Zoning issues can easily get lost in the many issues arising when a business thinks about buying, leasing or changing property. But zoning restrictions can derail a company’s plans, so business owners need to consider the issues sooner rather than later.
Zoning laws govern the use of land and buildings in a city’s or county’s districts. Every jurisdiction develops its own system, and zoning varies by district.
The laws usually categorize use as residential, commercial, industrial, agricultural or recreational. Some might restrict buildings according to height and overall size, proximity to other buildings, and the types of facilities that must be included with some uses. They also address issues such as parking, signage, waste management, visual appearance and noise.
When use of an existing property violates a zoning law, the property is described as having a nonconforming use. The building itself or the activity conducted inside it may not conform. A property owner or tenant can lose the right to continue nonconforming use by abandoning the use or by amortization, where use is allowed for only a limited time.
Zoning may permit a conditional use, but only if some conditions are met, such as provision of parking spaces when a business operates in a residential zone.
A new tenant or owner can’t assume it will be allowed to continue the same activity a previous tenant or owner engaged in. The previous rights holder may have qualified for “grandfathering” when a new zoning law went into effect or may have been granted a zoning variance that doesn’t pass along with the property rights.
Property owners can seek a variance when a zoning law creates particular problems or unnecessary hardship for them. Obtaining a variance gives owners the right to use their property in a manner barred by zoning laws. For example, an area variance affects property size, while a use variance addresses how land can be used — such as allowing a business in a residential area. To obtain a use variance, the owner may be required to demonstrate that the property doesn’t provide a reasonable return under the zoning law.
Business owners seeking variances often face strong opposition from neighbors. If a variance request is rejected, the owner can appeal the decision in court. An owner with specific damage also can challenge a zoning ordinance as unconstitutional.
Business owners should never sign a lease or sales agreement without checking all applicable zoning laws. They won’t be excused from contractual obligations owing solely to zoning issues.
Sidebar: Added security
Business owners shouldn’t overlook another way to protect themselves against the risks associated with zoning laws. Buyers can ask the title company whether it offers a “zoning endorsement.” Such an endorsement insures buyers against loss if zoning laws preclude them from using the property as they intended.