Before You Build or Lease a Building in Miami – 8 Point Checklist Before You Buy or Lease

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

What parts of the building can be affected? The Florida Building Code may require installing a new fire alarm system, sprinkler system, increasing the number of plumbing fixtures, renovating electrical and air conditioning systems, adding accessible doors and entrances, and even adding insulation. to existing walls where there were none before. It may even require updating 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 that needed to be reviewed as above, I was also reminded of those things that potential building owners don’t look at until they have already leased or purchased the building.

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

• 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, will the setbacks and FAR allow for such an addition?
• Is the building on the sewer line? If a building is currently on a septic tank and is a commercial building, any substantial remodeling or addition will likely require the building to be connected to the sewer line. If the nearest sewer line is two blocks away, for example, that cost, which is many thousands of dollars, must be factored into the project budget. I have seen projects canceled due to the exorbitant cost of running a sewer line to a commercial building. And does the sewer line have sufficient capacity for the proposed use? If a future addition is to be considered, is the sewer line large enough for the new addition?
• If it is an existing building and it dates from the 1970s or earlier, be sure to do an asbestos report. Also consider lead and mold inspections. The building may be filled with asbestos. This is quite expensive to remove and should be factored into the purchase price or remodeling budget if it is to be leased. You can read more about asbestos removal 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 no “substantial improvement” can be made 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 remodel that will cost more than 50% of the building on the lot. Please note that the cost of the lot is not included in the calculations.
  For example, let’s assume a two-story building with the lot appraised at $3,000,000. Let’s say the building itself is accessed for $700,000, then an addition or remodel could be built that costs $350,000. However, it cannot cost $350,001, or the ground floor would have to be raised to base flood height. Assume the ground floor of the building was originally constructed at 6′-0″ NGVD and the new base flood elevation requires the new ground floor elevation to be 10′-0″. It will likely be impossible to raise the ground floor elevation 4′-0″ higher because the existing second story is still where it was. There will not be enough clearance when the ground floor is raised.
• Does the electrical service have sufficient capacity for the new use?
• Does the building have a handicap accessible entrance? If you have a ramp through which the handicapped person can enter, does the ramp have the appropriate slope?
• If the building is to be subdivided, is there an elevator to the upper floors accessible to all areas of the building?

Although each project may have more details that are important, these few questions, if answered in the affirmative before closing on a building purchase, or signing a long-term lease, will go a long way toward a successful purchase or lease and a feasible remodeling project.