Zoning due diligence has become a necessary process in every real estate investment transaction. A zoning report is a very inexpensive investment when compared to the cost of the transaction. The purpose of the report is to meticulously detail the allowances and restrictions within branded municipal codes that divide geographic areas, referred to as zones. Any development or acquisition needs to adhere to these codes to be considered legally compliant. Lenders, insurers, and buyers need to minimize their risk and ensure their investment is smart, safe and profitable before executing a transaction.
Lenders generally require a property to follow zoning ordinances before they will issue a loan. Certain states, such as New Jersey, make zoning reports compulsory before a commercial property can be purchased. In the event that a property becomes legally nonconforming, commonly referred to as “grandfathered,” lenders require a certain damage and reconstruction threshold percentage to again minimize the risk to their investment. Especially for longer-term occupants and investors, liability is the single greatest threat to property, either if a jurisdiction or zoning law changes, or if specific property designation changes. It is in the client’s best interest to protect their property by choosing a due diligence advisor that can provide insight and meticulous zoning reports, involving a team of professional planners, civil engineers, and legal professionals.
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