Laws are made to be followed and enforced. As an attorney, it is unethical to advise people to break the law. I am getting numerous calls and questions which ask me, “How do I get around FEMA’s 50% Rule?”

The answer is that everybody will have to comply with the 50% Rule. A damaged structure will either be determined to be above or below the 50% determination under federal and state law.

The next question is: “Does the insurance claim amount have an impact on the 50% Rule finding?” Technically, the answer is “no.” On the other hand, one cannot defraud an insurer or the government. The repair estimates and pricing for the insurance claim should be honest. If it is honest and far above 50% of the structure’s market value, I would suggest that it will be very difficult to expect avoidance of an adverse 50% determination.

The FEMA 50% issue is really one of real estate law rather than insurance coverage law. One Southwest Florida real estate law firm, Grant Fridkin Pearson, noted the following:

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.

2. 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.

3. 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.

Local building officials must follow state and federal rules and regulations. The federal government is not going to look the other way if the local building officials fail to follow the FEMA 50% Rule.

I suggest policyholders concerned about this issue also become very familiar with FEMA’s Substantial Improvement/Substantial Damage Desk Reference. I also encourage you to read my prior post on this topic: Substantial Damage and Questions About FEMA’s 50% Rule.

Thought For The Day

The government cannot enforce its mountain of laws and regulations without voluntary compliance.
—Charles Murray