OK, here’s something new to watch out for that was just in the news:

BUYING A HOUSE WHICH HAS MADE ONE OR MORE FLOOD INSURANCE CLAIM(S).

Here’s the way it is right now. The National Flood Insurance Program (NFIP) in an attempt to limit properties which make multiple claims on the NFIP has defined problematic properties into two categories, Repetitive Loss properties and Severe Repetitive Loss properties.

A Repetitive Loss (RL) property is any insurable building for which two or more claims of more than $1,000 were paid by the National Flood Insurance Program (NFIP) within any rolling ten-year period, since 1978. A RL property may or may not be currently insured by the NFIP.

A Severe Repetitive Loss Properties (SRL) which is a single family property (consisting of 1 to 4 residences) that is covered under flood insurance by the NFIP and has incurred flood-related damage for which 4 or more separate claims payments have been paid under flood insurance coverage, with the amount of each claim payment exceeding $5,000 and with cumulative amount of such claims payments exceeding $20,000; or for which at least 2 separate claims payments have been made with the cumulative amount of such claims exceeding the reported value of the property.

And now the administration would like to add a new category called Extreme Repetitive Loss Properties AND they want to stop issuing new policies for new construction homes built in the Special Flood Hazard Area (SFHA). SFHA areas are designated on the flood insurance rate map as Zone A, AO, A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-A30, V1-V30 or V.

OK, so what is the problem here? First the current law. If you are buying a home which has had even a single $1000 claim made then you have a flood loss and make a claim you could wind up owning a property which has made 2 claims IN THE LAST 10 YEARS and being classified as a ‘Repetitive Loss’ property. The stigmatization of this will adversely affect the property value and drive up your insurance costs if you stay.

As a practical matter, there are only about 50 or so repetitive loss properties in Palm Beach County. If you answer YES to any of the B) questions below then that’s a problem…

If changes are made to stop issuing policies in the SFHA it will affect in fill and tear downs in communities like Lost Tree and Hidden Key. These folks can afford to pay more for insurance PROVIDED someone else will write the policy. No insurance = no loan = reduced sales prices.  It will also affect in-fill lots in some locations in the acreage. AND it will affect some new construction but not really in our area as the larger developments are not in the SFHA.

How do I know is there has been any claims made on a property?

First of all, as of January 2019 there are about 66 Repetitive Loss Properties (residential & commercial) in Palm Beach County according to a database called the Comprehensive Loss Underwriting Exchange, or CLUE. Underwriters use the information in a CLUE report to rate insurance policies. Only the Owner and their lender may access the CLUE reports and thus you will have to ask the Owner to provide it to you or sign an authorization for it to be released to you.

The short answer is YES. Rental for more than 30 days for two consecutive years, OR for more than six months, constitutes abandonment of a homestead exemption. What if I rent out a portion, say a room a guest house or an in law suite, of my homesteaded property?

This is the new wrinkle. THE FL SUPREME COURT RECENTLY ISSUED A RULING IN FAVOR OF THE TAX COLLECTOR. At the heart of this NEW case law is that Florida statutes property tax provisions define real estate used and owned as homestead to mean real property to the extent provided in the Florida Constitution, less any portion used for commercial purposes and specifically states that property rented for more than 6 months is presumed to be used for commercial purposes. The tax collector estimated, in this case, that 15% of the property was rented out (and was for the EXCLUSIVE use of the Tenant), producing income, for more than 6 months in a year, and therefore was being used for commercial purposes. They sent the Owner a bill for X Years of the 15% that was NOT covered by the homestead exemption, plus interest and penalties of course. And the supreme court of Florida agreed with the tax collector.

Thus, if you were to say rent out a 500 SF (square foot) room in the house you’re living in or a 500 SF Accessory Dwelling Unit, and your total square foot under air were say 3000 SF then the tax man could remove the homestead exemption on 500 SF of your 3000 SF.

According to the Florida Statute….

196.061 Rental of homestead to constitute abandonment

(1)The rental of all or substantially all of a dwelling previously claimed to be a homestead for tax purposes shall constitute the abandonment of such dwelling as a homestead, and the abandonment continues until the dwelling is physically occupied by the owner. However, such abandonment of the homestead after January 1 of any year does not affect the homestead exemption for tax purposes for that particular year unless the property is rented for more than 30 days per calendar year for 2 consecutive years.

