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This year, hurricanes, with record rain, storm surges and winds, have resulted in severe damage to both commercial and residential buildings, mold contamination, and significant interruption to businesses in the impacted areas. Several Caribbean islands have been wiped away, Key West is unrecognizable, and Houston may have lost more than 150,000 homes. For most of us, luckily, the damage was less severe. My wife and I have leaks in our roof and elsewhere and lost a window (but gained an indoor tree). We lost power for about four and a half days. Friends in South Miami are still without power as of the writing of this post.

The legal implications of the hurricane aftermath extend well beyond mere rebuilding. Mold contamination and water intrusion must be addressed and properly remediated. Design and construction defects may be alleged to have exacerbated the extent of the damage from the hurricane. Employers may face workers’ compensation claims from employees and also may have vacation and lost wages concerns. Insurance coverage may be at issue. Construction costs may have escalated causing losses to builders or developers. Building permits and development approvals may expire due to delays caused by the hurricane. Condominium associations may not have sufficient reserves to act on emergency repairs. Construction licensing regulations may affect the ability to commence repairs and provide penalties for failure to engage properly certified contractors.

So what to do?

  • Make sure you and your family, employees and customers will be safe in your home or building.
    • Are there electrical system damage and risks?
    • Is the water safe to drink?
    • Is there a risk to the structural integrity of improvements?
    • Other Physical Hazards (don’t panic, but snakes and scorpions like piles of debris).
    • Contamination? Such as leaking petroleum tanks, chemical spills and the like.
  • Address potential health risks, whether mold or risky property conditions.
  • Secure your property and protect it from potential or further loss of property value.
  • Deal with Insurance.
  • Deal with Government Agencies such as FEMA
  • Deal with FP&L’s reimbursement programs.
  • Check with your mortgage lender. The lender may have the right to collect insurance proceeds and disburse the funds as repair and rebuilding proceed.
  • Only then commence to restore your property. Use only licensed and insured contractors. Where required by law, obtain all necessary permits and approvals. If you are part of a condominium or property owners’ association, make sure all Board approvals are obtained.
  • Get on with your life

Our lawyers have assisted clients in resolving insurance disputes, negotiating agreements in connection with assessment and remediation services, resolving design and construction defect claims,  implementing programs for addressing employee benefits, preparing hurricane and disaster response plans, and in finding their way through myriad environmental regulations.   In one recent example,  we resolved an insurer’s denial of coverage for water damage based on a theory that the building envelope was defectively designed or constructed and that the damage was not caused by a windstorm (as provided in the policy). By engaging the proper experts, a successful argument was made that the building envelope was properly designed and constructed and that it was indeed the hurricane-force winds that caused the water intrusion.

In another example, we assisted a client in requesting an extension of the expiration date for various development approvals that could not be met due to the direct delays of the hurricane, the difficulty in obtaining materials and the need to redesign to address increases in construction costs.

In addition to helping guide our clients in making proper recovery efforts, we are also focusing our clients’ attention on preventative measures to avoid future repeat damage and liability. We have found that many building and business owners have been hesitant to expend significant sums in prevention, in part to the belief that the recent hurricane landfalls in Florida were merely a fluke.  Whether global warming or a regular climatological cycle, it appears that the Atlantic hurricane season has been on an upswing that may continue for a decade or more. Proper preparation can lessen the business impacts and speed up recovery efforts.

 

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Selecting the right property to buy or lease can be tricky. Every one knows the old adage “location, location, location”.  Clearly, location is crucial to every one involved in a real estate project from brokerage to development to construction; from lending to investment; from management to leasing, location will be a crucial factor in everyone’s return on the investment in real estate.  However, a corollary to location is zoning, zoning, zoning.  A property that does not have the proper zoning and land use designation for the proposed use, and one that can not be appropriately re-zoned, or variances obtained, will have no value to a buyer, developer, tenant or investor and location will add no value.

This rule applies to properties that are being purchased or that are being leased. A retail location might be the best spot in town for your client’s hot new night club.  But zoning might not allow any business which serves alcohol to be located in that location because a church is located within 1000 feet.  Or, noise regulations prohibit music after 10:00 because of the hospital across the street.   These are some of the things that should be considered even before entering into a contract or a lease.  They can save time and money.

When purchasing a property, it is a good idea to have preliminary, exploratory conversations with city planning and zoning staff to discuss the site. This is a good way to learn what the city would be comfortable with.  The meeting will help the buyer understand what approvals will be necessary for the project and will assist in formulating a timeline for obtaining approvals.

Upon preparing the contract, the buyer should make the obligation to close contingent upon obtaining the necessary approvals. The approvals can be specific, but I like to keep them as generic as possible.  For example, I define “Approvals” as all approvals necessary to enable buyer to obtain building permits to construct the Intended Improvements.  When pushed, I will list approvals to include, without limitation, zoning, land use, platting, site plan, and I will expand as necessary.

Many times, going into the contract, the parties know precisely what zoning is going to be required, or the seller has already begun the process of re-zoning in anticipation of a sale for such a use. This should not affect buyer’s contingency as the use drives the value of the property and must be in place prior to closing.

Zoning diligence before contract can make negotiations smoother and faster. It can also help buyers and sellers set a realistic price for a property, particularly because with proper approval contingencies, buyers won’t have to close if the zoning is not sufficient for the intended use.  But patient sellers will be more likely to get their desired price.

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    Welcome to Assouline & Berlowe’s Florida Real Estate Law and Investment Blog with news, insights, and commentary for investors, developers, and their advisors.

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