What Is a CDD Fee in Florida? An In-Depth Look for Buyers

Community Development District (CDD) fees are a financial aspect of property ownership in certain planned communities. These fees are typically integrated into annual property tax statements. They support various community-wide infrastructure and services, distinct from standard property taxes.

Understanding Community Development Districts

A Community Development District (CDD) is a special-purpose unit of local government, established under Chapter 190 of the Florida Statutes. These districts finance, construct, operate, and maintain community-wide infrastructure and services for large-scale planned communities.

CDDs ensure necessary public facilities and services are available early in the development process. This infrastructure includes roads, water and sewer systems, stormwater management facilities, and streetlights. CDDs also fund and maintain community amenities like parks, recreational facilities, and conservation areas.

Developers typically initiate CDD establishment, requiring local government approval. This structure allows for significant infrastructure provision that might otherwise strain municipal budgets. Once established, a CDD operates as an independent tax district, with powers similar to other local governments, including the ability to issue bonds and levy assessments.

Components of CDD Fees

CDD fees consist of two components: a debt service portion and an operations and maintenance (O&M) portion. These parts address initial development costs versus ongoing upkeep.

The debt service, or bond portion, represents the annual payment towards bonds issued by the CDD. These bonds finance the initial construction of major infrastructure and community amenities, such as roads, utilities, and recreational facilities. Property owners contribute to the repayment of this long-term debt, which typically spans 20 to 30 years.

The operations and maintenance (O&M) portion covers ongoing costs for the upkeep and operation of the CDD’s infrastructure and facilities. This includes landscaping, common area maintenance, amenity management, and administrative costs. Unlike fixed debt service, the O&M assessment can fluctuate annually, depending on the district’s budget and actual maintenance costs.

Assessment and Collection of CDD Fees

CDD fees are assessed annually to individual properties based on the benefits each parcel receives from district improvements. The amount can vary depending on factors such as property type or size.

These fees are collected as a non-ad valorem assessment on the annual property tax bill. This means the charge is not based on the property’s assessed value, but on a specific formula determined by the CDD’s governing board. Homeowners will find these assessments itemized on their property tax statements, often under a section for non-ad valorem taxes.

Payment of CDD fees occurs concurrently with regular property taxes. If a property is financed, these fees are typically included in monthly mortgage escrow payments. CDD fees, as assessments, constitute a lien on the property until paid in full.

Financial Considerations of CDD Fees

CDD fees represent an ongoing financial obligation for property owners. This cost is in addition to standard property taxes and any homeowners’ association (HOA) fees.

The debt service portion of the CDD fee, which repays initial infrastructure bonds, typically has a defined repayment period, often 20 to 30 years. Once these bonds are fully repaid, that specific portion ceases. However, the operations and maintenance (O&M) component continues indefinitely, as long as the CDD exists and maintains community infrastructure and amenities.

Prospective homebuyers should conduct thorough due diligence to determine if a property is located within a CDD and to ascertain the associated fees. Disclosure of CDD fees is required during real estate transactions. This provides buyers with necessary information about these additional costs.