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Lee County 50% Rule Changes To follow-up on my previous post, on November 8, the Lee County Commissioners considered several changes to facilitate repairs to buildings damaged by Hurricane Ian. The most significant changes involve how the “50% Rule” will be calculated.

The calculations for the 50% Rule along with other guidelines relating to the 50% rule are based on local regulation. Lee County Board of Commissioners were presented with and approved the following changes:

  • Allowing for a “permit-by-permit” valuation of the cost of repairs. The past County regulations required a cumulative consideration of improvements made over the previous 5 years. This change would not apply to “repetitive loss” properties that have received two or more NFIP payouts in excess of $1000 over a 10-year period.
  • Amending cumulative period for “repetitive loss” properties from 5 years to 1 year for 50% calculation.
  • Updating elevation requirements for manufactured homes in special flood hazard areas and coastal high hazard areas.
  • Amendment reflecting that the newest version of FEMA flood insurance rate maps for Lee County take effect November, 17, 2022.

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Continue Reading Outcome of November 8 Lee County’s Meeting Regarding 50% Rule for Hurricane Ian Repairs

At its upcoming Special Meeting on November 8, the Lee County Commission will consider several changes to facilitate repairs to buildings damaged by Hurricane Ian.  The Local Planning Agency (LPA) will consider and make a recommendation on the proposed changes at its meeting on November 7.

The most significant changes involve how the “50% Rule” will be calculated.  The 50% Rule, required by FEMA as part of the National Flood Insurance Program (NFIP), states that repairs to damaged structures cannot exceed 50% of the value of the building unless the structure is brought into full compliance with current flood regulations, including minimum finished floor elevations.…

Continue Reading Lee County to Consider Changes to 50% Rule to Facilitate Hurricane Ian Repairs

contractsOver the last year, I have noticed an alarming trend where residential builders, realtors, and sellers enter into contracts for new construction that utilize the “As Is” Residential Contract for Sale and Purchase (commonly referred to as “FARBAR Contract”), which is a standard form contract published by the Florida Realtors and The Florida Bar. The FARBAR Contract is a valuable tool in most residential real estate transactions; it provides standardized terms governing a transaction as well as provides for the basic outline to get to closing.

While immensely valuable in the resale market, the FARBAR Contract is ill-suited for the new construction context. The primary reason for this seems fairly obvious, as the FARBAR Contract assumes that the home exists at the time the contract is entered into. As a result, the FARBAR Contract fails to address many issues that arise during the construction process.

The most common of these issues are construction delays, increases in the price of material, and financing contingencies. These issues combined with external factors such as supply shortages, labor shortages, governmental delays and increasing interest rates have highlighted the inadequacies of the FARBAR Contract in the new construction context in recent months.

Construction Delays

construction delayConstruction delays are simply not accounted for under the FARBAR Contract; again, the assumption underpinning the FARBAR Contract is that the home exists, and the seller’s performance merely requires delivering clear title, possession of the property at closing, and executing the necessary closing documents. Extensions are certainly common with the FARBAR Contract, but they often do not extend for months on end.

With new construction, supply and labor shortages and delays at the permitting office can mean delays that go on for months. This often leaves buyers frustrated and on the hook for alternate housing and storage throughout the duration of the delay. Rising interest rates also pose an issue with new construction projects. Delays in construction could result in a buyer’s interest rate lock expiring or require per diem payments to preserve the interest rate. Significant delays could mean thousands of dollars in per diem charges to avoid large jumps in interest rates.…

Continue Reading Inappropriate Contracting: Using FARBAR Form Contracts for Residential New Construction

The Florida legislature’s special session held this week resulted in new laws aimed to promote condominium building safety. Senate Bill 4D passed the House of Representatives and Senate each, and was signed into law by Governor Ron DeSantis on May 26, 2022.

The legislation comes nearly one year after the devastating partial collapse of the Champlain Towers South residential condominium in Surfside, Florida. Following the tragedy, Florida’s legislature grappled with proposed legislative during the regular session in March 2022, but the condominium building safety laws proposed ultimately were not passed at that time. The special session presented a second, and successful, opportunity to revisit these proposals. The new laws represent statewide and industry-wide efforts to prevent similar tragedies in the future by mandating a variety of preventative measures, including:

  • “Milestone inspections” of condominium buildings at least three stories in height must be performed when the structures reaches 30 years since its Certificate of Occupancy and every 10 years thereafter. For similarly situated condominium buildings that are within 3 miles of a coastline, the milestone inspection must be performed when the structure reaches 25 years, and every 10 years thereafter.
  • A “structural integrity reserve study” is now required to be performed at least every 10 years after the condominium’s creation for each building on the condominium property that is three stories or higher. The study must include the roof, load bearing walls, floor, foundation, fireproofing and fire protection systems, plumbing, and any item with a deferred maintenance or replacement cost that exceeds $10,000.00.
  • Furthermore, Members cannot opt-out of the mandatory funding of reserves for structural integrity components, regardless of a membership vote approving same.
  • Requiring inspection reports and studies to be kept as Official Records and available and published to Members.
  • Clear developer requirements for building inspections, structural integrity reserve study, and funding requirements prior to transition to the residents.
  • Engagement of the Florida Department of Business and Professional Regulation and local municipalities to track condominium buildings and the inspection reporting.

