Community Development Districts and Community/Homeowners Associations – Partnering for Mutual Benefit
It is not unusual for master planned communities to have both a community/homeowners’ association and a community development District (“CDD”). It is easy to confuse their functions and responsibilities, and it can be frustrating to both developers and residents trying to provide needed services and facilities to communities. In most cases though, communities in which the association and CDD cooperate are communities with the highest level of amenities delivered for the best value to residents.
To understand how to maximize the value of the two entities, it is important to understand what each is and how each operates. CDDs are units of special purpose local government established pursuant to Chapter 190, Florida Statutes for the purpose of financing, constructing owning and operating public infrastructure. Public infrastructure include things like public roads, water and sewer lines, energy facilities, irrigation, public buildings (including community centers), public recreational amenities (pools, golf courses and tennis facilities), entry signage, guard houses and school buildings (if transferred to a public school board). CDDs finance construction of these facilities by issuing bonds secured by special assessments on real property located within the CDD. The special assessments can be imposed for up to forty years, but most are thirty-year assessments, and most are collected on the tax roll by the County Tax Collector. Initially, the CDD is established upon petition to the local government by the developer. Once established, the board is elected by the landowners on a “one-acre equals one vote” basis. Over time, as more residents reside in the District, the Board of Supervisors is elected by District residents as part of the general election.
In contract, community association (“CA”)/homeowner associations (“HOAs”) are usually not-for profit corporations that come into being by the filing of covenants conditions and restrictions (“CCRs”) and corporate paperwork filed with the State of Florida by the developer prior to selling any land to third parties. Chapter 720 Florida Statutes governs the operation of HOAs. Generally the purpose of the HOA is to own and operate private infrastructure (gated roads, irrigation systems, pools, playgrounds, landscaped common areas and recreational facilities) constructed by the developer and transferred or leased to the HOA for operation and maintenance. HOAs are funded by collection of assessments imposed by the CCRs. HOAs are also empowered to collect fines for violations of CCRs and rules and regulations by residents. The method of election of HOA and CA Boards is usually established in the CCRS or bylaws of the organization, but Florida law provides limitations on how long a developer can control an HOA.
In communities with both an HOA and a CDD, the first question usually is: whose responsibility is it? As a general rule the following is true:
- If the issue involves maintaining compliance with rules and regulations or CCRs, the HOA is responsible. CDDs are prohibited by law from enforcing private deed restrictions like CCRs.
- If the issue involves maintenance of property, the entity that owns the property (CDD or HOA or CA) will be responsible.
- If the issue involves public infrastructure that was built by the CDD and later dedicated or deeded to a city or county (typical with roads, water and sewer lines), then the responsibility to maintain, repair and operate it will be with the government that owns the infrastructure, unless the CDD retained an obligation to maintain it. Each year the CDD adopts a maintenance budget; the back up documentation for the annual budget summarizes what the CDD is paying to maintain.
So, how do residents in CDD/HOA/CA communities make all of this work to their advantage? Here are three easy ways:
- Contracts between CDDs and HOAs/CAs to consolidate common services that both may be providing. For example, if both the HOA and CDD have contracts with landscape maintenance companies to maintain landscaping areas within the community, the two entities can enter into a contract among themselves that provides that one entity will contract for all of the landscaping maintenance services for the community. This benefits the community because the community enjoys greater negotiation power by offering a larger project to contractors and eliminates duplicative fees, all of which are ultimately paid by the residents.
- HOAs/CAs leasing space or contracting to manage CDD owned community centers and recreational amenities. If the facilities are CDD owned, their public nature will have to be maintained, but residents can exert more control over operational decisions and amenity levels by taking over this function.
- Appointing liaisons to attend each other’s meetings so problems can be addressed jointly, if required.
Leigh Kellett Fletcher has been practicing land use, environmental and real estate law since 1997 and regularly represents clients acquiring, developing and selling real estate in Florida and the U. S. Virgin Islands. She has been involved in the purchase, sale and redevelopment of multi-family residential projects, office, commercial and mixed use properties and has worked with clients to obtain land use entitlements and environmental permits to develop and expand commercial development. She frequently works with clients acquiring environmentally contaminated properties and assists them with obtaining brownfield designations and completing remediation and development of those properties.