What is the 50% Rule?
Thoughts of hurricanes are starting early this year with the potential tropical storm forming off of our coast. In the past, I have written about protecting your existing house and best practices for new construction (March 2013 and December 2011, respectively). The area with some confusion are the rules for repairing and/or improving your existing house which I will address today.
Beaufort County and the municipalities within the county all participate in the National Flood Insurance Program (NFIP) that is administered by the Federal Emergency Management Agency (FEMA). FEMA establishes a base flood elevation above mean sea level which is revised periodically. Buildings must meet the NFIP requirements which include having the first floor above the base flood elevation or higher depending on the flood zone, along with other requirements.
If the cost of improvements or the cost to repair a damaged building exceed 50% of the market value of the building, the entire building must be brought into compliance with the NFIP requirements. The market value is for the building only, not the property, any landscape improvements, or detached accessory buildings. The value can be determined by a licensed appraiser or the county’s property assessment.
The only items that are excluded from the cost of improvements or repair are as follows:
- Plans and specifications
- Surveys
- Permit fees
- Cost to demolish storm damaged buildings
- Debris removal
- Landscape improvements
- Detached structures. If the detached structure is habitable space it is subject to the same rules when renovated or repaired.
Many existing houses in the county do not meet the NFIP requirements and must adhere to the 50% rule. Most houses built in accordance with the 2009 or 2012 edition of the International Residential Code (IRC) meet the NFIP requirements and are not subject to the 50% rule.
Municipalities often adopt a cumulative substantial improvement policy which combines any combination of repairs, reconstruction, rehabilitation, additions, or other improvements to a structure during a finite period of time that is limited to the 50% value. The cumulative substantial improvement policy for Beaufort County and Bluffton is 10 years; the City of Beaufort is 5 years; and Hilton Head currently does not have a cumulative substantial improvement policy.
When purchasing an existing house it is prudent to do the homework to determine if the house is built above the flood plain. A local surveyor can provide a flood elevation certificate that shows the flood zone, the required first floor elevation, and the actual first floor elevation. That fixer upper might seem like a good deal until you realize the cost of raising the first floor and meeting the NFIP requirements.
