HOA Fees After a Wildfire: Your Obligations and the Difference Between an HOA and a CDD

If your home in a community with a homeowners association (HOA) is destroyed by a wildfire, you are generally still legally obligated to continue paying your HOA fees. These dues fund ongoing community expenses like common area insurance and property taxes, which persist even if individual structures are lost. This article explains the critical differences between HOAs and Community Development Districts (CDDs) and what homeowners can expect in the aftermath of a disaster.

Are You Still Liable for HOA Fees if Your Home is Destroyed?

Yes, in most cases, you are still required to pay your HOA fees even after a catastrophic event like a wildfire destroys your property. This is because HOA dues are not solely for the maintenance of your individual unit but for the entire community's shared assets and expenses.

According to legal experts, the default rule in California and most U.S. jurisdictions is that the obligation to pay homeowners association (HOA) dues remains. An HOA is the governing body that sets rules and manages shared amenities in a community, like a condo complex or planned neighborhood. "Because the physical structure may be destroyed or temporarily uninhabitable, many owners assume the obligation to pay disappears. But... HOA dues remain owed even if the condominium building itself has been destroyed by fire," says Chad D. Cummings, a real estate law CEO.

These fees typically cover:

• Insurance for community property (e.g., lobbies, pools, roofs).
• Property taxes on common areas.
• Landscaping and general maintenance of shared spaces.

These expenses continue to accrue regardless of the condition of individual homes. Failure to pay can result in the HOA recording a lien against your property and, after due notice, potentially foreclosing. They may also impose late fees and interest.

What is the Difference Between an HOA and a CDD?

While both involve ongoing fees, a Community Development District (CDD) is fundamentally different from an HOA. Understanding this distinction is crucial for homeowners.

• Homeowners Association (HOA): An HOA focuses on enforcing community rules (like paint colors or fencing) and maintaining shared amenities (like pools and clubhouses). HOA fees are paid directly to the association, typically on a monthly or quarterly basis, and are not tax-deductible.
• Community Development District (CDD): A CDD is a governmental unit created to finance, construct, and maintain large-scale public infrastructure like roads, water and sewer systems, and parks within a community. CDD fees are actually long-term tax assessments that are incorporated into your annual property tax bill. A key benefit is that these assessments are often tax-deductible if you itemize your deductions.

As Chad Breeden, a real estate expert, explains, "The big difference is that an HOA handles neighborhood rules and shared amenities, while a CDD focuses on large community projects, like roads and utilities, paid for through long-term tax assessments."

What Should You Do Before Buying in an HOA or CDD?

Choosing between a home in an HOA or a CDD is a significant decision that impacts your lifestyle, finances, and obligations.

• HOA Considerations: Homes in an HOA community often have well-maintained common areas, which can help preserve property values. However, you must be comfortable adhering to the community's rules and regulations. It is essential to review the HOA's covenants, conditions, and restrictions (CC&Rs) thoroughly before purchasing to understand all obligations and limitations.
• CDD Considerations: Properties within a CDD might have a lower initial purchase price because infrastructure costs are deferred into the long-term tax assessments. However, your annual property tax bill will be higher as a result. CDD communities typically have fewer rules governing the appearance of your home compared to an HOAs.

Based on our experience assessment, an HOA is generally better for homeowners who prefer a structured environment with clear rules, while a CDD may appeal to those prioritizing large-scale community amenities with different financing.

Before buying a property in any managed community, carefully review all governing documents and financial statements to make a fully informed decision that aligns with your long-term goals.