Update has Ramifications for Owners, Investors and Lenders of Multifamily Assets
Freddie Mac recently released new guidelines for their Small Balance Loan program related to Physical Due Diligence 1105 reports with respect to apartment unit main electrical breaker size, according to CBRE Valuation & Advisory Services
“Oftentimes, older multi-family properties have undersized main breakers of less than 60 amps, sometimes ranging in size from 20-50 amps of service, which is less than the Freddie Mac 60 Amp minimum” said Randy Ward, Managing Director of Agency & Multifamily Services at CBRE Assessment & Consulting Services. “While these properties are generally found to have been built in accordance with the codes in effect at the time of original development, the main breaker and electrical service size may be inadequate due to today’s modern lifestyles that employ a wide variety of electrical convenience equipment and devices. This can lead to overloading problems with the electrical systems and may be a nuisance to the occupants, or in some cases unsafe.”
Recently, Freddie Mac’s “Top SBL Markets” (detailed below) are now allowed to have a minimum main breaker size of 40 amps, provided certain conditions are met. Freddie Mac published this change on May 9 in a Guide Update as well as an SBL Addendum Update Summary.
“Historically, when third party due diligence firms identify main breakers at less than 60 amps, a load analysis is carried out to determine if the undersized main breaker is adequate to handle the apartment unit electrical loads. In some cases, undersized main breakers are required to be replaced, together with the electrical service if the load analysis identifies a load that is larger than the main breaker capacity. This can be a costly remediation for the property owner, with replacement costs ranging anywhere from $1400 - $2000 per unit. The new guideline from Freddie Mac relaxes this requirement somewhat to the 40 Amp minimum for those top SBL market properties” said Mr. Ward.
The new amperage Guidelines are applicable only to properties in the top SBL markets, which are defined as:
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