While the legislation presents new requirements from the current regulations, it is not the first time that inspections have been required by the Condominium Act. In 2008, House Bill 995 was adopted, requiring inspections for three-story condominium buildings every 5 years, though a majority of voting interest could opt-out of this requirement. That law was later repealed in 2010; at that time, many advocates for repealing the law cited reducing fiscal costs in the wake of the Great Recession.

When does the new law take effect?

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Continue Reading New condominium building laws adopted in Florida seek to prevent future Surfside tragedies

Leaving Real Property to Loved OnesOwning real property has always been a staple investment vehicle for people throughout history. One attractive feature of investing in real property is that it may also double as a Homestead. In other cases, real estate investments may be rental, commercial or recreational (i.e. your log cabin or private island).

Whatever the case may be, it is important to understand that real estate can be owned in several ways, each of which has important legal consequences when it comes to leaving it to your loved ones upon death. Failing to understand how you legally own your property and how it will be passed on to your loved ones can lead to unintended, and often unforeseen consequences.

Outright Gifts at Death

  1. Gifts In Your Will. Leaving real property to someone at your death can be accomplished via your Last Will and Testament. Your Estate Planning Attorney can help you create the proper testamentary language to direct that ownership of a certain parcel of property be transferred to your chosen loved one(s). This method is very straightforward and initially, often less expensive than other options. However, making this kind of gift in a Last Will and Testament usually requires the person in charge of your estate when you die (the “Personal Representative”) to submit your Last Will and Testament to the probate court and begin the probate process to transfer the asset pursuant to the terms of your Last Will and Testament. Probate can be expensive, public and time-consuming.
  2. Gifts from a Trust. Many Revocable Living Trusts are designed to serve as a substitute for a Last Will and Testament by directing who among your loved ones should receive certain items of property at your death, including real estate. The Trust, similar to a Will, can also distribute your real property to your loved one(s) pursuant to your wishes. However, the Trustee, instead of your Personal Representative will transfer the property to your designated recipient privately during the Trust Administration. One of the primary benefits of a Trust is that, as long as you transfer your property’s title to the Trust before you die, the Trustee will have the necessary power to make the post death transfer to your intended beneficiaries. Probate will be unnecessary, saving your estate and trust beneficiaries significant costs and delay.
  3. Gifts Using Enhanced Life Estate Deeds. A number of states have passed laws that allow property owners to record with the local land records office, a deed that transfers the title automatically (without the need of a probate court) to a named beneficiary at the death of the original land owner. This method for transferring real estate outright to the person whom you intend to receive it at your death can be very simple and cost-effective. Not every state allows this type of transfer, so it is important to check your state laws or consult with an attorney knowledgeable in this area before attempting to use such a tool. Florida has a unique type of deed, named the “Enhanced Life Estate Deed” (a/k/a “Lady Bird Deed”), which allows for this type of title transfer.

Gifting Real Estate to Multiple Individuals

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Continue Reading 7 Ways to Leave Real Property to Loved Ones

grandparents homeThe short answer to this question is no. Naming your child as the recipient of your home in your will does not give them any right to your home while you are still living. However, understanding why requires a little more explanation.

Title Is Key

When it comes to real property such as a house, the person who has title to (or legal ownership of) the property controls the property. The title holder (owner) can lease, mortgage, refinance, sell, gift, or do anything else with the property. When you purchased your home, you received title to it through a deed. This deed proves you are the owner and you have all rights to your property.

A Will Is Effective Only upon Your Death

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Continue Reading If I Give My Home to My Child in My Will, Can They Take My Home While I Am Still Alive?

Henderson Franklin was again honored to sponsor 2022 Market Trends, which took place on March 16, 2022, with speakers Randy Thibaut, founder of Land Solutions, Inc., Denny Grimes, President of Denny Grimes & Team at Keller Williams Realty, and Justin Thibaut, CEO of Land Solutions, Inc.

The presentation discussed the current conditions of the real estate market in Southwest Florida and provided a future forecast about what the market may look like in the coming year. The presentation also focused on the primary areas of the real estate sector: residential development, resale properties, and the commercial market.

Overall, the end of 2021 was a continuation of the rapid growth that comprised 2020 and 2021, as waves of new residents and businesses entered into the market. All sectors of the market are currently seeing growth, but nowhere is this more evident than with residential development and resale, as low inventory coupled with high demand has prompted price fairly dramatic price increases across the three counties of Lee, Collier and Charlotte. The ultimate question, however, will be whether this will continue or will the market begin to decline as prices continue to creep up higher.

