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#2264574 - 01/11/22 04:19 PM Flood detached structure exemption
scb2011 Offline
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Joined: Mar 2011
Posts: 258
TN
If the collateral for a loan is located in a SFHA and consists of a home and a detached garage, and the loan purpose is business, a cash out refinance on a home already owned by the borrower, is flood insurance required on the garage provided there is no bathroom, sleeping space or kitchen in the garage?

I am thinking that the detached structure exemption does not apply to a structure if it is commercial/income producing. I don't think the borrower plans to run a business out of the garage, but if the garage is used by a renter, would that make the garage income producing causing the detached structure exemption not applicable?
Last edited by scb2011; 01/11/22 04:24 PM.
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Flood Compliance
#2264581 - 01/11/22 04:47 PM Re: Flood detached structure exemption scb2011
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
It is not the purpose of the loan that determines whether or not the detached structure is eligible for an exemption. It is the nature of the detached structure.

"A structure that is a part of a residential property" is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;
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#2265330 - 01/27/22 05:27 PM Re: Flood detached structure exemption scb2011
RegTalk Offline
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Joined: Dec 2020
Posts: 63
If the detached structure is a dirt floor lean-to type of building that is used as a farm shed, does the exemption apply still? (this is on a personal loan)

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#2265331 - 01/27/22 05:47 PM Re: Flood detached structure exemption scb2011
Adam Witmer Offline
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A building is defined as "a structure with 2 or more outside rigid walls and a fully secured roof, that is affixed to a permanent site." So, if your structure meets the definition of a building, then flood rules would apply (including the rules for the detached structure exemption).

Next, you have to ask: is the farm shed used for personal, family or household purposes? If so, you could presumably use the detached structure exemption. If not - such as it being used for primarily agricultural, commercial, industrial, or other business purposes - then you could not use the exemption.
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#2265334 - 01/27/22 05:52 PM Re: Flood detached structure exemption Adam Witmer
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Joined: Dec 2020
Posts: 63
it does meet the def of a building and its used to store lawn mowers & random farm items in.

Thank you for the reply

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