Understanding the Dreaded FEMA 50% Rule

The so-called “FEMA 50% Rule” is required by the National Flood Insurance Program. Every community that needs federally backed flood insurance to be made available to its citizens must adopt and enforce rules related thereto. The FEMA 50% Rule applies to homes and other structures where the lowest floor is below the 100-year flood elevation. In residential properties, only parking, building access and limited, incidental storage is allowed below the flood level. 

At its most basic, under the 50% FEMA Rule, if an improvement is “substantially damaged” or “substantially improved”, it must be brought into compliance with the flood damage prevention regulations, including elevating the building to or above the 100-year flood elevation. Each community is responsible for determining the definition of “substantial damage” and “substantial improvement”, but most communities in Southwest Florida use the same basic definition. As defined by Collier County (Z101-0410), “Substantial Damage” is “damage of any origin sustained by a structure whereby the cost of restoring the structure to its before damage condition would equal or exceed 50 percent of the market value or replacement cost of the structure before the damage occurred” and “Substantial Improvement” is “any reconstruction, rehabilitation, addition, or other improvement of a structure, the cost of which equals or exceeds 50 percent of the market value of the structure before the ‘start of construction’ of the improvement.”

Importantly, certain costs typically do not count towards the FEMA 50% Rule value. These costs include plans, specifications, surveys, building permits, driveways, pools, seawalls and other items that are not considered a permanent part of the structure. Typically, donated materials and volunteer labor must be valued at fair market value in calculating the FEMA 50% Rule value.

The FEMA 50% Rule only looks at the market value of the structure/improvement on the property, and not the land value, in calculating the FEMA 50% Rule value. Most local jurisdictions use the property appraiser’s value for the structure/improvement, but do allow the property owner to obtain their own appraisal to determine the value of the structure/improvement.

Below is a survey of how local jurisdictions have implemented the FEMA 50% Rule: 

  1. The City of Naples looks at the costs for improvements or repairs to a structure within a one (1) year period to determine compliance with the FEMA 50% Rule. To value the structure, the City of Naples currently looks at the Collier County Property Appraiser’s assessed value of the structure and adds 20%. However, the property owner has the option to provide an independent appraisal prepared and certified by a licensed appraiser. 
  1. Collier County appears to base the costs of improvements/repairs applicable to the FEMA 50% Rule value on each individual permit that is pulled instead of evaluating the totality of costs over a stated period of time. The value of the structure is currently determined by the Collier County Property Appraiser’s assessed value. However, the property owner has the option to provide an independent appraisal prepared and certified by a licensed appraiser. 
  1. Lee County looks at the costs for improvements or repairs to a structure within a five (5) year period to determine compliance with the FEMA 50% Rule. To value the structure, Lee County currently looks at the Lee County Property Appraiser’s assessed value of the structure and adds 20%. However, the property owner has the option to provide an independent appraisal prepared and certified by a licensed appraiser.

Understanding the FEMA 50% Rule as interpreted by the jurisdiction where you own property is critical to undertaking renovations and/or post-storm repairs of your property. For more information about the FEMA 50% Rule, please contact Charles C. Whittington, Esq. at (239) 514-1000. 

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Charles Whittington is an associate with Grant Fridkin Pearson, P.A. and has practiced in Southwest Florida since 2011. Charles is a member of the Firm’s Real Estate and Business law practice groups and focuses his practice on commercial and residential real estate transactions and business transactions and relationships. He also represents financial institutions and borrowers in all aspects of business and real estate financing.

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