Thus, if you rent out “all or substantially all of a dwelling” (not just a room but you can not keep just say a closet) for more than 30 days per calendar year for 2 consecutive years then you would not be eligible for the Florida Homestead exemption.

The Palm Beach County Property Appraiser has this to say…

Rental of a Homesteaded Property*

You may rent your homesteaded property for 30 days or less per calendar year and maintain a homestead exemption. Rental for more than 30 days for two consecutive years or for more than six months constitutes abandonment of a homestead exemption. Exempt property rented after January 1 of any year does not affect the homestead exemption for that particular year. If the property is rented on January 1 of the following year or the terms of the lease are six months or more the exemption will be denied. Property owners are required to notify the Property Appraiser’s Office when their property no longer qualifies for exemption. Failure to do so could result in a Homestead Tax Lien with substantial penalty and interest. *Florida Statute 196.061 and 196.011 (9) (a). Please call our Exemption Services at 561.355.2866 for more information.

Hurricane Resistant Homes – Part 6 OPENING PROTECTION

Moving right along from Part 5 on gable or hip shape.

Opening Protection?  When the wind starts blowing things around it breaks windows and the like.  This causes an increase in the internal pressure loading of the house and allows rain into the house.

HURRICANE SHUTTERS (OR IMPACT GLASS) ARE THE LARGEST SINGLE INSURANCE MITIGATION DISCOUNT.

Impact glass or shutters?  Similar to roofs, opinions vary on this one.  Impact glass is great. It’s always there whether you need it or not. BUT it’s very expensive, can break (but not breach, when impacted, can be scratched by blowing sand and the like, and since it’s typically a multi layer system with gas between layers they can leak this gas out leading to a moisture looking fog in the glazing.  Any one of these would necessitate the change out of at least the glazing which is VERY expensive.  If money is no object then go for it.

Shutters, the most important feature about shutters is that they get used.  Accordion and Bahama shutters are expensive but the easiest to close up.  The fabric coverings are also very easy to install but tend to go moldy if they are left rolled up in place.  Clear panels are great as well.  They are light weight and allow light in.  Some people leave them up all year round but this can be dangerous is a fire or if some other need to escape your house comes up.  Aluminium shutters are also light (er than steel).  And, finally the good old steel shutters.  I have Miami Dade approved steel shutters at my house and they are VERY heavy BUT I get a larger insurance discount even though they are stronger than what the building code requires in my area.

The best answer on this is most likely some combination of systems however to qualify for the insurance discount you must have 100% coverage of all opening including the garage door.  Garage doors have been shown to be particularly susceptible to wind failures.  The good news is that they are relatively inexpensive.  At my house I can tell you that installing a 100% coverage system of Dade County approved shutters was re-paid in a SINGLE year of reduced insurance premiums.  CLICK HERE TO SEE A POST I DID ON HOW TO CALCULATE THE ECONOMICS OF MITIGATION DISCOUNTS

One more tip.  Make sure you have all the required nuts, bolts and fasteners for your system.  When the storm is on the way these sell out quick.

That’s it for this series.  Ig you have any questions please use the chat button on this page or call me at the office at 561-626-8550.

CLICK HERE to go back to the first post in this series of how to buy a hurricane resistant home.

Hurricane Resistant Homes – Part 5 HOUSE GEOMETRY

The geometry of the house.  When I say this I mean is it a single story structure or 2 or 3 (townhouse) stories and is it hip or gable ended roof and does it have anything particularly susceptible to uplift?

As one goes up in height the wind gets stronger so generally a single story house is better than 2 or 3 stories.  This is due to the ‘shielding’ effect of ground structures, trees and the like.

The gable, hip or flat roof is the shape of the house.  Hip shaped roofs tend to do better than gable shapes at the end walls and both do better than flat roofs.  One can retrofit braces into a gabled roof end and these work well.

Most houses are a combination of at least 2 of these shapes but again if the house was built under the 2001+ FBC then it is built to withstand the appropriate loading.  Many older ‘classic Florida’ homes have hip shaped roofs with flat screened rooms.  These have been shown to be a particular weak point in many older homes.  Wind gets under those screened patios and lift the roof up which can tear right off at the wall attachment point allowing water to get into the house and the damage can compromise the remainder of the roof.  Now, I happen to like my big screened patio but I am very aware that it is a weak point in my house.  And, I get less of an insurance mitigation discount because more than 10% of my total roof perimeter is something other than a hip shaped roof.