Homeowners Association (HOA) and Community Development District (CDD) are both common forms of governance in planned communities, but they serve different purposes and have distinct characteristics. Here are the key differences between an HOA and a CDD:
1. Purpose and Function:
-HOA (Homeowners Association): An HOA is primarily responsible for managing and enforcing rules and regulations within a residential community. It typically oversees common areas, landscaping, architectural guidelines, and community aesthetics. The HOA collects fees from homeowners to fund its operations and maintenance of shared spaces.
-CDD (Community Development District): A CDD is a special-purpose local government entity created to provide community infrastructure and services. This can include the construction and maintenance of roads, utilities, parks, and recreational facilities. CDDs are often established to fund and manage the development of large master-planned communities. “Since 1980, CDDs have evolved into the preferred financing mechanism for residential developers,” according to Kite Capital Partners. “Instead of securing a traditional bank loan to finance this construction, CDDs allow developers to create a special purpose quasi-legislative government for the community. This enables developers to issue tax-exempt bonds that are collateralized by the underlying real estate without incurring upfront development costs.”
2. Governance Structure:
-HOA: Homeowners within the community are usually members of the HOA and have the right to vote on important issues. The HOA is typically governed by a board of directors elected by the homeowners.
-CDD: A CDD is governed by a board of supervisors. Initially, this board may consist of individuals appointed by the developer, but as the community develops and residents move in, elections are held to select board members. Although they are established by county statues they are not dependent upon the counties or municipalities. “For certain infrastructure districts, their boards are initially elected by property owners until qualified electors move in.
3. Funding:
-HOA: The HOA is funded by homeowner dues or assessments. These fees are used to cover the costs of maintaining common areas, enforcing rules, and managing the community.
-CDD: A CDD is funded through bonds and assessments on property owners within the district. The assessments may appear on property tax bills and are used to repay the bonds issued to finance infrastructure development.
4. Scope of Control:
-HOA: The HOA’s control is typically limited to the enforcement of community rules, architectural guidelines, and the maintenance of common areas and amenities. Multiple HOAs can operate within a given CDDs boundaries.
-CDD: The CDD has a broader scope, as it is involved in financing, constructing, and maintaining essential infrastructure for the entire community, such as roads, utilities, and recreational facilities in adherance of state and local planning and zoning requirements. Learn more about the History of Florida’s Independent Special Districts.
5. Duration:
– HOA: The HOA typically exists for as long as the community is governed by its covenants, conditions, and restrictions (CC&R). The CC&R can be amended, but the HOA is generally a long-term entity.
– CDD: A CDD may have a limited duration, especially when it comes to repaying bonds. Once the infrastructure is paid off, the CDD may dissolve, or its responsibilities may be transferred to another entity.
It’s important to note that the specific roles and powers of HOAs and CDDs can vary based on Florida laws, local regulations, and the governing documents of each community. Homebuyers and residents in planned communities should carefully review the governing documents of both HOAs and CDDs to understand their rights, responsibilities, and the overall management structure of their community.
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