Reading and understanding commercial zoning codes can be a daunting task. In the competitive realm of commercial real estate, staying ahead of the competition requires the ability to perform due diligence quickly and accurately. Having an accurate zoning compliance report is essential.
A zoning compliance report is a snapshot of the zoning conditions of a property that is the target of an acquisition or refinance. Typically, an attorney for the buyer or lender on a commercial property is responsible for determining that the property is compliant with zoning ordinances.
Zoning ordinances are established by municipalities to delineate permitted uses and restrictions in conjunction with defined geographic districts. For a project to be legal, it must conform to the local zoning code. A commercial zoning report is an essential part of the due diligence process for developers, investors, lenders and attorneys who need to protect their investment or clients.
For a prospective buyer or lender, a critical aspect of a commercial zoning report is that it indicates whether the intended use for an asset or project conforms with local law. Zoning ordinances are continually changing, and many communities have adopted special-use district overlays that add a level of complication to understanding the permitted uses for a development site or redevelopment project. Even if the property was built prior to a change, sometimes referred to as grandfathered, and is legal but non-conforming, the review should look at whether the use can be rebuilt to the prior use and standards if a casualty damages all or a portion of the property.
The zoning compliance report contributes to mitigating liability that can potentially arise from nonconforming and illegal uses for a commercial property and whether the property can be rebuilt after a casualty.
The Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys dictate the requirements for another important due diligence item – the land survey needed for proper due diligence before acquiring or refinancing a commercial property. The last set of changes was adopted on February 23, 2016, and changed the requirements for the reporting of zoning information. Specifically, there are new requirements for an ALTA Survey relating to the preparation of Table A 6(a) and 6(b), which shifted the burden of obtaining the zoning information from the surveyor to the client, who now must provide the surveyor with either a zoning report or a zoning letter.
Depending on the type of project, lender requirements and location, different forms of commercial zoning reports are available. Many details regarding the permitted uses and allowable design elements are noted in a report, including:
- Current zoning classification.
- Setback requirements.
- Height and floor area measurements.
- Parking requirements.
- Zoning compliance letter.
- Notice of outstanding code violations: zoning, fire and building.
- Notice of variances relating to special permits, conditions and exceptions.
- Allowable floor area ratio and total buildable square footage as-of-right.
- Comparison of as-built conditions and any nonconforming uses that are subject to violation and/or corrective action.
- Basic property information such as parcel numbers, property address, and current and prior uses.
A zoning compliance report will delineate the variances between property conditions shown in a land survey and current zoning requirements. It is optimal to order the zoning report at the same time as the ALTA Land Survey to be able to proceed efficiently with closing a commercial real estate transaction.
At Millman National Land Services, we provide reliable, inclusive reporting for our clients. We would be delighted to work with you on your commercial zoning needs and land survey requirements.