First the question must be asked are we building on an empty lot or are we replacing an old building if it's the latter we must face the decision of completely tearing down the old building or utilizing the current space and renovating it for our design what does latter mean as used in this sentence

In this sentence, "latter" means "replacing an old building."

Explanation:

When we use "latter", it refers to the last of two elements previously mentioned. It is a way of referring to that element without the need to repeat it. When we need to refer to both the elements separately, we use the words "former" and "latter", "former" referring to the first element. Take a look at the example:

Charlie and Jesse were not convinced, but for different reasons. While the former (Charlie) thought their mother was lying, the latter (Jesse) thought she did not know the truth herself.

In the sentence we are analyzing here, the two elements mentioned are: "are we building on an empty lot or are we replacing an old building?" Then the sentence continues with, "if it's the latter." Therefore, latter refers to the second element, "are we replacing an old building." If we are replacing an old building - says the speaker -, we must face the decision of...

3rd person, because the narrator is out of the story but explains the feeling of the main character