3-
CV, 2009 WL 2707398 at 10 (Tenn. Ct. App. Aug. 27, 2009).
Applying these principles to the issue presented, this Office is of the opinion that the
suggested rule requiring all vacation lodging service firms and agents to obtain a $25,000 surety
bond would effectively substitute the Commission's financial viability measures for the existing
financial viability standards established by Tenn. Code Ann. § 62-13-104(b)(3)(C). Such an
action is contrary to the legislative directive on how Tennessee is to hold vacation lodging
service providers financially accountable. The Legislature has expressly set forth three ways in
which the Commission may hold licensees financially accountable. A blanket surety bond
requirement for all firms and brokers is not one of the Legislature's expressly prescribed
accountability measures. Accordingly, the proposed rule to impose a $25,000 surety bond on all
vacation lodging service firms and all of their designated agents is overbroad and amounts to an
impermissible expansion of the Commission's delegated authority. Thus it is the opinion of this
Office that the rule, as proposed, exceeds the Commission's rulemaking authority. Of course,
the Commission has been granted the authority to accept surety bonds as "equivalent security" as
expressly provided in Tenn. Code Ann. § 62-13-104(b)(3)(D)(ii), but the amount of the bond
may not exceed the average advanced monthly deposits for the vacation lodging service firm.
We note there are multiple examples of existing Tennessee rules and regulations that
require various licensees to obtain and maintain surety bonds for financial viability purposes.
While many of these rules cite to express statutory provisions granting the governing board or
commission authority to require a form of security such as a surety bond, 2 there are multiple
examples of such rules and regulations requiring a surety bond that are not based on an express
statutory mandate to require a bond. 3 Rather, these rules are based on a general and broad grant
of authority, such as the authority to promulgate all rules necessary and proper to administer the
governing act or the authority to ensure the safety and wellbeing of the public. However, in each
of these instances, there was no existing legislative mandate imposing financial accountability
measures that was supplanted by the agency's surety bond requirements.
For the reasons stated above, a rule requiring all vacation lodging service firms as well as
their designated agents to maintain a surety bond would expand upon and conflict with the
existing consumer protection measures already in place in the enabling statute. Accordingly,
such broad rules would likely to be found to exceed the Commission's rulemaking authority.
2 There are more than twenty examples of Tennessee rules and regulations requiring the posting of security such as a
surety bond that are keyed to express statutory grants of authority authorizing the bond requirements. See, e.g.,
Tenn. Comp. R. & Regs. 0145-01-.03 (8) (the Athletic Commission requires those with a promoter's license to post
a bond pursuant to express authority granted in Tenn. Code Ann. § 68-115-204 (f)); Tenn. Comp. R. & Regs. 0160-
01-25(2)(c) (the Auctioneer Commission requires applicants for a public automobile auction license to post a surety
bond pursuant to express authority granted in Tenn. Code Ann. § 62-19-128(b)); Tenn. Comp. R. & Regs. 1340-06-
01-.06(1)(a) (the Division of Commercial Vehicle Enforcement requires all motor carriers engaged in the
transportation of passengers or property for hire to post security such as a surety bond pursuant to express authority
granted in Tenn. Code Ann. § 65-15-110(a)).
3 See, e.g., Tenn. Comp. R. & Regs. 0680-05-.02(1)(e) (the Tennessee Board for Licensing Contractors requires a
surety bond for those providing pre-licensing courses); Tenn. Comp. R. & Regs. 1200-02-10-.12(4)(d) (the
Tennessee Bureau of Environmental Health Services requires those licensed in the radiological health industry to
file security such as a surety bond); Tenn. Comp. R. & Regs. 1320-08-09-02 and 1340-01-04-.05 (the Tennessee
Department of Safety requires surety bonds from certain applicants for a certificate of title and from those providing
defensive driving courses); Tenn. Comp. R. & Regs. 1680-01-01-.04 (1)(a), 1680-02-01-.16 (1), 1680-02-02-.08(e),
1680-06-01-.07(12), and 1680-06-01-.09(4)(c)(5) (the Tennessee Department of Transportation requires surety
bonds of common carriers, holders of permits to construct driveways on state highway right-of-ways, holders of
permits to control vegetation, holders of use and occupancy agreements to install utilities within highway rights-of-
way, and holders of use and occupancy agreements to install fiber optic facilities on freeway rights-of-way).
