I can't get the link to work, dang nab it.

Here is a link that might be useful: Illegal $1.8M home?

Seems to me a lot of entities dropped the ball. Didn't they have an inspection? Isn't it someone's responsibility to check for outstanding code violations? The seller seems to have certainly lied on the disclosure form. Would an agent familiar with the area also be familiar with a big issue like this and be able to spot the violation?

If I were the buyer I probably would be looking to sue someone also. He paid for square footage that was represented to be habitable space, which isn't, so the property was likely overpriced and overpaid for.

But, maybe the buyer was fully aware of the issue and figured that he would be getting away with it -- until the notice came!

The seller lied on the disclosure form. The real estate firms helped perpetuate the lie. The city dropped the ball and should be punished for waiting three years to send a notice WITHOUT checking who currently owns the property. I'm glad the owner has deep pockets. Anyone else would be screwed...

I agree -- lots of lying and ball dropping, including by the title company (shouldn't the title insurance kick in to cover the drop in value??)

seems legit for the current homeowners to sue.

it says the county notified the homeowner of violations in 2010. But merely sending some kind of letter out notifying of a violation don't think is going to show up in a title search. It's also clear to me that the county was overwhelmed and not processing the violations correctly. I'm not sure how it could have been caught. The seller should absolutely have disclosed that, though,

Of course, any buyer looking at property in a flood zone should investigate that thoroughly, and be aware of the risks and consequences. If the buyers had been savvy, they would have known 1) it was in a flood zone; and 2) that first floor improvements would be prohibited.

Hmm, isn't there some kind of form that has to be signed at closing when a property is in a flood zone? I am not sure, it has been decades since I bought or sold.

When has it become a federal crime to improve a home in a flood plain? Is this a county by county regulation... it seemed like the article is saying that it is a FEMA regulation.

I looked it up in MLS for a little more info....

MLS Listing states heated area 8139 sqft
(List price was $2,278,000, sold for $1,800,000)

County Property Appraiser states living area 5337 sqft

NC RE Guy: Current code does not allow >50% improvements to homes with living areas below the BFE (base flood elevation), which was established in the mid-70's-ish. Since this was a new build in 2001, the entire living area has to be above BFE, so all new builds in our area look exactly like this house - ground level garages and living areas elevated.

Thanks C9. Must be a local reg.
Seems to me that both agents, the builder (seller) and all else involved should have clearly known that this was in the flood plain. I am sure a few simple clicks on the internet would show the floodplains for each property. Also, the insurance company knows which properties are located where too. If it has been a regulation since the 70's, then there is no excuse.

We have the same regulations where we live. If the buyers were Tampa natives, they should have been fully aware that the lower level was a flood issue, unless they have been living under a rock for the past 20 years.

The lower level should not have been included in the square footage and the realtor most certainly knew that.

Many people in our area improve their lower level fully knowing that if there is a flood that they will have to replace everything on their own dime. They do the improvements but also comply with electric code issues which say that all the wiring needs to be above a certain level.

The elevation of the main house looks like it complies but I think the insurance company would have asked many questions about the lower level, including asking about flood vents (which are basically holes in the walls).

Edited to add - I did a quick Google search of the buyer's name. They have lived in Tampa for many years. I would bet the farm that they bought this house fully knowing that the bottom level was in a flood plain.

This post was edited by deee on Fri, Oct 3, 14 at 9:52

c9 - Do you live in the area? What do you think about the situation?

ncguy: It's not a local reg- it's a national reg from FEMA.

It has to do with the Base Flood Elevation (BFE) of a home that is in a high risk flood zone (A, V, etc). These homes have a set BFE - let's say it's 15 ft for this home. This means 15 foot above sea level. Per FEMA rules, the 'living/finished' areas of the home must be at or above 15'. A garage or storage area can be built lower than 15 ft, but the actual parts of the home with drywall, electrical, plumbing, trim, cabinets, etc MUST be at or above 15'.

Normally someone gets an "elevation certificate" from a surveyor when the home is in a flood zone. The elevation certificate identifies 1) the FEMA required BFE and 2) the ACTUAL BFE of lowest living area for the home.

The home in this post originally had the top floor as the "lowest living area", and that met code to be above the FEMA required BFE. But the bottom floor was only allowed for non-living.

