Entitlements sweeten commercial land deals

“Bemmie” Eustace

An entitlement essentially grants a landowner or developer the right to use a specific parcel of land for a designated purpose and is considered a valuable asset in the real estate development arena, applicable to both small and large projects across the board. The entitlement process may be triggered in a variety of circumstances at different points in the life of a project for developers and sellers.

A land use is generally regulated by local and state laws, with rules promulgated through statutes and ordinances. Typically local land planning agencies act as the regulating authority, though in large developments with regional impact, state agencies may be involved as well. As an overview, the responsibilities of land planning agencies fall within the zoning ordinances, although they are guided by larger, comprehensive plans for the municipality’s future.

The Future Land Use Plan, an overlay of current zoning maps, allows the community’s governing fathers to identify specific growth corridors and find balance among - and transitions between - future uses including residential, commercial, industrial, office, parks and schools among others. The plan offers broad designations, whereas zoning regulations provide more refined details for the subcategorized zoning classification. Sometimes a property’s use is inconsistent with the future land use and/or existing zoning classification, resulting in the need to amend the Future Land Use Plan or rezone a property.

When rezoning for larger developments, it is prudent to consider pursuing the Planned Unit Development zoning classification, which offers benefits to both the municipality and land owner or developer. Instead of being relegated to one zoning classification, PUDs allow the flexibility of applying various standards from other zoning designations to the overall project and can incorporate a broader range of uses consistent with the adjacent commercial uses. All of the standard zoning issues applicable to densities and intensity of development - parking, loading, open space/landscaping, pedestrian ways, access, etc. - are discussed and negotiated until both the municipality’s and developer’s concerns are resolved.

The municipality, however, may restrict the intensities of uses within the PUD to ensure the development is consistent with upgraded services that will be required to meet the needs if additional traffic is generated. Some of the upgraded services that would need to be considered include adequate water, roadway and wastewater capacities. Ideally, the developer would attempt to secure the maximum amount of flexibility within the PUD so that prospective buyers will already have the entitlements in place for development.

In some cases, a property may be zoned properly to permit a particular use, though ensuring all the zoning requirements will fit on the parcel can be challenging. In the case where space does pose a problem, a variance may be necessary to entitle the owner to move forward. Variances are usually only granted under circumstances where the owner or developer can offer compelling evidence to the city to allow a variance by demonstrating how the property’s circumstance is different from other similarly-zoned parcels.

Conditional uses, sometimes called special exceptions, are yet other cases where an approval process is invoked for entitlements. Consider a commercial property that allows restaurants as a permitted use, but if a drive-thru is proposed, this additional component would only be allowed as a conditional use. The process provides the municipality with the ability to impose conditions on the proposed development in order for the owner to secure approval for the modification.

Under circumstances where an owner is developing a large tract of land and wishes to sell portions of it, the tract must be subdivided into smaller parcels. And in the case where access roads are needed for those tracts, an approved plat will be required as well. The plat legally documents and describes the new parcels and ensures that easements for utilities and access are in place. Once approved, the plat documents the improvements that create legal lots in accordance with the development regulations.

Since entitlements may be required at any point in time within the life a property, it makes good sense for land owners to obtain basic entitlements from the outset. This is beneficial both to the owner as a prospective developer and also to the owner as a seller who will be well-positioned to attract a range of potential buyers. Land owners are usually familiar with local politics and strength of neighborhood associations capable of raising objections to a proposed development. Since a prospective buyer does not always have a pulse on local residents who wield the power to halt a project, the required public hearing process could erode the developer’s confidence in securing approvals.

Another consideration is that the time required for the developer’s construction start can be markedly reduced if previously obtained entitlements are in place. While not all entitlements may be available until an end user is identified, there are definitive steps that can be taken by the landowner prior to marketing the property. If these steps are initiated, the closing date may be moved forward - ultimately attracting developers who want to minimize opening date delays.

AnneMarie “Bemmie” Eustace is director of site development for Orlando-based Interplan LLC, an architecture, engineering, interior design and project management firm specializing in the program management of national multiunit restaurant, retail, hospitality and commercial development programs.