Zoning

Hello landlords and tenants, I’m going to discuss “zoning” in commercial real estate leasing. My name is Jenna Zebrowski and I am the attorney behind LawByJZ.com. The landlord isn’t the only one who can decide how land can be used, there are governmental authorities who don’t want certain businesses to be located close to each other.  

How do they enforce that?  Through zoning. Depending on the use, it’s important to find out if you can operate for that use or if you have to get special permission for it, if you can get permission at all.  If you’re not sure when you’re ready to sign the lease, make sure you’ve negotiated a contingency so you can get out of the lease if you need to because the location isn’t zoned for your use!

---

Commercial Real Estate Case Study

Zoning: Can My Business Operate Here?

Barry found the perfect location for his auto body and oil change shop, which was in a mixed-use area of the city.  There was some light industrial use allowed, which was what his location was, but there were also areas that didn’t permit auto body repair work, or the use of motor oil or other chemicals that his work required, because of the use of the other buildings nearby, such as hospitals, schools or residential homes. Barry really wanted this location and didn’t want to lose out to someone else in a competitive real estate market, but he only wanted to lease it if he could operate his shop there.

The landlord was in a hurry to have Barry sign the lease, especially since he was going to be there for a long time.  The landlord agreed to work with Barry to work to get the zoning confirmed, or to get it rezoned if needed, but he wasn’t going to do the work and spend the time unless Barry committed to the location and signed the lease.  Barry thought that would be okay, but when he read the lease, he wasn’t sure that’s exactly what the lease said. He hired an attorney to help him understand.

The lease did not have a contingency for zoning, which is what Barry wanted. He didn’t want to be stuck paying rent in a location he couldn’t use with no way out if he couldn’t get the correct zoning. So the lease was changed.  Barry would sign it and agree to operate his shop in that location at that rent, but only if the zoning was correct.  He and the landlord would work together to get the zoning confirmed or fixed, but if they couldn’t get the right zoning, Barry would be able to terminate the lease without a penalty.

Barry signed the lease and went to a lot of city counsel meetings with the landlord in an effort to get the zoning changed.  The city did not grant the zoning variation, because it was too near residential area, and there was concern about traffic, noise and the chemicals used at Barry’s shop. So Barry had to get out of his lease, and use the contingency clause tied to his zoning.  Otherwise, he would have been stuck in a multi-year lease, paying rent, where he couldn’t work at his business!