Certain communities in Florida have what is called CDD fees or Community Development District fees. These fees came about approximately 10 years ago. Many homebuyers in Florida are unaware of the fees and consider them a ‘hidden fee’ in buying a home. In reality, they aren’t a hidden fee and with just a quick question to the seller and/or realtor, you could find out if a home you want to buy includes them.
Keep reading to learn more about this fee and how it can affect you.
What is a CDD Fee?
The CDD fee helps cover the cost of building a community. Think of things like roads, parks, utilities, street lights, pools, and other infrastructures when creating a new community. Someone needs to pay the costs to cover them.
Unfortunately, most counties don’t cover the costs of building a new community, or at least the items we spoke about above. Home developers often just have enough money to start building the homes themselves; they don’t have the cash to cover the necessary infrastructure.
In order to cover the costs, the developers take out municipal bonds. In other words, they borrow the money. The bonds are tax-exempt and the developer must pay them back by the date of maturity, just as you would have to pay back your mortgage by maturity. Developers earn the money to pay back the bond by charging the CDD fee to homebuyers.
How Much Will You Pay?
The largest concern most homebuyers have is how much the CDD fee will cost them. Unfortunately, there isn’t a blanket amount that we can tell you, as there are different factors that determine how much you will pay.
- What was the cost of the project?
- How many homeowners are paying the CDD fee?
- How long does the developer have to repay the bonds?
You typically don’t pay the fee all at once. It’s often a line item on your tax bill. You’ll see it as a special assessment on your bill. You aren’t responsible for the fee if you sell the home, either. It’s not a personal liability; instead, it’s one that transfers with the home.
Can CDD Fees Change?
Unfortunately, CDD fees can change. You might be quoted one fee, but see it go up on future tax bills. This occurs when the developer takes out more municipal bonds to continue to improve the area. If the developer decides to add amenities or there needs to be more roadwork done, they may need to borrow more money, which becomes the liability of the homeowners in the area.
While CDD fees can seem unfair, they actually help you to make sure that you have a safe and sound place to live. What many homeowners don’t realize is that they pay these fees in one form or another. In areas that don’t have CDD fees, they just increase the cost of the home. A portion of those proceeds then goes to pay off the bonds that the developer had to take out to improve the area. One way or another, you pay the costs.