Zoning ordinances can be a major hurdle for land developers, commercial real estate investors, and construction contractors. But, despite how frustrating zoning permits might be at times, they are there to serve a vital purpose to the community.
When it comes down to it, local governments put zoning regulations in place to keep commercial and residential asset uses separate. Land use regulations, zoning permits, and building permits are all related, but the roles they play in commercial real estate often get confused.
Zoning is a very complex topic and varies from city to city. This article will distinguish between the three types of regulations and go into more detail about zoning permits as they relate to commercial real estate so you don’t have to worry about lengthening your development timeline.
A zoning permit is a document that gives the holder permission to construct a new building or make changes to an existing building, even if that change is its use. For example, you would need a zoning permit to turn a residential house into a small office building, even if you made no changes to the house itself.
The purpose of zoning permits is to maintain order and organization in a municipality. Zoning ordinances designate residential, commercial and industrial areas. In other words, zoning ensures your new neighbors are true residents and not a bustling shopping center or noisy manufacturing plant.
Determining when you need a zoning permit versus a building permit can be confusing to anyone new to commercial real estate development. An experienced developer knows that a zoning permit is the first step you take in the building process. Builders need to acquire zoning permits before they apply for a building permit.
In some municipalities, zoning permits are built into the building permit application process. Regardless, they must always come first so the regulatory authorities can determine if your plans fit into the zoning code of a particular region.
Zoning permits aren’t always just for new construction. A permit can also be necessary when altering an existing property. Here are some other instances in which you may need to acquire a permit.
Applying for a zoning permit is a relatively simple process. However, the key to being approved lies in the preparation. When it comes to CRE zoning, understanding zoning ordinances and land-use regulations are where it gets complicated. It’s always a good idea to first secure a commercial real estate attorney to help guide you through what your specific city regulatory committee will need from you to grant the permit outside of the application. Also, many times a hearing might be involved to have your zoning permit approved, so it’s wise to seek professional guidance at the beginning of the process.
Before you apply, you should study your city’s local zoning ordinances and land use regulations. If, going into the process, your development doesn’t fit into the zoning classification for the area, you might need to be prepared to apply for a zoning variance. To understand if you may need this, it’s always a good idea that you and your attorney talk to the city Director of Public Works to understand what type of permit or potential variance you’ll need. Go to these meetings prepared with any blueprints, sketches, photos, designs, or any other supporting documents about the property that will clearly portray your vision.
Once you think you’re ready to move forward with your application, it’s a simple three-step process.
This is as simple as following the instructions on the application form. Many cities have helpful guides and checklists on their websites that let you know what you’ll need before applying.
Follow the instructions in step one and make sure you file your zoning permit application appropriately with any required supporting documents or approvals. Be sure to file with the correct department within the city and pay attention to the number of copies you must submit. Some municipalities require you to file multiple applications to different departments or numerous copies of the application to the same department so the board members can review it on their own.
Applying for anything within a city comes with a fee. Zoning permit application fees can be hefty in some municipalities. Make sure you have the appropriate fee for the permit you’re applying for.
After you follow these steps, keep an eye out for an approval, rejection, or letter requesting a hearing in the mail. If a hearing is requested, this is where an attorney comes in handy. Attend the trial and provide answers and supporting documentation for any of the committee’s questions. If, after the hearing, your request is rejected, you may appeal the decision.
It’s important to remember that zoning is a way for local governments to regulate land use. In broad strokes, there are three types of zoning. However, where it gets confusing is that residential and industrial land use can also be used to determine the commercial property type as it relates to the laws of a particular region. We’ll dive into that a bit later. For now, the three broad-stroke types are as follows.
If you’re looking to build a single-family home, this is the type of zoning you’ll need. Single-family rentals, duplexes and multi-family homes can also fall under this category.
Industrial zoning is usually reserved for businesses that don’t deal directly with the public. Think oil refineries or automotive manufacturing plants.
Practically everything else falls under the category of commercial zoning. How commercial zoning is classified depends on several land-use factors and where it falls within particular areas of commerce within a given municipality.
How commercial zoning is broken down varies depending on whether a property fits within a city’s land-use regulations. Depending on the municipality, there can be many considerations factored into a specific zoning permit. However, almost every commercial zoning permit involves lot coverage, floor to area ratio (FAR), parking ratios, and the existence of exits/fire escapes.
Before, we mentioned that the intended land use for a commercial property could be used to classify the type of zoning permits. To understand what we mean, take a look at this commercial zoning chart for the city of Hermosa Beach, California. You’ll notice that they break up (as most cities do) commercial use buildings into levels of C1, C2, and C3.
In most instances, C1 level zoning refers to smaller businesses that are adjacent to residential areas.
C2 zoning classifications are typically the central or downtown business districts. There are usually heavy volumes of traffic and trade. Residential zoning is a subset of C2 zoning and is classified by density levels. Residential zoning from low to high is (R3, R4, R5) for lower density, (RM) medium density, and (R1) for high density. Be aware that some areas, called opportunity zones, may allow you to apply for a density bonus which will increase the number of units on your building in exchange for making some of them affordable housing.
C3 zoning is usually reserved for heavy commercial use (industrial), which requires much square footage. In some cities, shopping malls or mixed-use buildings can fall under C3. When planning to develop in a city, especially if it’s one you’re new to, you must look at that city’s commercial zoning chart. You might notice that your intended project is not permitted in the particular area you were planning on building in because of its zoning classification.
If that happens, all hope is not lost. You can always apply for a zoning variance. A zoning variance is, in essence, a waiver by the governing board of the city to be allowed to build outside of the regulations. Typically you fill out an application and wait while it’s reviewed, which sometimes may involve a hearing to discuss the plans. If the variance is granted, great! If not, you can appeal the decision. If the appeal fails, the last thing you can do is wait it out to see if the zoning laws of a particular region change over time.
For your next commercial real estate project to be successful, think of the type of uses it will be serving. If your commercial property serves more than one of these uses, obtaining a zoning permit could get tricky. Here are the land use designations, which all have separate rules.
If you want to make a small change to a structure without changing its purpose entirely, you may qualify for a conditional use permit (CUP). A CUP can help you bypass a long, drawn-out process to change a zoning regulation.
Zoning ordinances are complex and can be a headache for anyone in the real estate industry. However, they are essential for cities and towns to maintain a balance between commercial and residential regions.
