Community Development Districts
As a home buyer, determining how much you can afford to spend on a home is often the first, and most important decisions in the home-buying process. In Florida, this often includes more than just a consideration of the price tag of the home, but also what the Homeowners Association (HOA) and CDD fees will be. Many home buyers find these fees confusing and frustrating, especially when buying a house that has both an HOA and a CDD fee attached to the property. Below you will find answers to some of the most common questions regarding CDDs.
Florida is known for its prestigious gated neighborhoods that boast fabulous amenities ranging from pools to golf courses, and even beach clubs. The year-long sunshine, gorgeous beaches, and booming tourism industry draw more families to Florida every year. In the last seven years Florida’s population has grown 7.85% (the fifth largest rate of population growth in the country) to a population of over twenty million people[i]. Today, Florida is the third most populous state in the United States.[ii] With Florida’s continual growth, it is no surprise that many developers have looked for new and innovative ways to fund their development projects. The need for more infrastructure and new large-scale developments to support Florida’s population growth has led many developers to forego traditional methods of financing for their development projects and instead use Community Development Districts (CDDs).
What is a CDD?
CDDs are local special-purpose taxing units that are authorized to issue bonds, generally secured by the land within the district’s boundary, which offset the initial costs of large-scale master-planned developments.[iii]
The debt (including both principal and interest) is then passed on to the residents who buy property in those developments through tax assessments by attaching the bond to each separate parcel of property based on its respective size (i.e. the larger the parcel, the greater the debt).[iv] The CDDs act as a special-purpose government but are limited to the performance of the specialized functions authorized by Fla. Stat. §190.[v].
What is the difference between an HOA and a CDD?
- HOAs address certain issues (such as restriction enforcement, the development of community rules, and architectural control) and fund certain amenities within a community (such as community events and security) but are not capable of financing or managing major capital improvements which would normally be constructed by the local government, such as the construction of major roadways and utility systems.[vi] A CDD however is capable of financing and maintaining the overall infrastructure of the community.
- HOAs are not given the same authority to issue tax exempt bond, nor the ability to levy and collect special assessments as are CDDs.[vii]
- The method of collecting fees is very different. While HOAs generally issue monthly, quarterly, or annual statements through the association, CDD fees are paid through a home owners annual property tax bill.
In general, the CDD complements the responsibilities of the association. While the association will be in charge of handling the “overall condition” of the community and will enforce the various covenants and restrictions regarding use and appearance of the community, the CDD will pay off the communities’ amenities and infrastructure. It is important for homeowners to understand what the association fees are paying for in relation to what is being funded by the CDD fees. This will play a major role in whether, and when, the fees will change.
What are the Pros and Cons of Living in a CDD?
Homeowners living in a community with a CDD will receive three major benefits: (1) the provision of consistently high levels of public facilities and services managed and financed through CDD fees and assessments; (2) the assurance that the CDD facilities and services will be completed concurrently with other parts of the overarching development; and (3) the ability to choose the Board of Supervisors, which is able to determine the quality and expense of CDD facilities and services.[viii] The CDD Fees pay for projects such as infrastructure (water and sewer) as well as more attractive features such as pools and golf courses, which act as major selling points to potential buyers.
Obviously, the biggest con is the added expense. Arguments can be made that these value-added items, while desirable, in reality, are paid for by the buyer twice over: once in the actual CDD Fees, but also in the premium value added to the purchase price of the home or lot itself.[ix] Living in a CDD is costly and can be an economic drain on the residents. Additionally, one of the main issues that arises in the area of CDDs is the lack of knowledge among homeowners about the district’s function, purpose, and fee structure. Buyers and homeowners, especially those who move to Florida from out of state, do not know what a CDD is, and of those who are familiar with these districts, most do not understand how they function or what the CDD Fees are really paying for.[x] Many homeowners become frustrated when CDD Fees and Homeowner Association or Condominium fees add up. Even more become frustrated when CDD Fees suddenly rise.
