Real Estate Investing Article Zoning

Without a doubt, the single most important thing to know about a development property you’re thinking of buying is its zoning. That’s the starting point for your evaluation because it tells you how you can use the property.

 

By enacting land use laws, state legislatures delegate to local governments the power to regulate development within their borders.

 

This regulation takes the form of local and county zoning, subdivision and other ordinances that implement the municipality’s overall land use plans and objectives.

 

Land development laws vary not only from state to state but also among municipalities within each state, so there’s no “one size fits all.”

 

The zoning ordinance contains classifications intended to cover different categories of residential, commercial, industrial, institutional, office, agricultural and conservation uses and the accompanying zoning map shows the geographic boundaries of the zoning districts.

 

To determine a parcel’s zoning, locate the property on the map and then review the ordinance (both of these documents are available at the municipal office).

You’ll find provisions for use, dimensional, area and other requirements listed under each of the zoning districts.

 

There are also general provisions that apply to every classification dealing with issues like non-conforming lots and uses, accessory structures, flag lots, fencing, signage and minimum lot frontage requirements. You should always read the chapter on definitions since it will help you understand the terminology that is used throughout the ordinance.

 

real estate zoning laws

 

Uses listed in zoning districts often include those that are permitted “by right” as well as conditionally. For example, single-family detached dwellings, agriculture and governmental recreation areas are permitted in one district.

 

These are listed as by-right uses so they don’t require any zoning approval. Privately-owned riding academies, public or private day schools, 18 hole golf courses and places of worship are also permitted in that district but only when authorized by the municipal zoning board as a special exception.

 

These “special” uses are not permitted automatically. To get the special exception, you would have to demonstrate that your use falls within those defined in the ordinance and that it complies with any use-specific requirements, such as minimum site area, building coverage, buffering and parking.

 

“Rezoning” and “variance” are often used interchangeably, but they are not at all the same. A change of zoning is just that – the zoning of a property is changed from one classification to a different one.

 

Municipalities are not required to change a property’s zoning (absent a law or court order), so rezoning a property is not a slam dunk. In fact, depending on the state’s laws, the governing body may not even have to grant a hearing on the rezoning petition or justify its decision to deny it.

 

A variance, on the other hand, is relief from some zoning requirement. It modifies an ordinance provision as it applies to a specific property for a specific reason, but it doesn’t change the underlying zoning classification of that property.

 

To get a variance you would have to show the municipal zoning board that an unreasonable hardship (one you didn’t create in the first place) would result if it weren’t granted. You won’t get it, however, if your only argument is that you’d lose money, because the hardship has to be something other than economic.

 

A classic example of a situation in which a variance would be granted is where the parcel has some physical characteristic that would make it impossible to satisfy zoning requirements. Suppose, for example, that you wanted to build on a 100’ x 200’ parcel and the zoning required front, side and rear yards of 60’, 20’ and 80’, respectively.

 

Below is a video by Yale Professor Wargo discussing Land Use Law and Property Rights.

 

 

This means that the structure would have to be located within the “building envelope” which is the area of the lot after measuring off those setbacks. But the right side of the parcel drops off sharply and the steep slopes cut the building area in half.

 

The back third of the lot is relatively level, but most of this area lies outside the building envelope. Reducing the rear yard not only would create a building area large enough to accommodate your structure, but it would also be the least intrusive solution to the problem. So in this situation, the municipal board would probably give you a variance to allow the structure to encroach slightly on the rear yard.

 

Finally, some words of caution. Zoning and other municipal codes are available online. Don’t rely exclusively on this information.

 

Go to the municipality and review the ordinance or zoning map to make sure you have the most current and accurate information. And always page through the entire ordinance. Amendments that have been enacted are often printed in the back of the book without cross-referencing the provisions that have been changed.

Real Estate Subdivision and Zoning Approval Process

There are many ways to develop real estate, but if you’re doing something more than renovating a fixer upper, like making structural changes, etc… you’re going to be needing permission from the city to move forward on your plans.

Before you can subdivide or develop a property, first you’ll have to submit plans to the local government for review and approval.

This happens in stages and can be a lengthy process depending on how complex your plans are. Again, this more for developing land than for rehabbing a fixer upper house.

You won’t need the city’s permission to fix a roof, redo the walls, carpeting, overhaul the yard, or to repaint a house.