Due to FEMA rules, new homes cannot get permits for living area that is below BFE in high risk flood zones. This is why the original builder had to make the lower floor garage/storage. This would be required in any US state because it's a FEMA rule and all local municipalities have to adopt the same rule. The area that is below BFE is not allowed to be counted in sq footage for living area. It's treated similar as an unfinished basement in appraisals...very low value in the sq footage.

Sweet Tea wrote:
"ncguy: It's not a local reg- it's a national reg from FEMA.
It has to do with the Base Flood Elevation (BFE) of a home that is in a high risk flood zone (A, V, etc). These homes have a set BFE - let's say it's 15 ft for this home. This means 15 foot above sea level."

So this regulation only applies to ocean front properties?

It's not only ocean front properties; it's any property in a high risk flood zone. However, many ocean front properties tend to be in this category especially when located in low elevation areas. Though properties many blocks or even several miles from the ocean can also be in high risk flood zones. Even properties near rivers and lakes and bays and streams can fall into high risk flood zones. Even totally dry land that's a mile from water can be in such flood zone.

FEMA flood maps identify the required BFE for a home. BFE is measure by ft above sea level but it's just the standard measurement for land elevations. This doesn't mean the property needs to be near the sea.

nc - It's any lot in a high risk flood zone. The FEMA flood elevations effect two issues - local building code and a person's ability to get a mortgage.

Even if you pay cash and can afford to self insure, you still have to follow the building code.

I'm about 1.5 miles from the ocean and we are in a high risk zone. In my county, people up to 25 miles from the ocean are in high risk zones because of out tidal rivers.

This is not as cut and dried as it may appear. Everyone I know who lives in a flood area in what is commonly called a "stilt house" in Florida has finished at least part of their lower level. It is not "habitable" and they know that as it cannot be insured because the walls are designed to break away in a flood so that water can thow through and be absorbed into retention ponds or protected marshes. If the buyers lived in Florida hey would know this, and if they had a homeowners policy that would spell it out for them. The only way the buyers did not know,about this is if they bought the house just when they moved to Florida and paid cash and thus did not need to get a mortgage and weren't obliged to get homeowner's insurance. That seems unlikely.

Perhaps it comes down to what the buyers MAY have known versus what the seller DID know. Much easier to prove that the seller knew and deliberately mislead the buyer.

So a little education on flood zones - simplified for understanding:
The important ones are "A" "V" or "X" based on FEMA's FIRM maps for 1% chance, aka 100-year-flood or base flood.

X means not in a flood zone. I have a friend who is waterfront seawall on the west side of Tampa Bay and his house is X (although his pool is in the flood zone). So you can be waterfront and not in a flood zone.

V (and variations beginning with V) are the coastal zones where there may be wave action and unobstructed winds. These are the "stilt homes" found on the barrier islands such as the Outer Banks or St Pete Beach (and elsewhere, but that's the familiar site on the news). If you enclose the stilts under the house, you have to have breakaway walls or vents - basically the requirements are different for V homes. My neighborhood has one row of "V" homes that are on the outside of the canals, facing west across a big bay, so they are subject to the higher winds and building waves coming across.

A (and variations beginning with A) are the other flood zones, more along the lines of rising water. Building code is set for the maps at the time, so that the lowest living level (determined by your elevation certificate) cannot be below your BFE (base flood elevation from the FIRM). In my county, you can be miles from the water and still in an A flood zone - you have to check the maps.

The big problem is that the FIRMs change all the time so you might not be in a flood zone one year, and then the next you are suddenly in one because the lines were re-drawn. They are not obvious.
My home is -3 (my lowest living elevation is 8' and my BFE is 11'). In the 50 years these canal homes have been here, the water has never risen over the seawalls. In the 7 years we've lived here, the water has risen just awash over the dock a few times during tropical storms - and our dock is about 2-3 feet below the top of the seawall and 6-7 feet below our lowest living level. So it's difficult to believe that flooding will be an issue here, but that's the same thing that those folks in NJ and NY thought during Hurricane Sandy - although if you live on a barrier island, well, you should know what you're getting into.

So, the issue that came up with the flood insurance homeowner's protection act during the past year, is that a lot of homes were built to the current code at the time, before the FIRM was in place. The maps were drawn and new flood insurance rates reflected homes not built to current code. While some people say that their prior rates had been "subsidized", I say that we were "grandfathered" because there are lots of "old code" issues that we don't correct every time a house sells and gets insurance. We grandfather the electric, the pool safety equipment, the roof, etc, so I think it's fair to "grandfather" the elevation, too.
I make this argument because of the randomness of the FIRM - each year, more folks suddenly learn they are in a flood zone and need to buy flood insurance that they never needed before, and it sure would be nice if they were grandfathered based on the building code when the house was built. (I don't think anywhere is hardly ever un-designated flood).
Even if you are already in a flood zone, you may find that the new FIRM has raised your BFE and now your flood insurance may double or triple (or worse).

