Determining the zoning of your property is an integral part in any commercial real estate purchase or development, especially if you are planning to change the use of the property. Understanding the background of why zoning regulations came about, why they are necessary, and how these regulations can help you is key to ensuring your commercial property is compliant and can remain profitable. Assuming you know the zoning of a property without doing your proper due diligence can lead to major issues down the road for you and/or any potential buyers you plan to sell to.
What is Zoning?
Zoning is a tool that municipalities use to designate land areas. The basic purpose and function of zoning is to divide a municipality into zones for different uses such as residential, commercial, and industrial districts (or zones). These designated zones create reasonably uniform property uses within each zoning district. Let us begin by clarifying what zoning is and what it is not. Zoning regulations allow local and national authorities to regulate and control land growth and development, by determining what business types can operate on a piece of land and how that land is transferred in the property market. For example, zoning regulations and restrictions can determine what kind of structures can be built on a plot of land, whether an existing property can be re-purposed, and even whether an existing structure can be replaced with something new at all. But zoning laws do have their limitations. When authorities establish zoning laws, the resulting regulations do not permit local governments to demand that only a certain business occupy a parcel of land. Zoning regulations also cannot force an established business to leave once a new regulation is in place. As such, Zoning regulations ensure complementary uses of the land, the structures, the businesses, and the property market.
Zoning vs. Land Use
The terms “zoning” and “land use” are often assumed to be the same thing. However, they are distinct elements that serve different purposes for the planning and development of cities. Land use, as the name suggests, is associated with planning, control, and rights of property. Zoning on the other hand, is the allocation of land in a municipality by dividing them into different zones such as residential, commercial and industrial districts (or zones). The purpose of zoning is to protect and conserve the value of land use.
Why are zoning regulations necessary?
Though zoning regulations may appear to be more red tape if you are looking to develop or purchase a property, zoning is in fact a good thing. Zoning can provide the opportunity to stimulate development in specific areas which in turn helps property owners draw in new businesses. In part, zoning regulations were created to help minimize the overcrowding of urban spaces and to help resolve land use disputes, which supports healthy urban planning. Well-planned zoning districts can be beneficial to well-established existing neighborhoods as well by protecting property values. Zoning regulations prevent incompatible property use with the surrounding areas and provide systematic lot arrangements so that neighborhoods retain their same physical makeup as ownership is transferred throughout the years. Without zoning laws, industrial facilities could be built next door to schoolyards. Or peaceful residential neighborhoods could be inundated with nighttime bars or high traffic commercial activities.
How can Zoning Regulations help me?
Ordering a Zoning Report will provide you with the confidence that your intended, proposed, or existing use and development of a property is (or will) be compliant. If you are obtaining financing to purchase a property, a Zoning Report will typically be required by a traditional lender during the due diligence period. Lenders consider the Zoning Report necessary for securing financing, determining compliance, securing title endorsements, and ascertaining insurance needs. A misconception that most unseasoned buyers have is that Zoning Reports are just an added cost or pain to their financing process. This could not be further from the truth. A Zoning Report provides protection for both the buyer (you) and the lender by minimizing risk and ensuring profitability for your current and future projects. Furthermore, a Zoning Report provides you concrete knowledge and subsequent empowerment in a rather inexpensive investment when compared to the overall cost of most real estate transactions.
Authored By: Elizabeth French and Alicia Taylor
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