Need some help please

This property located in a flood hazard area has four separate buildings on. A 4-family residential unit, a tavern, a shed and a 2-car garage on it. At this point, we can verify flood insurance on both the 4-family and the tavern. We would like to use the detached structure exemption for both the shed and the garage. From pictures of the property, we have no concerns with the shed.

However, currently the owner rents out the garage for $80.00 a month to someone who stores passenger vehicles in it. There is no heat to the garage.

Thoughts on if we can still use the detached structure exemption for the garage??

Thanks

Since they are renting out the garage, it needs its own policy.

That is the way we were thinking too, thanks for confirming.

New question--same property.

Does the fact that the property is owned by the LLC not a person preclude us from using the detached structure exemption for the shed?

What is the shed used for?? Commercial purposes? Or is a shed a storage unit for the people living in the house for personal use.

Ownership of the property is not a determining factor.

To our knowledge, the shed is not used for anything--from the pictures I've seen it looks like it could fall over at any time. But we were questioning it, since it is a separate structure on the property.

Have them kick it over and it solves your dilemma

As Randy stated, the borrower is not a factor for the Detached Structure Exemption. The use of the building is. Here's a portion of our training outline on this topic:

Detached Structure Exemption [§339.4(c)]:
A bank does not have to require flood insurance for qualifying detached structures that do not serve as a residence. However, lenders should account for any safety and soundness considerations.

1. Qualifications:
Each of following must be met:
a. Multiple Buildings: There must be more than one building on the property.
b. Residence Structure: One building must serve as a residence (sleeping, bathroom or kitchen facilities).
c. Structure Purpose: The detached structure(s) must be used primarily for personal, family, or household purposes. However, it cannot serve as a residence (sleeping, bathroom or kitchen facilities).

2. Loan Purpose vs. Structure Purpose:
a. Loan purpose DOES NOT matter.
b. Structure purpose DOES matter.

Hope that helps.

Thanks to both for your responses. I was out of the office for a few days and just back to this.

I have a question related to the detached structure exemption. Customer has a house and a detached garage (no residence in the garage) in a flood zone. Customer has obtained a LOMA to remove the house, but not the garage. Since insurance will not be required on the house should insurance be required on the garage? Does the exemption still apply?

I think this pretty much says it all.

§ 339.4 Exemptions.

The flood insurance requirement prescribed by § 339.3 does not apply with respect to:

(c) Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence.

The exemption remains available even though the residence itself isn't required to have coverage. For both buildings, it becomes a business decision whether to require flood coverage on a safety-and-soundness basis.

Just came upon a scenario similar to the above. Large acreage property in which the Residence IS NOT in a flood zone, however a "horse barn" IS located in a flood zone. If I understand correctly, we are required to obtain proof of flood insurance since the purpose of the "horse barn" is agricultural in nature. Or could we determine that it is for personal use in the form of a recreational purpose? Any advice is appreciated.

we are required to obtain proof of flood insurance since the purpose of the "horse barn" is agricultural in nature. Or could we determine that it is for personal use in the form of a recreational purpose?

Which is it?

Do they board horses for others, do they train horses, do they buy and sale horses....etc. Or do they simply keep their personal "pet" horses in the barn? Is the property primarily used for agricultural purposes or is it residential property?

You have to make a reasonable determination based on how the property is actually used.

It will be a retirement home, with no plans for horses or any ag purpose at all. It will be a large garage/storage building. In order to claim the exemption it would be prudent to note this in the file, correct?

Will it be a retirement home for the people buying it or will it be retirement home facility. If the garage/storage building is being used for business purposes it would not qualify for the exemption.

I'm sorry I should have specified. It is a single family residence and the "horse barn" was utilized by the previous owners for personal use. No commercial or agricultural aspect involved with the structure. The property does contain several acres, but the acreage is not income producing.

If the property is residential and the use of the barn is strictly for personal use and not used as living quarters it would qualify for the exemption.

So we have a similar situation....individual is purchasing a single family dwelling with several outbuildings (storm shelter, yard shed, two loafing sheds) for investment purposes. Borrower plans to purchase this property and then use it as a rental property, so loan will be booked as a commercial loan; borrower has multiple other rental properties. Obviously none of the detached structures are used as residences, and they are all detached from the dwelling/residence, the piece I am struggling with is the structure purpose. How do we determine this when the loan is being purchased as investment property? Thanks.

You will have to determine the intended use of the buildings by the buyer. Will the buyer store business related assets in the buildings? Will they be used for any business or agricultural purposes?

If they will be for the personal use of the renters then they would be eligible for the exemption.

That makes complete sense, thanks for your prompt response Dan!