Also note: The NFIP flood insurance max is $250K. I'm not sure what the point is for a $1.8M house (back to the OP).

Another note: FEMA flood zones ARE NOT the same as hurricane evacuation zones. I've had plenty of people say they are fine because they are in the "B" zone, and I know they're talking about the evacuation level, which are labeled "A" for the first evacuees, then "B" and "C". Evacuation zones are based on travel routes and other factors, so that the barrier islands evacuate early due to bottlenecks at the bridges and such. Those with direct access to highways will evacuate last. Those have have to drive through "worse" flood zones to get out will evacuate early even if their homes are on high ground (like my friend in the first example - he's an "A" evacuation even though his house is X)
Tierra Verde, where the $1.8M house is located, is an "A" evac zone.

I think the issue is building codes/permits, not the ever-changing flood zones. ...and who knew what.

I think you are right.

Addressing the main issue here - who should have known what?

- The buyers, especially having lived in this area, should be more educated on the codes and flood issues before spending that kind of money on a waterfront home, but there's nothing illegal about ignorance.

- The buyers' agent probably assumed that they knew about it since they were not moving from out-of-area and were spending a lot of money, so probably didn't bring it up. However, if my buyers are preparing to make an offer on a house, I always look up the tax records and compare everything to MLS, especially improvements, to check for permitting and square footage, age of roof, pool, deck, dock, HVAC, etc and cover all of that when deciding on the offer.

- The seller lied on the disclosure so he's definitely at fault here. While here in FL an "As-Is" contract is the way around non-permitted (and unknown to the authorities) construction, the fact that he already received violation notices meant that he had to disclose the issue.

- The listing agent should have checked the square footage from county records - in fact, our MLS auto-fills those fields from the tax records when you start building a listing, so did he actually go in and manually increase the square footage based on...something the owner/builder said? And did he ask why that wasn't reflected in the public record? Depending on how the wrong SQFT got into MLS, the listing agent could very well be at fault, too.

(When the buyer says "the Realtor I bought the house from" in the article, I don't know whether he means his agent or the listing agent - but either way, there's no knowing that either agent knew anything about the violation notices, although they should have both known that the construction was in violation of code and non-permittable, non-insurable, and of questionable value.)

But how could the buyers have caught the problem before closing?

Home Inspector: I wonder if the home inspector checked all the standard stuff (seals, electrical, plumbing, etc) on that bottom floor during his inspection. Most of the time, inspectors I've used will say something like, "this wiring falls under the old code, but it looks fine and I don't see any problems" (but if you replace it, you have to bring it up to current code - that old aluminum stuff - which we've been doing at my house) I don't know that an inspector would state "everything on this whole floor is not to code, but it all works 4.0".

Survey: just covers the footprint of the house on the property, so wouldn't catch it

Insurance Company: neither the homeowners' nor the flood insurance companies are going to cover this, but I'm sure they assume the homeowner knows that they are only covering the upper floors because everyone carefully reads all the 50 pages of their insurance policy

Title Company: I don't think it's the title company's responsibility to check for code violations. They are looking for a clean title, liens, that sort of thing. Even now, there is nothing on the tax records that I can see about the code violations - I don't know that they are actually posted anywhere that anybody can find them.

Appraisal: whether it was the buyer's appraisal (if they paid cash and got one) or lender's appraisal, it should have only been based on the legal part of the house, so I doubt the house has been "dramatically diminished in value" other than the relatively minimal cost to remove the illegal improvements. If the appraisal came in so dramatically lower, then they should've questioned that before closing.

So, I see several points at which this should've been caught, but also how it slipped easily through the cracks.
I also think that the buyers probably knew that the bottom floor was illegal - although they probably thought they could get away with it (as so many do), not knowing that that it had already been caught by the city.
At first glance I thought the lawsuit was frivolous, but the seller's lies on the disclosure were pretty egregious and seriously affect the buyers' use of the home, so I think he deserves some sort of punishment. But I doubt there is any financial loss to the buyer.