For commercial real estate, one critical aspect that often comes into play following natural disasters, such as hurricanes or floods, is the Substantial Damage rule. This rule, coupled with density regulations, often negatively impacts how commercial buildings are repaired and rebuilt after sustaining damage. (This discussion applies equally to Florida residential real estate.)
Substantial Damage Rule
The Substantial Damage rule is part of the National Flood Insurance Program (NFIP). It requires any structure in a Special Flood Hazard Area (SFHA) that incurs damage to 50% or more of its market value must be brought into compliance with current building code standards. The local jurisdiction’s building code officials make the determination of what the owner of the property must do to rebuild because of the damage caused by wind, rising water, fire, or other peril.
Commercial real estate owners and professionals in hurricane prone Florida must understand the rule and know how crucial it may be to your client. The damaged structure may need to be elevated, demolished, or moved to abide by the current building code and zoning law.
Density Regulations
Density regulations state the number of units or the amount of floor space that can be developed for your client’s property after sustaining substantial damage, density regulations in some cases dramatically impact what the property owner can do in rebuilding. Local zoning laws also dictate how the rebuilding process will play out.
Impact of Wind and Water Damage
Wind and water damage can cause enormous damage. For commercial real estate professionals, having a realistic plan to manage and mitigate the effects of wind and water damage is essential. Regular maintenance, using durable materials, and ensuring adequate insurance coverage are key strategies to protect the property owner.
Conclusion
Navigating the Substantial Damage rule and density regulations is an essential task for property owners and commercial real estate professionals in Tampa Bay. Awareness of the local jurisdiction’s interpretation of the Substantial Damage rule and the density regulations must be part of the tools to help in responding to damage from natural disasters. Rules and their interpretations evolve and change. It is essential in Florida for the property owner and the commercial real estate professional to stay informed about the Substantial Damage rule and density regulations.
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