Tuesday, October 2, 2012

Before Building or Leasing a Building in Miami - 8 Point Checklist Prior to Purchase or Lease

I met with a prospective client yesterday who is looking to lease space for a pre-school facility. This space is going to need substantial remodeling in order to bring it to code. Here in Miami when a the use of a building is going to be changed, as in this case, from office space to a pre-school facility, the entire area must be brought up to the current building code. In the case of Miami, this means complying with the Florida Building Code.

What parts of the building may be affected? The Florida Building Code may require installing a new fire alarm system, a sprinkler system, increasing the number of plumbing fixtures, revamping the electrical and air-conditioning systems, adding accessible doors and entrances, and even adding insulation to the existing walls where there was none before. It may even require upgrading the structural system if a substantial portion needs to be revised due to the new programmatic requirements of the new use.

As I went through the list of things which had to be reviewed as noted above, I also remembered those things which prospective building owners fail to look at until they have already leased or purchased the building.

It is important that the following checklist be used, as a minimum, to analyze the potential of a building and its potential cost in remodeling:

    The zoning for the building. Would the use being considered for the building be acceptable in the zoning district in which it is located?

    If a later addition is being considered, then will the setbacks and Floor Area Ratio (FAR) allow for such an addition?

    Is the building on sewer line? If a building is presently on septic tank, and it is a commercial building, any substantial remodeling or addition would likely require that the building be connected to the sewer line. If the nearest sewer line is two blocks away, for example, that cost, which is in the many thousands of dollars, needs to be factored into the budget for the project. I have seen projects cancelled due to the exorbitant cost of bringing a sewer line to a commercial building. And is the sewer line of sufficient capacity for the proposed use? If an addition will be considered in the future, is the sewer line of sufficient size for the new addition?

    If it is an existing building and it dates from the 1970's or earlier, make sure that an asbestos report is done. Also consider doing lead and mold inspections as well. The building may be full of asbestos. This is quite costly to remove and should be factored into the buying price or in the budget for remodeling, if it is to be leased. You can read more about asbestos abatement in the Florida Statutes, http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0400-0499/0469/Sections/0469.002.html.

    Is the building in a flood zone? The Federal government is the exclusive seller of flood insurance in this area. And they have a rule called the 50% rule. The 50% rule says that a "substantial improvement" cannot be undertaken to a building in a flood zone without raising the ground floor to the base floor elevation. A substantial improvement is defined as an addition or remodeling that will cost more the 50% of the building on the lot. Note that the cost of the lot is not included in the calculations.
    For example, suppose a two-story building with the lot appraises for $3,000,000. Let's say that the building itself is accessed at $700,000 then an addition or remodeling could be built that costs $350,000. However, it cannot cost $350,001, or the ground floor would have to be brought up to the base flood elevation. Suppose the ground floor of the building was originally built at 6'-0" NGVD and that the new base flood elevation calls for the new ground floor elevation to be at 10'-0". Bringing up the ground floor elevation 4'-0" higher is likely to be impossible because the existing second floor is still where it was. There will not be enough headroom when the ground floor is raised.

    Is the electrical service of sufficient capacity for the new use?

    Does the building have an entrance which is accessible to the handicapped? If it does have a ramp where the handicap can enter, does the ramp have the right slope?

    If the building is going to be subdivided, is there an elevator to the upper floors accessible to all the areas in the building?

Although each project may have more specifics which are important, these few questions, if answered in the affirmative prior to closing on the purchase of a building, or signing a long-term lease, will go a long way towards a good purchase or lease and a feasible remodeling project.

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