The “50/50 Rule”

A good Realtor friend called asking for a refresher on the “50/50 Rule.”

The regulation to which they were referring, of course, is the so-called “Fifty Percent Rule,” which simply states that if the cost of any reconstruction, repair, addition or other improvement to a property equals or exceeds 50% of the market value of the structure, then the structure has to be brought into compliance with current FEMA regulations.

Each municipality has its own rules about how to calculate the 50%, so the best advice you can give a client is for them to seek the guidance of the appropriate building official if they are planning to renovate the home or redevelop the site.

And, be extremely careful if you think someone is considering, or worse, has conducted, unpermitted work to the structure to avoid the 50% threshold.  The unpermitted improvements will inevitably come to light, and likely when the timing is least opportune.  More fundamentally, who wants to play nursemaid to a transaction where the sellers have to produce a forensic appraisal of the structure’s value prior to the completed renovations, while building officials are tearing out drywall to check plumbing and electrical work for code compliance?  It may sound far-fetched, but it is a true story.

For your reference, following are the pertinent portions of the Sarasota County zoning code on the subject, including the code provision which details how the 50% is calculated.  Keep in mind that this code only applies to the “unincorporated” portion of the County – the City of Sarasota, City of Venice, Town of Longboat Key, etc. all have their own codes:

Substantial Improvement means 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. This term includes Structures which have incurred Substantial Damage, regardless of the actual repair work performed. The term does not include:

a. Any project for improvement of a Structure to correct existing violations of state or local health, sanitary, or safety code specifications which have been identified by the County and which are the minimum necessary to assure safe living conditions, or

b. Any alteration of a Historic Structure, provided that the alteration will not preclude the Structure’s continued designation as a Historic Structure.

Market value means the replacement value of a building or Structure, less the value of all forms of depreciation as supported by a well-recognized cost estimator, not to include the vacant land value, Accessory Structures, and Appurtenant Structures such as pools, pool cages, detached garages and any other Structure not structurally attached.

For the purpose of determining Market Value the applicant may use the Sarasota County Property Appraiser’s Office assessed value of improvement plus 20 percent or an Appraisal Report prepared by a State of Florida Certified Residential Appraiser or State of Florida Certified General Appraiser which meets the requirements of the version of the Uniform Standards of Professional Appraisal Practice (“USPAP”) incorporated by reference in Florida Administrative Rule 61J1-9.001. As contemplated by Standards Rule 1-2 of USPAP, the applicant’s appraiser shall identify all intended users of the Appraisal Report, including the Building Official, and the intended use as ensuring compliance with this Ordinance. The Building Official shall perform a review of the following: (1) whether the Appraisal Report accurately reflects the characteristics of the building or Structure (e.g., total square footage and number of rooms compared to tax records, condition of the building or Structure, quality of construction); and (2) whether the replacement value excludes the vacant land value, Accessory Structures, and Appurtenant Structures such as pools, pool cages, detached garages and any other Structure not structurally attached. Further, the Building Official shall use whichever Market Value is higher.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

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