Zoning analysis is an essential part of the commercial real estate due diligence process. AEI’s expert zoning consultants will help you identify and avoid transactional liabilities with regards to the property’s conformance to the governing zoning code.
Zoning regulations determine how land can be used and built within a community. Nonconforming uses, structures, and outstanding code violations may result in disruption of cash flow and property devaluation should the municipality take enforcement action against a property. As such, the need to conduct proper municipal due diligence in connection with a real estate transaction is essential and considered an integral part of the loan & equity underwriting process and for the issuance of Zoning Endorsements.
AEI’s Zoning Analysis Reports are offered as stand-alone services or can be packaged with any of our due diligence consulting services, providing our clients with a single point of contact through project completion. Our zoning team of professional planners, and regulatory experts help clients avoid liability.
What is a Zoning Analysis Report?
A Zoning Analysis Report (ZAR) is a comprehensive report using both text and figures to provide the client with the zoning classification and designation of a property and to understand if the current on-site use and buildings conform to the requirements set forth in the governing zoning code.
AEI’s ZAR includes details of property use, improvements, and conformity with respect to zoning ordinances, as well as the re-buildabilty of the property. Also included are a Zoning Verification Letter from the municipality, a report of any zoning, building or fire code violations, and copies of Certificate(s) of Occupancy.
AEI’s Zoning Analysis Reports are recognized by all major lenders in the United States, including Fannie Mae and Freddie Mac.
Significant Components of a Zoning Analysis Report are:
- Property use
- Yard setbacks, Building step-backs, Building heights/number of stories
- Bulk density & Floor Area Ratio (FAR) restrictions
- Parking requirements
- Right to rebuild
- Open/Outstanding code violations
- Municipal document retrieval (if available): Zoning Verification Letter, Variances, Conditional Use Permits (CUPs), Certificates of Occupancy, Property-specific zoning ordinances & approved site plans
What Does a Zoning Analysis Report Determine?
A ZAR determines whether the property’s use and buildings conform to current zoning classification and development standards. Zoning Analysis evaluates density, structure height/stories,conformance status of property’s existing use, conformance status of parking spaces, and any yard setbacks or building step-backs.
Additional Zoning Consultant Services from AEI
In addition to the Zoning Analysis Report, AEI also provides Small Balance Loan (SBL) Zoning Reports to meet the needs of SBL Lenders as well as a Permits & Approvals Reports (PAR) to assist our FHA (HUD) clients in obtaining and organizing documentation required for the closing of their multifamily and healthcare deals. More details about these reports can be found at the bottom of this page.
Why Do I Need a Zoning Analysis Report?
A ZAR allows you to understand if the property in question meets local requirements for use, density, height, parking, and setbacks. If a property does not meet these current zoning regulations, there may be restrictions as to the re-buildability of a property in the event of a catastrophic loss. Additionally, if any outstanding zoning/building/fire code violations are on file with the governing jurisdiction, this could result in fines, fees, or penalties until the violations are addressed by the property owner and closed out with the municipality.
What Are the Benefits of a Zoning Analysis Report?
If a property is non-compliant, the project faces a wide array of risks that could adversely affect its value, potential use, and marketability as well as substantially increase expenses. A Zoning Analysis can help mitigate these risks by discovering, in advance, any non-compliance issues that could affect the property’s development.
Becoming Aware of Policy Changes in Zoning Ordinances
Zoning ordinances and land use policy are continually changing, adding a level of complexity to understanding the permitted uses. AEI orders Zoning Verification Letters from the municipal departments as a part of the ZAR SOW to confirm the zoning classification of the subject property and compare that against the available zoning map, in the event the Property recently went through a re-zone.
Identifying and Addressing Issues Early On
A ZAR helps you to avoid expensive and time-consuming delays. Understanding regulations and zoning ordinances from the beginning allows you to have a clear strategy and framework for future plans.
Nonconforming elements of a property or other SOW items identified in a ZAR can stall a real estate transaction. For example, a property may have outstanding code violations with fees that need to be cleared before the client is comfortable moving forward. If the property’s uses or improvements do not meet the requirements in the zoning code, the property may not be able to rebuild (without special approval) if it experiences a catastrophic loss such as fire, flood or other Act of Nature or the Public Enemy beyond a specified threshold (ex. 50% of the current value of the property).
What is Included in the Scope of a Zoning Analysis Report?
Exact details of Zoning Analysis may vary based on factors such as type of property, lender requirements, and location. Overall, the information will cover the property’s permitted uses and the development standards as well as determine the following:
- governing jurisdiction and zoning classification of the property
- on-site uses that are permitted in the zoning designation
- whether the building improvements meet the zoning designation’s development standards for yard setbacks/building step-backs, height/number of stories, bulk density including floor area ratio (FAR) building coverage, and off-street parking
- the re-buildability threshold for the property in the event of a catastrophic loss (typically expressed in terms as a percentage of the property destruction or replacement cost).
Municipal Documents and Information requested through the FOIA process include:
- Zoning Verification Letter
- Variances/Conditional Use Permits (CUPs)/Special Use Permits (SUPs)
- Site plan approvals
- Zoning code violations
- Building code violations
- Fire code violations
- Copies of Certificates of Occupancy
AEI Consultants provides three essential zoning services to our clients: Zoning Analysis Reports, Small Balance Loan Reports, and Permits & Approvals Reports.
Zoning Analysis Report (ZAR)
AEI’s ZAR provides details of property use, improvements, and conformance with respect to zoning ordinances, as well as the re-buildabilty of the property. The report includes a Zoning Verification Letter from the municipality, a report of any zoning, building or fire code violations, and a Certificate of Occupancy.
The significant components of Zoning Analysis Reports are:
- Property Use
- Yard Setbacks & Height
- Bulk density & Floor Area Ratio (FAR) Restrictions
- Parking Requirements
- Right to Rebuild
- Potential Code Violations
- Municipal Document Retrieval (if available): Zoning Verification Letter, Variances, Conditional Use Permits (CUPs), Certificates of Occupancy & Approved Site Plans
AEI’s zoning and urban planning experts are experienced in jurisdictions throughout all 50 states and will help identify zoning conformance issues concerning the use, bulk density, setbacks, building height, and parking requirements, and more.
Small Balance Loan Report (SBL)
The Small Balance Loan (SBL) Zoning Reports are also ordered as a part of a project’s due diligence process, catering to the needs of SBL Lenders. They are an abbreviated version of the ZAR – comprised of the same scope of work as outlined above, apart from the Zoning Verification Letter and information on outstanding building/fire code violations (as this is included in the SBL Report).
Permits and Approvals Report (PAR)
Although the Reports are not required by HUD, AEI developed the Permits and Approvals Report to assist our FHA (HUD) clients in obtaining and organizing documentation required for the closing of their multifamily (MAP) and healthcare (LEAN) deals.
Documentation obtained as part of the report include:
- Building permits & outstanding building code violations
- Zoning permits (including approvals such as variances/CUPs & Site Plans) & outstanding zoning code violations
- Fire Department permits, alarm/sprinkler inspections & outstanding zoning code violations
- Copies of Certificate(s) of Occupancy
- Elevator permits
- Boiler permits
- Pool permits
- Wastewater & Stormwater permits
- Environmental permits/Air Emissions
- Tax licenses
- Business licenses, and
- Rental licenses required to operate a property
AEI can also include a full Zoning Analysis (SOW outlined under “ZAR” service) for use and building conformance as outlined above under the ZAR service at the request of the client for an additional fee.