Ground Lease on Commercial Property in SFHA

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    A new commercial loan is going to be secured by property located in a SFHA with 2 improvements, a shopping center which we are obtaining flood insurance on, and a 2nd improvement located on a portion of the property that has a ground lease on it. The business leasing that property built a small building that houses an ATM and I had initially said it needed flood insurance. However the borrower and insurance agent have said it is not the borrower’s to insure. The improvements are the responsibility of the leasee. That seems to coincide with the definition of a ground lease and the lender obtained a copy of that lease.

    Is flood insurance required on the improvement located on the property within the ground lease, owned by the business leasing that section? If not, does the ground lease suffice in documentation to prove insurance is not needed?


    If you the building doesn’t secure the loan in question then flood insurance wouldn’t be required. You should check with your attorney to make that determination.

    ยง 22.3 Requirement to purchase flood
    insurance where available.
    (a) In general. A bank shall not make,
    increase, extend, or renew any designated
    loan unless the building or mobile
    home and any personal property
    securing the loan is covered by flood
    insurance for the term of the loan.

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