New homes or commercial buildings constructed in the floodplain as shown on the FIRM are rated based on the elevation of the lowest floor of the building in relation to the Base Flood Elevation shown on the FIRM.
- These buildings are rated using an elevation certificate.
- If updates to the floodplain map (FIRM) occur sometime after construction, then the building may need to be rated using grandfathering procedures in the future.
Effect of Substantial Improvements
If your building is pre-FIRM it may be grandfathered into a lower insurance rate and is allowed to remain non-conforming to flood plan management regulations. However, substantial improvements requires that the entire structure (existing & proposed improvements) in a Special Flood Hazard Area (A and V zones) comply with the current floodplain management regulations adopted by each County, regardless of the requirement for flood insurance. Substantial improvements are 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.
Building improvements will be tracked over a period of time (varies between each county) and when the cumulative cost of permitted improvements exceed 50% of the market value of the existing structure, then the entire building will have to be brought up to present day regulations. Because each county establishes their own methodology for determining “improvement cost”, “market value” and defines their specific “tracking period”, it is important to consult with the local county floodplain manager during the planning stages of a project.
Change in ownership does not ‘reset’ the tracking period. So when a property changes ownership, the new owners need to find out what improvements have been done as this may affect their proposed improvements. The new owners of these pre-FIRM structures may not have the ability to do their envisioned renovations without having to bring the entire existing structure up to present day flood code. The most common requirement would involve raising the finish floor elevation of the existing structure to the current Base Flood Elevations (BFE).
So if you are looking to buy a property in a flood zone and want to do renovations be sure to check what percentage of the market value have already been done in the tracking period.
Check out an example of how to calculate substantial improvement allowances.
IF YOU ARE CONSIDERING PURCHASING A PROPERTY IN A FLOOD ZONE AND PLAN TO DO RENOVATIONS/IMPROVEMENTS BE SURE TO LOOK INTO THE SUBSTANTIAL IMPROVEMENT RULE!!