October 20, 2017
What is the difference between an HOA and a CDD?
Most Florida subdivisions and master-planned communities have a Homeowners Association (HOA), and may also have a Community Development District (CDD). The two organizational structures are different, which can lead to some confusion for homebuyers.
Residents of communities with an HOA pay a fee to the association, which is governed by residents and manages the upkeep of the community.
Some residential communities may also have a CDD, which is more complex than an HOA. Instead of functioning privately, CDDs are special-purpose units of local government that operate as independent special taxing districts. These districts are typically set up as a way for developers to cover up-front infrastructure costs through bonds, with the bonds.
Here are a few common questions homeowners have about HOAs and CDDs:
What do HOAs and CDDs pay for?
Both HOAs and CDDs are used for pay for maintenance, but CDDs are also used to finance the construction of infrastructure, such as roads.
For communities with HOAs, fees from homeowners typically pay for the maintenance of community landscaping, and for operation of shared community amenities owned by the HOA, such as a pool, clubhouse and security gate. HOAs are more common in well-developed areas, where infrastructure like sewer, water and roads existed before the community was built.
A community that also has a CDD is usually built from the ground up, with little or no infrastructure already in place. CDDs allow developers to finance the construction of infrastructure through tax-exempt bonds. Once in place, homeowner fees paid toward the CDD are used for the operation and maintenance of community roadways, facilities and any shared common areas and amenities that the CDD owns.
Who manages HOAs and CDDs?
HOAs are initially set up by a developer or homebuilder, but after the community reaches a certain level of sales, the governance shifts over to residents. A licensed Community Association Manager (CAM) works with the HOA to maintain the community. HOA board members are able to meet whenever they choose to since they are private entities. The board is chosen in elections by the HOA’s members.
CDDs are managed by a board of supervisors, which first starts with the developers being on the board and then transfers to residents once there are 250 voting residents in the district.
The board members are considered public officials since CDDs are local government entities. CDDs must follow Florida’s Sunshine Laws and meetings must be held in an official public setting. Residents on the board of supervisors are chosen through an election.
Are communities with CDDs more expensive?
All communities with a CDD also have an HOA, but it’s also very common for communities to have only an HOA. One common misconception is that fees in a CDD community are always higher than in one with just an HOA. The level of fees all depends on the community and its amenities and features. If a community with an HOA is highly amenitized, residents could end up paying more in dues than they would in a community with a CDD and HOA of a community that has fewer shared amenities.
Whether it’s an HOA or CDD, quality management is essential for success. Rizzetta & Company, Inc. is an expert in working with both HOAs and CDDs around Florida. For information on the services we provide, visit the District Services and Association Services pages on our website, or call 813-514-0400.