How do I know if I am buying in a CDD?
Fla. Stat. §190 has strict disclosure requirements which require each contract for the initial sale of real property or a residential unit within the CDD to include the following disclosure statement:
“THE (Name of District) CDD MAY IMPOSE AND LEVY TAXES OR ASSESSMENTS, OR BOTH TAXES AND ASSESSMENTS, ON THIS PROPERTY. THESE TAXES AND ASSESSMENTS PAY THE CONSTRUCTION, OPERATION, AND MAINTENANCE COSTS OF CERTAIN PUBLIC FACILITIES AND SERVICES OF THE DISTRICT AND ARE SET ANNUALLY BY THE GOVERNING BOARD OF THE DISTRICT. THESE TAXES AND ASSESSMENTS ARE IN ADDITION TO COUNTY AND OTHER LOCAL GOVERNMENTAL TAXES AND ASSESSMENTS AND ALL OTHER TAXES AND ASSESSMENTS PROVIDED FOR BY LAW.’”[xi]
Any buyer who purchases property within a Florida CDD should expect to see the above quoted language in their contract for sale, which legally, is enough to put the buyer on notice that their property lies within a CDD that has the power to impose taxes or assessments upon such property.[xii] Furthermore, the CDDs are required to disclose their public financing (most districts post a copy of their annual budget and expenditures on their website, along with the minutes from their board meetings).[xiii]
About the Author: Rebecca Perkins is a recent graduate of the University of Florida Levin College of Law.
Disclaimer: The information in this blog post (“Post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this Post should be construed as legal advice from Hover Girl Properties or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this Post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
 Florida Population 2017, https://worldpopulationreview.com/states/florida-population/.
 Paul D. Asfour, The Potential for Abuse in Developer-Controlled CDDs, 19 Barry L. Rev. 1 (2013); Ryan Geddes, Nocatee Developers Approve Boards and System for Bonds, Jacksonville Bus. J. (Nov. 1, 2004), https://www.bizjournals.com/ jacksonville/stories/2004/11/01/story3.html; Fla. Stat. §190 (“CDD means a local unit of special-purpose government which is created pursuant to this act and limited to the performance of those specialized functions authorized by this act; the governing head of which is a body created, organized, and constituted and authorized to function specifically as prescribed in this act for the purpose of the delivery of urban community development services; and the formation, powers, governing body, operation, duration, accountability, requirements for disclosure, and termination of which are as required by general law”).
 Paul D. Asfour, The Potential for Abuse in Developer-Controlled Community Development Districts, 19 Barry L. Rev. 1-3 (2013).
 Fla. Stat. §190.
 An Introduction to CDDs and Stewardship Districts, Hopping Green & Sams, https://hgslaw.com/wpcontent/uploads/Frequently_Asked_Questions_ re_CDDs.pdf.
 Fla. Stat. §190; Fla. Stat. §720; Fla. Stat. §718.
 Understanding a CDD, Tampa Bay House Finder, https://tampabayhousefinder.com/ cdd.html; What is a CDD?, Twin Creeks North CDD, https://twincreeksnorthcdd.net/cdd-information.php.
 Asfour, supra note 4, at 2.
 See e.g., Complaint Review: Dream Finders (2014), https://www.ripoffreport.com/reports/dream-finders/st-johns-florida-32259/dream-finders-they-presented-an-hoa-monthy-fee-that-is-not-an-hoa-fee-just-an-addition-to-1171572 (homebuyer complaint about hidden HOA fees which were really CDD fees).
 Fla. Stat. §190.048.
 Larry Tolchinsky, Florida Condos, Coops, TimeShares, HOAs, and CDDs: Know the Difference Before You Buy, AboutFloridaLaw.Com (Feb. 24, 2015), https://aboutfloridalaw.com/2015/02/24/florida-condos-coops-timeshares-hoas-and-cdds-know-the-difference-before-you-buy/.
 Fla. Stat. §190.009.