But if you’re adding a room, knocking down a wall, building a garage out back, turning your downstairs into a mother-in-law apartment, or adding square footage of any kind to your house, then you will need to go through the city first.

Land Developing, Subdividing, Zoning Approval Process

As we mentioned in our article on real estate zoning, your engineer will prepare the plans in accordance with the requirements of the applicable subdivision and land development ordinance. This ordinance contains provisions relating to a variety of issues.

These include construction and design standards for public site improvements (e.g., streets, curbs, sidewalks, parking spaces, landscaping, utilities and drainage), safety concerns (angles at intersecting streets and lighting), and general matters such as data to be shown on the plans, scale, paper size, and submission deadlines.

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Review

The plans are scrutinized by a group of people and agencies. First on the list is the municipal engineer who, after examining the plans to make sure that they comply with all applicable ordinances, issues a review letter setting forth comments and recommendations.

In addition to the engineer, typical players in the approval process consist of local/county land planning agencies, water and sewer authorities, state environmental and transportation departments, and the municipal manager and solicitor.

The review letters generated by these people provide the structure for the discussions between you as applicant and the municipality, and this is an ongoing dialogue frequently marked by give and take and negotiation on both sides.

Submissions

Although the ordinance specifies the number of plan submissions that must be made, usually these consist of 3 separate plans. The Conceptual or Sketch Plan shows the proposed layout or development and the relationship of the property to its immediate surroundings.

The benefit of preparing this plan, even when it’s not required, is to give the municipality an overview of the development on one sheet of paper. This plan can be used to address some basic issues like the location of the entrance to the development, alignment of proposed and existing streets, and existing features that may impact how the project can be configured.

The Preliminary Plan actually consists of a set of very detailed plans drawn to scale. These depict all of the basic existing physical features of the site (such as soil types, topography, floodplain, vegetation, wetlands, surveyed boundaries and existing structures).

Your engineer would then prepare a series of overlays illustrating exactly how the parcel is to be carved up or developed. So, for instance, the plans would show the boundaries of proposed lots and building envelopes, parking lots and structures, locations of new streets and utility lines, regrading and landscaping, and management of storm water to prevent flooding and erosion.

In short, the Preliminary Plan shows on paper how the property looks now and what it would look like when developed. The Final Plan contains all of the data on the Preliminary Plan together with revisions necessitated by comments from the reviewers.

Approval/Denial

The decision-maker is usually the governing body of the municipality. (This depends on the provisions of the particular state land use laws.)

In addition to public meetings held by the elected officials and the planning commission, private informal meetings or work sessions can frequently occur between the municipality and the applicant to brainstorm concepts, problems and solutions, discuss review comments, and negotiate terms and conditions of approval.

Each municipality is unique and the cast of players changes over time. Relationships and mindsets color official actions. Often the process takes on the appearance of a “board game”. Attempts by applicants to progress around the board towards their goals seem to be thwarted by waiting for review letters and responding to them, or by spending time, effort and money revising and resubmitting plans.

The length of time from application to Final approval varies widely, ranging from a couple of months to several years. Factors that impact the timeline include the preparedness of the developer team, the frequency of municipal meetings, the proposed development itself, public opinion and finally just plain politics.

The elected officials examine the plans, take review comments into consideration and vote to either grant or deny approval. Under the applicable laws, development applicants have certain rights and protections.

For example, when the governing body grants approval of your Preliminary Plan, you may be guaranteed approval of the Final Plan on the same terms and conditions that were imposed at the prior approval stage. In other words, the municipality gets only one bite of the apple, so it cannot raise new issues or conditions at final approval that it didn’t impose when it granted preliminary approval.

The particular state law might also provide that once you had submitted your Preliminary Plan and while it was in the review and approval process, the municipality could not require your property to conform to changes in the zoning and subdivision ordinances that were enacted after the date you submitted your plan.

Approval conditions usually range from minor revisions of plans to major considerations such as your having to obtain approvals, waivers or permits from other reviewing agencies. One condition will likely involve a contract between you (or the builder you sell to) and the municipality requiring that security be posted.

This insures that the local government will have the funds necessary to complete installation of the public site improvements in the future if the developer becomes unable to do so. Once this and all the other approval conditions are satisfied, you should be able to record the plan in the county courthouse, apply for building permits, and actually start installation of improvements and building of structures on the property.