Let’s say you are a master mechanic looking to buy land or a garage for the purpose of repairing vehicles. The commercial real estate agent and seller will tell you that the property is zoned for automotive repair. You sign the agreement and buy the property only to later find out that the property is not zoned or permitted for an automotive repair garage. The property you purchase may have technically have a garage on it, but it cannot be used for the purpose of repairing cars. It is too often that people fall into these traps. We will go over how to avoid zoning mistakes when investing in a commercial property.
Zoning Categories
There are three main zoning categories: Residential, Commercial, and Industrial. Not to be confused with the four commercial property classes: Multi-Family, Retail, Industrial, and Office. In the automotive repair garage example, most cities will allow this type of business in both commercial and industrial zones, however some cities may only allow these shops to be in industrial zones.
Industrial Zoning
Industrial Zones can be loud with heavy semi-truck traffic. To keep cities as clean and quiet as possible, industrial areas are separated away from residential areas. It is preferable to have industrial type businesses grouped together within the same industrial park or section of a city.
Commercial Zoning
As I mentioned, it is normal to see an automotive repair shop in a commercial zoning area such as retail. There are plenty of standalone shops like Midas, Jiffy Lube, and Pep Boys located in retail shopping centers.
Residential Zoning
Residential zones are easy to spot. If you see homes, you are in a residential zone. You may mix specific commercial zoning properties within a residential zone. For example, it is normal to see offices and retail stores mixed in with town homes in a downtown city area. Just about every Chinatown is like this.
Zoning Ordinances
Zoning ordinances regulate several aspects of your property and building including what your property can be used for, how high the building could be, how much of the lot can be covered with building or pavement, parking requirements, and setback requirements that tell you how far your building must be from the property line.
Due Diligence
Before you purchase a property or sign a lease, check the zoning allowances with your local government. This may involve calling the city planner to get the zoning information. The city planner should have a zoning map, usually color coded, of the entire city. When looking for a property to invest in, or to run your business, it is a good practice to obtain this zoning map ahead of time so that you only look at properties that fall within the zoning you are looking for. This will save you lots of time and effort.
The rules and regulations of each zone are public records. You can get them for free sometimes, or they may charge you $5 to $25 for the documents. Make sure you study these set of rules so that you know if your business can run as intended in a specified zone. This will keep you and your business out of legal trouble.
Special-Use Permits
If you REALLY want to have your business in a zone it does not belong, you can apply for a special-use permit. You can also apply for this permit if you cannot follow the rules of the zoning ordinances due to something out of your control. Each city should have a permit-review board or city planning commission that will review special-use permit applications. Application fees can range from $1000 to over $10,000. This application fee does not guarantee your application will be approved so think carefully before you decide to purchase a property that is not zoned for your business plan. In addition, you must submit the entire plan for your property including the site plan, floor plan, parking layout(s), landscaping, building elevation, and signage. If the application is not approved, you have the right to appeal the decision. In that case, the city council will review the appeal and if you are lucky, they will override the decision. Keep in mind this appeal process can take up to 1 year.
A popular reasons why a special-use permit would be approved is because it creates jobs and supports the economy. For example, see the Amazon warehouses popping up everywhere. Reasons why they would not be approved includes not being able to meet the parking requirements or landscaping requirements of the zoning ordinance, or not being able to demonstrate how the business can operate in harmony with other local businesses.
Construction Permits
With any property type, permits are required to construct anything whether it’s a sign, deck, patio, staircase, or a building. Any time there is a design alteration, you need to get a new permit. The city’s permit process is the reason why construction can take months if not years on some projects. These permit applications need to be very detailed. It should include how you will construct the item, what material it will be made of, what it will look like, how it will be structurally supported, what floor plan and elevation will it have if applicable, and more.
Consultation
For a list of resources, contact your local city government. These resources are often free and they will help you plan your business properly around the zoning ordinance requirements laid out by the local government.
If you want to learn more, check out my post “Investing in a Commercial Property” or my post on “The Property Classes and Zoning of Industrial Real Estate”. I also have a post that describes “10 Ideas You Can Make Money With a Plot of Land”.
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