Page 4
expressly provided in Tenn. Code Ann. § 62-13-104(b)(3)(D)(ii), but the amount of the bond
may not exceed the average advanced monthly deposits for the vacation lodging service firm.
We note there are multiple examples of existing Tennessee rules and regulations that
require various licensees to obtain and maintain surety bonds for financial viability purposes.
While many of these rules cite to express statutory provisions granting the governing board or
commission authority to require a form of security such as a surety bond,2
there are multiple
examples of such rules and regulations requiring a surety bond that are not based on an express
statutory mandate to require a bond.3
Rather, these rules are based on a general and broad grant
of authority, such as the authority to promulgate all rules necessary and proper to administer the
governing act or the authority to ensure the safety and wellbeing of the public. However, in each
of these instances, there was no existing legislative mandate imposing financial accountability
measures that was supplanted by the agency‟s surety bond requirements.
For the reasons stated above, a rule requiring all vacation lodging service firms as well as
their designated agents to maintain a surety bond would expand upon and conflict with the
existing consumer protection measures already in place in the enabling statute. Accordingly,
such broad rules would likely to be found to exceed the Commission‟s rulemaking authority.
ROBERT E. COOPER, JR.
Attorney General and Reporter
2
There are more than twenty examples of Tennessee rules and regulations requiring the posting of security such as a
surety bond that are keyed to express statutory grants of authority authorizing the bond requirements. See, e.g.,
Tenn. Comp. R. & Regs. 0145-01-.03 (8) (the Athletic Commission requires those with a promoter‟s license to post
a bond pursuant to express authority granted in Tenn. Code Ann. § 68-115-204 (f)); Tenn. Comp. R. & Regs. 0160-
01-.25(2)(c) (the Auctioneer Commission requires applicants for a public automobile auction license to post a surety
bond pursuant to express authority granted in Tenn. Code Ann. § 62-19-128(b)); Tenn. Comp. R. & Regs. 1340-06-
01-.06(1)(a) (the Division of Commercial Vehicle Enforcement requires all motor carriers engaged in the
transportation of passengers or property for hire to post security such as a surety bond pursuant to express authority
granted in Tenn. Code Ann. § 65-15-110(a)).
3
See, e.g., Tenn. Comp. R. & Regs. 0680-05-.02(1)(e) (the Tennessee Board for Licensing Contractors requires a
surety bond for those providing pre-licensing courses); Tenn. Comp. R. & Regs. 1200-02-10-.12(4)(d) (the
Tennessee Bureau of Environmental Health Services requires those licensed in the radiological health industry to
file security such as a surety bond); Tenn. Comp. R. & Regs. 1320-08-09-.02 and 1340-01-04-.05 (the Tennessee
Department of Safety requires surety bonds from certain applicants for a certificate of title and from those providing
defensive driving courses); Tenn. Comp. R. & Regs. 1680-01-01-.04 (1)(a), 1680-02-01-.16 (1), 1680-02-02-.08(e),
1680-06-01-.07(12), and 1680-06-01-.09(4)(c)(5) (the Tennessee Department of Transportation requires surety
bonds of common carriers, holders of permits to construct driveways on state highway right-of-ways, holders of
permits to control vegetation, holders of use and occupancy agreements to install utilities within highway rights-of-
way, and holders of use and occupancy agreements to install fiber optic facilities on freeway rights-of-way).
Page 5
WILLIAM E. YOUNG
Solicitor General
GREGORY O. NIES
Assistant Attorney General
Requested by:
Mr. Isaac Northern
Chairman, Tennessee Real Estate Commission
500 James Robertson Parkway
Nashville, Tennessee 37243-1151
WILLIAM E. YOUNG
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