Flood Insurance Tip: Get that elevation certificate!

Is the creek rising?  The federal government thinks it is and wants to stop subsidizing flood insurance. Sellers and buyers owners of flood prone properties should consider getting an elevation certificate to find out their risks.


Since 1968 the federal government has been subsidizing the cost of flood insurance for homeowners in flood prone areas. These subsidies proved important in the development of many low-lying properties especially in states with large coastal areas like Florida. However, after the significant flood related losses due to hurricanes such as Katrina and Sandy the cost of providing these subsidies has strapped the federal program. So, in 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act to phase out subsidies for flood insurance for certain properties. The new law does not change subsidies for year-round residents who already have flood insurance. However, the subsidized insurance for these owners will not be grandfathered for the property itself, so new owners may face higher premiums. The new law however will adversely affect owners of second homes or commercial properties. These owners will see increased rates of up to 25% starting this year. Additionally,  FEMA has drawn new flood zone maps with new elevation standards. These new maps will cause some homes not currently in a flood zone to be re-designated to be within flood zones. Insurance rates will be directly linked to the true elevation of the property.  As a result, the elevation of properties (elevation certificates) and the cost of flood insurance will take on a greater significance in sales transactions.

Practical Considerations:

1. Homeowners that are contemplating the sale of their home and who are uncertain as to whether their property is in a flood zone, should consider getting an elevation certificate or flood zone determination before they list the property.

2. It is likely that property prices will become depressed for properties located in flood zones. Agents will need to do more inquiry as to the cost of flood insurance for such properties.

3. Read the Flood insurance disclosure provisions in the Florida Realtors/Florida Bar-Contract and pay attention to the termination deadlines for determining  flood insurance eligibility.

In August 2013 there were several  changes to the standard Florida Realtors/Florida Bar-Contract. One of these changes was found in paragraph 10 (D) which concerns flood zone and elevation certificates. This revision to paragraph 10 (d) inserted a blank line for the parties to designate the number of days the buyer has to the terminate the contract if the property is found to be ineligible for flood insurance through the national flood insurance program (NFIP), or if the lowest floor elevation for flood insurance purposes is below minimum flood elevation. Twenty (20) days after the effective date is now the default provision. Also, this paragraph discloses that flood insurance rates through NFIP may be increasing on non-primary residences and that Buyers may be required to obtain a flood elevation certificate to obtain flood insurance.

Practice Pointer:

Paragraph 10(d) creates an additional escape for buyers where the property is found to be in a flood zone and the finished floor is below flood elevation. However, there’s a temptation to delay the survey work and avoid the expense until after the inspection period has expired. This leaves little time to complete the survey before the expiration of the 20 day period. Agents are advised to use greater diligence to see that survey work and/or elevations certificates are obtained within the flood zone determination deadline (20 days or as per contract).

It should be noted that the language in paragraph 10 (d) puts the burden on the Buyer and agents to determine whether the property under contract is located within or outside a flood zone within the (20 day) deadline. However, agents (especially listing agents) must also realize that paragraph 10 (d) comes under the “Disclosures” section of the contract and that should the Seller or an agent have actual knowledge that the property is located below minimum the flood elevation, they must disclose this fact to the buyer or run the risk of giving Buyer a right to cancel the contract or even a suit for damages after closing.

 Note about minimum flood elevations and non-conforming structures: Many local ordinances have adopted building codes containing minimum floor elevation requirements that are .5 to 1.5 feet above flood elevation, so while paragraph 10 (d) can be satisfied where the floor elevation is above the flood elevation, the floor may still be below the minimum elevation as required by ordinance and thus the home may be considered a non-conforming structure and objected to by the buyer. Buyers should obtain an elevation certificate and confirm that the elevation of the home satisfies the minimum height requirements found in local ordinances.

Post Script:   The Biggert-Waters Flood Insurance Reform Act has drawn severe criticism especially from Florida lawmakers and Congress is  moving to delay implementation of the law. Check out this link for details: http://www.insurancejournal.com/news/national/2013/10/28/309383.htm.
Stay tuned for more developments.

Stay dry…


Why marriage is so great in Florida-Tenancy by the Entireties

Charles H. Sanford, Esq._0244_0001crop

Legal News Post # 1
Why marriage is so great in Florida-Tenancy by the Entireties:

Florida has a very old form of property ownership known as tenancy by the entireties (“TBE”).  TBE is a joint tenancy that exists only between spouses. TBE only exists if the property is specifically titled to a married couple in a manner as follows: “John Doe and Jane Doe, husband and wife”.
This type of joint ownership has several interesting features:

1. Survivorship: Upon the death of one of the spouses the property goes to the surviving spouse by operation of law. This property will be excluded from probate of the estate of the first spouse to die.

2. Legal fiction: This ownership is deemed to be an ownership by the marriage itself. In other words, it creates the curious legal fiction that there is one entity (the marriage) that owns the property. Each spouse in the marriage is said to own the whole (the entirety). This strange fiction creates the basis for the next two features unique to TBEs.

3. Limited asset protection: A general judgment creditor (think credit card company) of either the husband or wife can not look to the TBE property to satisfy the debt solely owed to creditor by that spouse. Florida’s acceptance of TBE ownership, along with homestead is the reason Florida is considered one of the most debtor friendly states in the US. Note: This protection does not apply if the debt is jointly owed by the husband and wife. Also, this protection does not apply with respect to federal tax liens (pre-emption by federal law). Hint for spouses: Don’t sign husband’s or wife’s credit card application or you both become liable for debt and thus expose otherwise protected property!

4. Severance of TBE upon divorce. Logically, since the marriage “owns” the property, if the marriage no longer exists then TBE ownership can’t exist. So, upon divorce the TBE ownership severd and is converted to a tenancy in common (“TC”), in which each party gets an equal interest (50%) in the whole.
Interestingly, once the TBE is severed by divorce, if the divorced parties remarry, the TBE does not get reinstated. The parties must re-convey the property to each other as husband and wife. Admittedly this scenario does not occur too often, but not re-conveying to create the TBE could cause unitended consequences for a surviving spouse especially in 2nd or 3rd marrages with “blended” families. This is so because in 2nd marriages upon the first spouse’s death his or her TC interest (say 50%) will not go to the husband by operation of law and , assuming there is no will, Florida’s intestacy statutes could cause an interest in such property to go to the first to die spouse’s children and not 100% to the surviving spouse.

Florida Statues Sec.732.102 provides:
The intestate share of the surviving spouse is:

(3) If there are one or more surviving descendants of the decedent who are not lineal descendants of the surviving spouse, one-half of the intestate estate.

(4) If there are one or more surviving descendants of the decedent, all of whom are also descendants of the surviving spouse, and the surviving spouse has one or more descendants who are not descendants of the decedent, one-half of the intestate estate.

Finally, in any matter dealing with the ownership and rights in real property, one must always determine whether the real property is homestead. Homestead rights exist by virtue of the Florida Constitution and are quite broad and very complex. Legal scholars refer to Homestead as a “legal chameleon” because of its complexity and the maze of court rulings interpreting the application of the law to facts. I mention homestead only to point out there are other considerations and options when it comes to asset protection and that homestead can protect real property from creditors regardless of whether the property is owned as a TBE. I’ll discuss homestead in future posts.