[joelenew]

I have a residential property in the SFHA that currently has $250,000 on it. It is owned by an LLC, is not owner occupied, has short term rentals, usually weekends sometimes a little longer. The OCC Examiner stated it is a commercial property since it is not owner occupied. I can’t find anything in the reg. that states it has to have $500,000 on it and should be considered commercial. It is not a licensed B&B. Anyone have any thoughts besides if that’s what the Examiner says that what it should be?

Thank you

[rcooper]

I agree with your assessment. Coverage limits would be based on the type of property (e.g. residential, other residential, non-residential) rather than who occupies it. Since you have a residential structure, those applicable limits would apply. See page 18 of the NFIP Q&A: https://www.fema.gov/media-library-data/20130726-1438-20490-1905/f084_atq_11aug11.pdf. Looking at the definitions of non-residential, business building, and residential building is also helpful to understand how the buildings are defined: https://www.fema.gov/media-library-data/1490893737230-1063d7d6fbb6bbb9a46fc5eaa34a94fb/23_definitions_508_apr2017.pdf

There is a $500,000 coverage limit for other residential buildings (non-condominium residential buildings designed for use for five or more families) but that doesn’t sound like what you have here. I don’t recall anywhere that the NFIP rules or the flood regs discuss owner-occupied, except determining when the NFIP will pay replacement cost on a structure in regards to a principal residence (https://www.fema.gov/media-library-data/20130726-1620-20490-4648/f_679_summaryofcoverage_11_2012.pdf). Here is the same form for commercial property if you’re interested: https://www.fema.gov/media-library-data/6a2ad0291e8d6a5452aa891a6c037039/fema_Summary_508C.pdf.

Try to have a conversation with the examiner to explain your thoughts and ask what they are basing this opinion on.

[Author]

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