Flood Insurance Update

The As Is Contract and Regular Florida Realtors/Florida Bar Contract forms both contain important disclosures under Section 10 “Disclosures”. One important but often overlooked section pertains to section (d) titled “Flood Zone; Elevation Certification”. Both versions of the Contract advise the Buyer to verify the elevation and flood zone of the property they are looking to purchase and a reminder to the buyer to identify what restrictions, if any, would apply to the buyer should they wish to improve the property or have to rebuild in the event of casualty. It is also prudent for a Buyer who is obtaining financing to verify their lender’s flood insurance requirements, preferably as early in the process as possible. They can vary.

The Contracts also include language allowing a buyer to be released from the contract within a specific timeframe after the Effective Date (a default of 20 days), if they are unable to obtain flood insurance through the National Flood Insurance Program or through private flood insurance (where available).

It is important to note that Congress requires all properties within the 100-year floodplain that are purchased with a federally backed mortgage to carry flood insurance. However, at the time this article is being written, the partial government shutdown has resulted in FEMA and the National Flood Insurance Program suspending sales of new policies, thereby creating an issue for buyers who are required to have flood insurance. This decision could potentially delay any closings where a buyer requires coverage through the National Flood Insurance Program. However, all policies already in effect will continue to be effective until their expiration date.

One option for parties that anticipate that their closing will be impacted by the government shutdown is to review the current flood insurance policy that the seller has on the property. The seller’s policy may be assignable and the parties may be able to close if the seller can assign coverage to the buyer. Keep in mind that at this time policies are not being renewed so the existing policy will only be effective until its expiration date.

As a reminder, a cash buyer who wishes to obtain flood insurance will have a thirty (30) day waiting period from the application date and the premium is paid before their flood insurance can be bound. This is an important timeframe to account for if any buyer is required to, or otherwise wants to obtain flood insurance.

As always, if you have any questions, we urge you to contact one of the attorneys at Berlin Patten Ebling, or consult with your local real estate attorney, for additional guidance.

Sincerely,
Berlin Patten Ebling, PLLC

Article Authored by Natasha Selvaraj nselvaraj@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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