Zoning Nightmares

If you’re in the business of buying and selling commercial property, you’re likely very familiar with zoning, and the issues that can crop up with the process. If you’re not familiar, zoning is the process of categorizing the uses for a piece of real estate. The most common distinguishable zones that Realtors deal with are Residential, Commercial, and Industrial. Typically, each zone has its own uses and prohibitions; for example, a residential home can’t be turned into a gas station, or vice versa. These laws exist for the safety of the residents as much as the value of the land.

For Realtors, the property is usually listed as it should be, and you needn’t second-guess the sign. However, every great once in a while a property will be mislabeled, resulting in a tangled mess. One such example happened locally, where a property that had been advertised as commercial was in fact not allowed to be used for commercial purposes. Through a number of resells, the property had picked up a “commercial” tag with the Realtors, but was actually originally owned by a tax-exempt institution, and was zoned as “Institutional,” prohibiting the property from being used for commercial purposes.

This is a very sticky situation for a number of reasons: the Realtor had a duty to the Buyer, but had no way of knowing the property wasn’t commercial. The Buyer is expected to do their due diligence but a listing should be relatively fool proof. The issue wouldn’t have come up in closing paperwork or title paperwork, meaning it slipped all the way through the process. So, who’s on the hook?

In the end, in this case, the best advice would be for all parties (Buyer and Realtor) to verify for themselves that a property is zoned as it’s listed before the paperwork is done, especially if you have an inkling that there might be an issue. Anything after that is a legal dispute, and for that sticky of a situation, you’ll want to have an attorney on hand.