SDE Module 10 – Community Approach to Substantial Damage Determinations

SDE Module 10 – Community Approach to Substantial Damage Determinations


This is the FEMA Substantial Damage Estimator Training Series. Welcome to Module 10 Community Approach to Substantial Damage Determinations. In this module we’ll review the importance of a consistent community-wide approach to appeals of Substantial Damage determinations. Before we start let’s review the definition of Substantial Damage. Substantial Damage determinations are based on the ratio between the cost to repair a structure to pre-damage conditions divided by the market value of the structure before it was damaged. If the ratio is greater than 50% the structure is considered substantially damaged under the NFIP. In Module 9 we covered the importance of adopting and consistently applying an approach to Substantial Damage determinations for all properties throughout the community. This means having a single community-wide approach to calculating repair costs and building values. Failure to adopt and consistently apply a single approach can have dire future consequences for communities participating in the NFIP including community-wide probation or suspension. Even with a consistent approach appeals of determinations are inevitable. Appeals occur most often if there is ambiguous code language or regulations that lead to differing interpretations. Typically appeals are heard by a board designated to hear such cases. In some small communities the function may be handled by the jurisdiction’s governing body like the town council. There may be a fine line between Substantial Damage and Non-Substantial Damage determinations. Property owners may want to show that their structures are substantially damaged because they have flood insurance and want to file an Increased Cost of Compliance claim to help mitigate the building’s risk to future floods. They may submit higher repair cost estimates or lower market value appraisals to show the structure is substantially damaged. Some property owners will want to show that their structures are not substantially damaged because they may not be able to afford rebuilding to a higher standard or don’t want to relocate. The property owner may submit lower repair cost estimates or higher market value appraisals to show the structure is not substantially damaged. When a property owner appeals they can provide alternate values for the cost of repairs the value of the structure or both so long as the proposed new values are not developed with the same approach used by the community in its original determination. Communities must develop and follow a clear consistent process for reviewing substantial damage determination appeals. Establish written procedures set documentation requirements establish an appeals board and set timelines for owners to file appeals. Getting into disputes over individual elements of the original determination should be avoided if possible. Assign the same staff members to individual cases throughout the appeals process to maintain continuity. When reviewing appeals based on the computed damage repair costs from the SDE Tool check that the unit cost data is from a credible source like a builder, engineer, or industry-accepted cost guide and adjusted for local conditions. Beware of unit cost data that attempts to incorporate post-disaster inflation. This has been shown to have little or no significant impact on construction costs. A contractor’s estimate is likely to be the most
common approach. The estimate must be itemized to include all structural elements, all interior finish elements and all utility and service equipment. Beware of cost estimates that don’t reflect the fair market value of labor and materials include lump sum costs that exceed 50% of the overall repair cost incorporate contingencies include out-of-scope repair items or improvements and are not signed and dated. For more guidance on contractor’s estimates of repairs refer to Appendix D in the SDE User Manual and Field Workbook. It is highly unlikely that appeals will be submitted using the community’s estimate since community estimates of damage repairs are usually developed by building officials for all structures in a community. In the unlikely event one or more property owners submit the community’s own estimate check the residential and non-residential structure information check repair cost data and review damage repair assumptions. Owners may use alternate approaches to building value including actual cash value professional market appraisals or adjusted tax assessed value, When reviewing these appeals check that the value of the land and any improvements are not included in the value of the building. The value of the building is based on the condition of the structure before the damage occurred. Once the community appeals board accepts an appeal communities must reissue official determination letters or provide notes in board meeting minutes to document the change in the Substantial Damage determination. If determination letters are reissued they should include the property information basis for the change in determination explain the consequences of the new determination new permit requirements and the contact information for the community official. The new determination should include documentation to support the change. If the community appeals board rejects an appeal communities may reissue official determination letters or provide notes in board meeting minutes to document no change in the Substantial Damage determination. Communities must maintain records of appeals and determination letters. Appendix D of the Substantial Improvement/Substantial Damage Desk Reference includes a sample worksheet that can be used to document determinations. Failure to maintain records can lead to problems for communities participating in the NFIP including community-wide probation or suspension from the program. Congratulations! You’ve completed the FEMA Substantial Damage Estimator Training Series. Thanks for watching. For more information on this topic please visit fema.gov and search for SDE.

Author: Kennedi Daugherty

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