July 6, 2011
By Harold B. Yellin, published on July 6, 2011, in Business in Savannah.
When negotiating contracts for the purchase and sale of real estate, consideration must be given to the zoning classification and the related land use requirements of applicable zoning ordinances.
If you are buying commercial real estate that is raw land, the buyer must research the applicable zoning classification and determine which uses are permitted within the zoning classification. Zoning districts vary considerably from municipality to municipality, so great care should be taken when buying real estate. Do not assume that a particular use will permitted, for example, in a commercial district, just because the same use is permitted in a different municipality’s commercial district.
Buying raw land for development may also pose greater challenges than purchasing an existing building or structure that does not require any additional modifications. Most municipalities require some form of site plan review. During the due diligence period of the sales contract, the buyer should hire competent professionals who can demonstrate that the land can accommodate buyer’s intended use.
Once again, every municipality is different with respect to site plan issues such as parking requirements, landscaping requirements, buffer requirements, setback requirements and height restrictions which, in turn, will dictate the size and location of the building footprint that can be built on a particular site. Do your homework up front. Allow yourself sufficient time during your due diligence period to satisfy both zoning and site plan issues.
When drafting a sales contract, many buyers often make the mistake of only providing for due diligence for the zoning of real estate to be acquired. Zoning approval and site plan approval should be treated as separate requirements.
I am personally aware of a local transaction where the real estate was rezoned in a relatively short period, but the site plan approval took several months to approve because of numerous infrastructure issues that required resolution. Be safe. Make sure that your obligation to purchase real estate is contingent upon both zoning and site plan approval.
If you are buying real estate with existing improvements, do not take anything for granted. A particular use may be located in a particular zoning district, but it is a non-conforming use under the applicable zoning ordinance. Most jurisdictions do not allow you to expand a non-conforming use. Always confirm with the zoning administrator for the appropriate municipality.
If you are buying real estate with an existing structure, also consider whether or not you intend to expand the existing footprint of the building. In many cases, additional construction will trigger additional code enforcement issues that did not apply when the original structure was built. Building codes do change over time as well as zoning ordinances. Make sure that your expansion plans do not trigger unexpected compliance costs.
If you are buying real estate in Savannah or Chatham County, be aware that the Unified Zoning Ordinance was introduced on June 28th, with public comment to be received through September 30th. The purpose of this new ordinance is to unify the separate zoning ordinances of the City of Savannah and Chatham County into one ordinance.
Although there will be new zoning districts with different land use requirements, the stated purpose of the Unified Zoning Ordinance is to simplify the zoning process. No one can be certain as to the adoption date, but the new ordinance will certainly impact real estate development in Savannah and Chatham County and, of course, understanding the new ordinance after its adoption will be important for contract negotiations and development requirements.
Most people would agree that it is still a “buyer’s market” and that there are enormous opportunities for buyers. Nevertheless, it is incumbent upon all buyers to recognize the application of both the zoning and site plan requirements to their potential purchases and care should be taken in the drafting of real estate contracts to ensure adequate due diligence for this purpose.
Harold B.Yellin is a partner at the law firm of HunterMaclean who specializes in commercial real estate, zoning, land use and commercial leasing. He can be reached at 912-236-0261 or firstname.lastname@example.org.
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