What You Need to Know Before Closing
Many buyers focus almost entirely on the house they are purchasing.
In a deed-restricted community, however, you are buying more than the property. You are also agreeing to a set of private rules, financial obligations and community standards that may affect how you use your home.
Those restrictions can have a meaningful impact on both your lifestyle and the future marketability of the property.
Read the Governing Documents
Homeowners associations typically operate under several governing documents, including declarations, bylaws, rules and regulations. These documents may regulate matters such as:
- Fences & exterior paint colors
- Boats, RVs & commercial vehicles
- Pets & landscaping
- Rentals & short-term rentals
- Parking & architectural changes
- Home-based businesses
A buyer should understand these restrictions before becoming legally obligated to purchase the property.
Understand the Financial Condition
The monthly or annual assessment is only part of the picture. Buyers should also ask:
- Does the association have adequate reserves?
- Are assessments expected to increase?
- Are there planned capital projects?
- Are owners delinquent?
- Is litigation pending?
- Has the association recently issued special assessments?
An association with poor financial management can create unexpected expenses for owners.
Ask About Special Assessments
Special assessments are additional charges levied when regular association income or reserve funds are insufficient to cover a major expense. Examples could include:
- Roof replacements & road repairs
- Drainage work & clubhouse improvements
- Structural repairs
- Insurance increases & legal expenses
A low monthly HOA fee is not necessarily an indication that an association is financially healthy. Sometimes it means that maintenance has simply been deferred.
Rental Restrictions Matter
Investors should pay particularly close attention to rental rules. Some communities:
- Prohibit rentals during the first year of ownership
- Limit the number of rental properties
- Require minimum lease terms
- Prohibit short-term rentals
- Require association approval of tenants
These rules can materially affect the investment value of the property.
Community Development Districts Are Different
Many newer Florida communities also have Community Development Districts, commonly called CDDs. A CDD is not the same as an HOA.
CDDs typically finance infrastructure such as roads, drainage systems, utilities and community amenities. The resulting assessments are often collected through the property tax bill.
Buyers should understand both HOA assessments and CDD obligations when comparing communities.
The Bottom Line
A beautiful home can still be the wrong purchase if the surrounding restrictions or financial obligations do not fit your needs.
Before buying in a deed-restricted Florida community, evaluate the governing documents and finances with the same seriousness you give the home inspection.
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