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Zoning laws: The good, bad and ugly
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Zoning is one of the most confusing and least understood aspects of real estate and property ownership for many people.
What exactly is "zoning"? Technically speaking, it's the body of law that encompasses the rights granted by a jurisdiction for the legally allowed use of real estate.
I have observed zoning issues from both sides of the fence. It was first as a zoning administrator in two different cities near Atlanta; and most recently, as a commercial real estate broker and real estate investor. I've seen both the benefits and the damage that can be caused by zoning laws.
There are several reasons why, as an investor, I prefer to purchase property that has strict zoning regulations. First, strict zoning laws help maintain property values. Whether you are a landlord or a homeowner, your worst enemy is other landlords and homeowners who allow their homes and neighborhoods to deteriorate. When grass gets overgrown or the neighborhood is scattered with broken windows or junked cars, a good code enforcement officer should help remedy the problem.
Of course, many properties are in neighborhoods with homeowner's associations (HOAs). While an HOA can affect the same outcome as a code enforcement officer, the process is much slower and more cumbersome. A code enforcement officer can usually see a problem, knock on the door and talk to the owner or tenant, and the problem is resolved in a few days.
However, HOAs have to write letters and sometimes beg and plead to have problems corrected. And depending on state law, many HOAs can only lien property for failure to comply with neighborhood rules. The HOA is sometimes not even allowed to actually correct the problem.
In many cases, a code enforcement officer can take the landlord or homeowner to a local court, similar to a magistrates court, which may legally require a clean up. Some jurisdictions have the right to hire contractors to do the clean up, and the property is liened by the jurisdiction for payment. Other remedies include hefty daily fines until problems are fixed.
An effective code enforcement officer is like having your own maintenance man running around with a gun and badge requiring neighboring landlords and homeowners, as well as your own tenants, to keep everything clean and in good repair. That's a valuable service that I take advantage of anytime I can.
From a landlord's perspective, another reason I believe in strong zoning laws is that they tend to help regulate supply and demand market cycles. In a community with strong zoning laws, there are usually a lot of obstacles for developers to overcome in order to start a development. As a developer, I'm not crazy about this part of government control, but as an owner of existing units, I realize that it helps protect the status quo.
Why is this important? Government control decreases competition by increasing what we call "barriers to entry." The jurisdiction will require numerous public and permitting meetings and will generally put the developer through a hair-pulling process. It is this slow, tedious process that makes it hard to develop property in most communities—and that will work to your advantage as an owner of existing residential or commercial buildings.
However, it is this government control and barriers of zoning laws that can impede upon the rights of property owners. Property owners have a certain bundle of rights that are granted to them by the constitution. One of these rights is the "use" of the property. In other words, the property owner can have a reasonable use of the property.
The definition of "reasonable" is usually where the problems begin. Is it reasonable to be able to remove any tree on your property that you want? Is it reasonable to paint your house any color you want? Is it reasonable to park a car wherever you want on your property? Is it reasonable to build any kind of privacy fence you want?
It might surprise you that these are a few of the issues that many zoning laws attempt to control. It is this government control that can be draconian or a blessing, depending upon which side of that privacy fence you are on.
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Brian Patton, CCIM is the founding broker of Capital Realty Advisors, LLC. You can contact Brian through www.CapitalListings.com For helpful tips and videos on zoning, visit: www.RealEstateTipsandAdvice.com and click on the "Zoning" category.
Tags: Business
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