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#1837678 - 07/30/13 04:13 PM Not securing buildings to avoid insurance
Bec Offline
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Bec
Joined: Jul 2010
Posts: 1,114
The Great White North
A lender would like to take out two building located in a flood zone and only use the main building (not in a flood zone) to secure a commercial loan. Is that allowed?
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Flood Compliance
#1837744 - 07/30/13 06:22 PM Re: Not securing buildings to avoid insurance Bec
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,020
Bloomington, IN
It is not as easy a fix that it may seem. The exclusion was primarily for low value buildings on high value land. It was not really meant to be used to exclude any building just for the sake of avoiding flood insurance.

But if you go that route your mortgage/DOT, not your note, must explicitly exclude those buildings. In doing so the exclusion should address what will happen to the buildings if the property goes into foreclosure. Will they be moved? Whose responsibility is it to move them? How soon must they be moved? What happens in the case of flooding? You don't want the customer coming back claiming damage against the bank for not requiring the building to be insured against flood.

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The opinions expressed are mine and they are not to be taken as legal advice.

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