Commercial real estate entitlements are the approvals granted by a municipality to rightfully develop a piece of land or redevelop an existing building. Their approvals come from a variety of authorities having jurisdiction including design review boards, HOA boards, and city, county, state, and federal departments. You will need entitlement approval when developing a vacant piece of land or property by whomever has jurisdictional control to allow it.
Let’s take a look at some of the most common issues to avoid during the entitlement process.
Some regions are designated for very specific uses, regardless of their zoning code. If you run into an issue like this, a request might need to be presented at a public hearing where local residents and nearby businesses have the opportunity to state concerns and ask questions about the project or user. Regardless of any jurisdictional or design review, you will need a building plan and permit to build on a property prior to the start of construction. This process comes after any zoning or rezoning approvals that occur first. Permits also protect you from code-violating renovations that were made before the property was sold. If you’re not careful, you could end up buying a property that has multiple violations and face added costs trying to correct mistakes made by previous owners. Permits are a way of ensuring that commercial properties are taking the right measures with design to ensure safety and order among their area.
A local development plan might not allow your project to go through; in which case you will need to ask the planning commission or city council to adjust the zoning code. Ordinances could be outdated for current land users and may require updating. This process could be simple; however, the burden to convince your local planning board or city council as to why they should approve your zone change is completely your responsibility. Sometimes a Conditional Use Permit (CUP) is required as the specific use could impact the surrounding general public. CUPs are very common when developing quick service restaurants with drive-thrus or buildings that will have a large outdoor patio. Noise and traffic flow created from the establishment could impact the neighboring community and the local jurisdiction will want the public to have a say or invoke any mitigation measures before development can begin.
Specific studies conducted by the planning department can reveal unsafe conditions and cause developmental delays. This could include environmental site assessments, traffic impact studies, acoustical studies, biology or wetlands delineations, cultural and archeological studies, and determine how the project will impact the surrounding community. Local utility providers, fire departments, parks and recreation, public transportation, and local government may need to approve your project and proposed design as well. A board of supervisors or city council will have the final say to approve the project typically. If the project is perceived negatively or doesn’t meet the existing general plan for land use, the commission or council will most likely vote against it.
The cost of acquiring various entitlement approvals will depend on your local jurisdiction and the project magnitude. Costs can range from a few thousand dollars to hundreds of thousands of dollars when full environmental mitigation is required. Your local planning department should be able to provide a list of costs related to the land entitlement process with that municipality. Determine your budget by discussing this with your city planner and land use attorney ahead of time.
Entitlement applications are reviewed by the planning department and take a while to process because they are carefully examined. The process can take anywhere from a month to a few years based on the scope of your project. Studies are required and are conducted by independent consultants who will look at everything from air quality to transportation issues. Your project could be denied or delayed, and you might encounter obstacles such as new legislation or strict zoning codes.
During COVID-19 related shutdowns, many jurisdictions were experiencing staff shortages because they were not prepared to work remotely when much of what they do requires public interaction and public hearings. Continuous delays forced hearings to move to virtual platforms, which limited public interaction and the applicant's ability to speak directly to people on the project clearly. Reviews of plans shifted to be carried out electronically after they had previously been done using paper submittals. Moving into 2022, the changes made from the COVID-19 impacts are still playing catch up as many city budgets are still attempting to hire more qualified staff.
The entitlement process is a very important step to acquiring and developing a commercial property. Entitlement approvals protect your investment from suffering unforeseen ordinance or variance changes once approved and/or constructed. Although the process can be lengthy and challenging, getting an entitlement approval on a property before development is required and can bring great value once done.