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Buyer Basics
Other Costs of owning a home
Special Improvement District (SID)
Local Improvement District (LID)
Before a real estate developer can start erecting new homes or commercial structures on land they own, a significant investment must be made to prepare an infrastructure. Water, sanitary sewer, and gas lines must be buried, streets must be laid out and paved, strom drains put in, electrical, cable TV and telephone lines must be run. Fire hydrants must be placed, sidewalks and street lights may be put in. Perhaps the area must be terraced, retaining walls constructed, and an access road may need to be built just to get to the land. There may also be gates, guard houses, parks, fitness centers, community pools, or other buildings.
These items present a significant expense and must be paid for somehow. The expense is divided among the number of lots in the subdivision, and will eventually be paid by the future home owners. But who pays initially? In some cases, the city or county government pays, from reserves if available, or more likely they will sell municipal bonds to raise the necessary capital, thereby establishing an Improvement District. Home owners must then make periodic payments, usually semi-annually for a period of several years (usually 10 to 20), until the bond holders can be fully repaid, complete with interest. In other cases, however, the developer pays for the infrastructure themselves, and adds the cost into the price of the new home, in which case, there is no SID or LID.
In the greater Las Vegas area, most areas fall into the latter case described above, where the infrastructure costs are included in the purchase price of the home, in which case there are no SIDs. However, in Summerlin and parts of Henderson, the county issued bonds to finance the infrastructure, so there are SIDs (Summerlin) or LIDs (Henderson).
SID and LID really mean the same thing, but one city or county might use one name, while another location uses the other. In other parts of the country, you might also encounter Land Improvement Districts, Community Improvement Districts, or other terms. But no matter what it's called, it is a debt owed to a city or county government, which must be paid over time by the current home owner. When a property is sold, the debt is prorated so that the seller pays only for the exact number of days they owned the property, and the buyer takes over all future payments from the date of purchase.
Some home owners ask if they can pay off a SID in advance. The answer is usually NO because the issuing agency is obligated to pay interest to the bond holders till the established maturity date, so if they did accept such a prepayment, they'd have to charge a penalty in order to cover future interest payments.
Home Owner's Associations
A Home Owners Association, usually abbreviated HOA, also known as a Common Interest Community or CIC, is an organization whose purpose is to maintain property values and quality of life within a community or subdivision by imposing rules and restrictions on the appearance of property and on the conduct of the occupants. The idea is to make the community a desirable place to live by keeping it free of unsightly yards, vehicles, and structures, and to limit the amount of noise caused by vehicles and activities. An HOA might also limit the number of investor owned properties or dictate the minimum lease term for renters.
The HOA is empowered by state law to collect dues, enforce its rules, impose fines on violators, and even foreclose on owners who do not pay in a timely fashion. The HOA must maintain security gates, guard houses, common area landscaping, parks, gyms and pools, if such facilities exist. The board can adjust dues upwards or downwards, and impose special assessments as they see fit to ensure that adequate funds are on hand to meet their obligations
An HOA is usually set up by a real estate developer when initially building a new subdivision. The developer operates the HOA until a significant portion of homes have been sold, then elections must be held and home owners take over operation of the HOA themselves. Some developers maintain a member or two on the HOA board until the subdivision is completely or more fully sold.
If you want to purchase a home which does NOT have an HOA in the Las Vegas area, you'll severly limit the areas in which you can purchase. Virtually all areas built within the past 15 years or more, have HOAs. You'll have to find either a rural area, or an older area that existed before HOAs became a common practice.
HOA dues are usually billed by the month, and prices vary widely from as little as $20 a month to thosands of dollars. There may be more than one HOA involved. For example, in Red Rock Country club, there are gated subdivisions inside of another gated subdivision, which in turn is inside Summerlin, a master planned community, which means there are three HOAs to which you must pay dues and adhere to their rules.
Highrise condominium projects typically have the highest HOA dues because they typically offer more amenities, and are usually based upon the number of square feet in your condo. Fees commonly range from 50 cents per square foot to more than a dollar. Highrise HOAs usually have the most strict policies regarding rentals, often requiring background checks on renters, minimum lease durations of one year, and additional damage deposits over and above those imposed by the condo owner.