Tips for Managing CDD Fees

 

When you buy a home in a community with CDD fees, you agree to pay the annual fee required by the board. This fee typically ranges between $1,000 and $3,000 a year, based on the amenities provided, and comprise two main components: municipal bonds, which are used to finance the development of the infrastructure and amenities in a community; operation and management fees, which go toward the maintenance of different infrastructure elements and amenities.

What Happens When a Homeowner Fails to Pay CDD Fees?

Under Florida law, the homeowners and renters who live in a community with a CDD are responsible for paying CDD fees. Because these fees represent a non-ad valorem special assessment, they’re included in the annual property tax bill as a separate entity. If a community member fails to pay the CDD fees by the due date on the tax bill, the unpaid assessment will become delinquent within 30 days from the deadline. Failure to pay the assessment after it becomes delinquent may result either in an amount equivalent to the delinquent assessment, along with any applicable penalties and interest, to be billed on the next property tax bill or in a tax lien foreclosure. The CDD board must notify the property owner about the intent to include the unpaid delinquent assessment in the next property tax bill or file a foreclosure action within 60 days from the due date.

One important consideration is that even the homeowners who are eligible for specific exemptions, including the homestead exemption, are required to pay CDD fees. That’s because these special assessments apply to all residential and non-residential property uses, regardless of the exemption status. 

Paying CDD Fees as Part of Property Taxes

Because CDD fees are billed annually on your property tax bill, you can access the property tax billing system via the Tax Collector website and use a credit/debit card or checking account to pay them. Alternatively, you can pay your property taxes, including CDD fees and other special assessments, in person at the county Tax Collector’s Public Service Office. You can also use any other payment portal that allows you to create an online account, view your bills, manage tax statement preferences, and make payments. Once real estate taxes become delinquent, additional fees, penalties, and interest will be added.*

If you intend to purchase a piece of property with the help of a mortgage, it’s important to know that most lenders set up escrow accounts as part of the mortgage paperwork. When you make your monthly mortgage payment, your lender will collect the required tax payments, including the CDD fees, deposit them into the escrow account, and pay property taxes on your behalf when they’re due. After you pay off your mortgage, you’ll be responsible for paying property taxes together with any ad and non-ad valorem special assessments to your local tax office.

Can You Pay Off Your CDD Fees?

The short answer is: yes. However, paying off CDD fees ahead of schedule isn’t always a wise financial decision. That’s because it depends on how long you plan to stay in the house. Let’s assume that you buy a new home in a community with an annual CDD fee of $1,000, which must be paid over a period of 30 years. If you decide to pay the CDD fee each year, you’ll end up paying $30,000. On the other hand, if you pay off your CDD fees when you purchase your home, you could save a lot of money, but only if you stay in the home long enough. For instance, if the break-even point is 14 years, you’ll need to live in the home for more than 14 years after closing in order to save money. If you sell the home within the next 14 years, you might lose money, depending on its sales price.

An important aspect is that only the municipal bonds can be paid off. This basically means that you’ll be required to continue to pay the portion of the CDD fees that goes toward operation and management fees. Considering the same annual fee of $1,000 and assuming that the CDD board allocates $600 toward the municipal bonds, your CDD fees will be reduced to $400 a year if you pay off the bonds. Another notable point is that, similar to other non-ad valorem special assessment, CDD fees aren’t deductible.

If you intend to take out a mortgage in order to purchase a home in a community with or without a CDD, our mortgage originators can help you research and understand the financing options available to you so that you can get the right type of mortgage for your financial situation. 
*In Florida, penalties on late property tax payments are waived through May 6, 2021, for the taxpayers who have experienced financial hardship due to the pandemic.

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