Residential Development

real estateIn 2021, Southwest Florida saw a 47% increase in new single-family residential permits issued amongst the three counties, with Lee County seeing the highest increase of 59%. Total residential permits increased 39% percent to approximately 25,000 permits. These percentage increases, while dramatic, still pale in comparison to the number of permits issued in 2005, which numbered around 44,000 permits prior to the crash in 2008. Similarly, multi-family residential permits increased by 19% over the last year.

These numbers illustrate that low resale inventory is driving up the prices, leading buyers to seek new construction and rental properties. Presently, the current inventory of resale properties cannot match the demand of new homebuyers entering the market, leading to homes rising in value by as much as 77% in some areas over the last year.…

Continue Reading The Pulse of Southwest Florida Real Estate: A Recap of 2022 Market Trends

When using trusts in estate planning, a key element includes transferring the trustmaker’s real estate into the trust by recording a deed with the local recording authority. This step is crucial for ensuring that the trustee has the authority to manage and ultimately sell or transfer the property should the trustmaker become incapacitated or die.

If the trustmaker were to die without retitling the property in the trust’s name, the property may have to pass through the probate process even if the trustmaker had a will. Probate is a state court process that often involves significant expenditures of time and money and causes complications that many people would rather avoid.

However, an important question arises regarding the type of deed that should be used for transferring real property into the trust’s name. There are several types of deeds that can be used, one of which is a general warranty deed. The other types of deeds commonly used in the United States for transferring property are quitclaim deeds and special warranty deeds.

Although a full discussion of the differences among the types of deeds is not possible in an article of this length, the following information briefly explains each type of deed and why someone might want to use it when transferring ownership of real property.

Quitclaim Deeds

When someone (grantor) wants to transfer whatever property rights they have in a parcel of property, they can use a quitclaim deed. When an individual drafts and signs a quitclaim deed, they are, in effect, making a statement that whatever they own regarding the property described in the deed is now transferred to the grantee.

real estateWhat makes quitclaim deeds unique, however, is that the grantor who creates and signs the quitclaim deed is also putting the grantee on notice that they make no promises whatsoever that they actually own the property. If they do own the property, it is effectively transferred using the quitclaim deed after it has been recorded with the local recording authority. But if it turns out that the grantor did not, in fact, own the property, the grantee cannot bring a claim against the grantor unless they can prove that the grantor knowingly intended to defraud the grantee. However, if the grantor thought they owned the property but in fact did not own it because of some problem with the title, the grantee would have no ability to make the grantor legally liable for the error.

However, it is still common for individuals to use quitclaim deeds when transferring real property into a family trust for estate planning purposes. They (or their attorneys) reason that a quitclaim deed transfers any ownership interest that you may have in the property to your trust so that your trust can hold and manage it if you become incapacitated or die. Then, when the time comes to sell the property, the purchaser will, presumably, buy title insurance to cover any past defects in the title when they take the property.

General Warranty Deeds

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Continue Reading Using Real Estate Deeds in Estate Planning

Florida Gulf Coast University recently released the January 2022 edition of the Southwest Florida Regional Economic Indicators. The report shares economic data for the region, including an update on the real estate market status across the coastal counties of Lee, Charlotte and Collier. Overall, the report indicates that the real estate market is leveling off after fairly dramatic swings brought about by the COVID-19 pandemic.

Building Permits

Single-family building permits, the metric which indicates the number of new homes under construction, saw an increase of 40% from November 2020 to November 2021. Yet, while this growth indicates increases in new construction from earlier stages of the pandemic, a comparison of more recent numbers actually shows a slow decline over the latter half of 2021.

For example, at the peak of the pandemic housing boom in May 2021, approximately 1,100 new single-family permits were issued by Lee County. However, that number dropped over 18% to roughly 900 permits the County issued by November 2021. These numbers seem to indicate that in the early stage of the pandemic, new construction fell off, likely due to concerns over the economy, material and supply shortages, labor shortages, and a variety of other pandemic-related factors.

In 2021, Florida attracted thousands of new residents seeking to enjoy warmer weather and less stringent COVID restrictions. However, it appears now the population influx into the state may be beginning to slow, which in turn is resulting in a leveling off in new construction. Whether this pattern continues now that more seasonal residents are returning to the area remains to be seen.

Existing Single Family Home Sales & Active Listings

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Continue Reading State of the SWFL Real Estate Market

Real Estate Contracts Are you aware that the standard Florida Association of Realtors/Florida Bar Contract, often referred to as the “FAR/BAR Contract” has changed? Below is an overview of the revisions to the FAR/BAR Contract for Sale and Purchase, “AS IS” and other residential forms which were discussed earlier this year and have now become effective as of November 1, 2021.

Major Updates to the Standard Form

Section 8(b) – Loan Approval Period

Two tasks are to be completed during this period now. The first is that the buyer must obtain approval for financing as described in the section. This is consistent with the prior version of the contract. However, the new requirement is that the buyer’s lender must receive a satisfactory appraisal before the approval period expires.…

Continue Reading Overview of Changes to “FAR/BAR” Contracts Effective November 1, 2021