When considering buying a property in a planned community or neighborhood, you may come across terms like Homeowners Association (HOA) and Community Development District (CDD). Both entities play crucial roles in managing and maintaining communities, but they serve different purposes and have distinct characteristics. In this article, we will explore the differences between an HOA and CDD to help you understand their roles and responsibilities.
Homeowners Association (HOA): A Homeowners Association, commonly referred to as an HOA, is a governing body established to manage and maintain the common areas and shared amenities within a residential community. Homeowners who purchase properties within the community automatically become members of the HOA and are required to pay regular fees, known as HOA dues or assessments, to fund the association’s activities.
Key Features of an HOA:
- Mandatory Membership: All homeowners within the community are required to join the HOA and abide by its rules and regulations.
- Rules and Regulations: The HOA enforces a set of rules and regulations, known as covenants, conditions, and restrictions (CC&R), which aim to maintain a certain standard and preserve property values. These rules may govern aspects such as architectural guidelines, landscaping, parking, noise levels, and pet restrictions.
- Fees and Assessments: Homeowners are obligated to pay regular HOA fees to cover the costs of maintaining and managing the common areas, including amenities like parks, swimming pools, clubhouse, landscaping, and security.
- Board of Directors: The HOA is typically governed by a board of directors, elected by the homeowners, who make decisions on behalf of the community. The board is responsible for enforcing the rules, managing finances, and overseeing community maintenance.
Community Development District (CDD): A Community Development District, commonly known as a CDD, is a special-purpose local government entity created to provide infrastructure and public amenities to a specific area, such as a planned residential community or commercial development. CDDs are typically established by developers and are authorized to issue bonds to finance the construction of infrastructure projects like roads, water and sewer systems, parks, and recreational facilities.
Key Features of a CDD:
- Special Taxing District: CDDs have the authority to levy taxes or assessments, known as CDD fees, on properties within their jurisdiction to repay the bonds used for infrastructure development.
- Infrastructure Financing: CDD fees collected from property owners are primarily used to repay the debt incurred by the CDD for constructing infrastructure and amenities.
- Board of Supervisors: CDDs are governed by an elected board of supervisors who manage the district’s finances, establish budgets, and oversee the maintenance and operation of the infrastructure and facilities. The board has the power to set and collect CDD fees from property owners.
- Limited Role in Property Regulations: Unlike HOAs, CDDs do not typically enforce property-specific rules and regulations regarding architectural guidelines, landscaping, or other aspects of property use. Their main focus is on providing and maintaining the community’s infrastructure.
Distinguishing Factors:
- Purpose: HOAs primarily focus on managing common areas, enforcing rules, and preserving property values, while CDDs are responsible for financing and maintaining infrastructure and public amenities.
- Fees: HOA fees primarily cover the costs of managing common areas and amenities, while CDD fees are primarily used to repay the bonds for infrastructure development.
- Authority: HOAs have the power to enforce rules and regulations within the community, whereas CDDs have limited authority in regulating individual properties.
- Governance: HOAs are typically governed by elected boards of directors chosen by homeowners, while CDDs are governed by elected boards of supervisors.
Understanding the differences between an HOA and CDD is crucial when considering purchasing a property in a planned community. While HOAs focus on maintaining common areas and enforcing property-specific rules, CDDs are responsible for financing and managing the infrastructure. By understanding the roles and responsibilities of both entities, homeowners can make informed decisions and ensure they are comfortable with the community’s governance and financial obligations.
