Flood Insurance for property not owned by owner of the land

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    Mary Frances

    We have a loan with 4 parcels of land as collateral and all 4 parcels are in a floodplain. 2 of the parcels have buildings on them which our borrower owns the buildings and the land. The other 2 parcels our borrower only owns the land…one has a billboard and the other has a cell tower. The cell tower has a building (a roof & 4 walls) located next to it which sits up on concrete stilts and we assume is used for equipment for the cell tower. Our question is if our borrower only owns the land and the cell tower w/building is in a floodplain who is responsible for the flood insurance? And is flood insurance required? We think flood insurance is required because the “building has a roof & 4 walls.

    We did find this while researching but wanted to be sure we were think correctly.
    NYCalls Questions – December 3, 2012 Flood Insurance Teleconference
    1. An organization owns the land on which a building (owned by another organization) sits. The property is located in a V zone. Both organizations have common ownership. The organization that owns the building pays lot rent to the organization that owns the land.
    If we issue a loan to the organization that owns the land, securing only the land, is the customer exempt from flood insurance because the building is owned by a separate organization?
    The loan described in this scenario does not meet the definition of a designated loan because it is not secured by a building or manufactured home. The borrower is not required to obtain flood insurance under these circumstances


    The flood regulation states a bank shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan.

    I agree with the information you cited above – if you don’t have a security interest in the building, flood insurance isn’t required.

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