Today, virtually all real estate purchasers recognize and appreciate the term “due diligence.” You can’t watch a home improvement show on television without seeing the — sometimes scary — confirmation of the value of home inspections, radon inspections and other forms of due diligence investigations. For investment or commercial properties, due diligence should include not only structural and environmental investigations of the land and its improvements, but also title examinations, surveys and financial analyses to understand the impact of the information or conditions affecting the property.
However, even the most experienced and sophisticated purchasers often overlook or underestimate the value of obtaining an opinion letter from the zoning administrator of the jurisdiction in which the property is located before they are obligated to close on their purchase. The assumption that a title examination, appraisal report, or an on-line check of the tax records is sufficient to confirm whether or not the property is properly zoned for their intended purposes constitutes an unnecessary risk. It is imperative for purchasers to be aware of the presence of zoning conditions, which “run with the land” (i.e. remain attached to the property even after the property is sold) until those conditions are modified by the jurisdiction’s governing body. Such an omission of due diligence can overlook the possibility the building located on the property they are purchasing is not a “permitted” use under the zoning code, but, rather a “non-conforming” use. That distinction is critical if the purchaser intends to renovate the building, or if/when the building needs to be reconstructed after a casualty.
Neither a title report, appraisal report, nor on-line search of the tax records is sufficient for purposes of confirming zoning compliance. An opinion letter from the zoning administrator provides the most reliable confirmation of use, which is necessary to build a zoning foundation (absent fraud, malfeasance, clerical or other nondiscretionary errors). While localities are permitted to charge a fee for processing zoning verification letters, typically they are modest and fair. In the event the zoning administrator’s letter reveals zoning conditions, which would prevent or unduly complicate a purchaser’s plans for the property, the fee paid for that knowledge represents money well spent.
The importance of obtaining a written zoning determination from the appropriate administrator has been underscored by recent changes to Section 15.2-2307 of the Code of Virginia (effective July 1, 2010). That statute outlines how a landowner can acquire “vested rights” in a particular land use such that the use cannot be affected by a subsequent change in zoning. To have that statutory protection, the landowner must (i) obtain or be the beneficiary of a significant affirmative governmental act which allows the development of a specific project; (ii) rely, in good faith, on that act; and (iii) incur extensive obligations or substantial expenses in pursuit of the project relying on the significant governmental act.
A property owner or developer with “vested rights” is entitled to develop his or her property in accordance with prior zoning provisions. Achieving this status can be important to a property owner or developer when zoning laws are changed by local governments.
For years, courts have debated exactly what constitutes a “significant governmental act” — and in 2009, the Virginia Supreme Court ruled that a zoning administrator’s zoning verification letter was not such an act. Reacting to that decision, the General Assembly amended Section 15.2-2307 of the Code so as to specifically provide that a zoning administrator’s zoning verification letter does constitute a significant affirmative governmental act. While landowners seeking to establish “vested rights” must still meet the other elements of the statutory test — purchasers are well advised to seek a zoning verification letter in order to satisfy the first rung of the “vested rights” test.
Requesting a zoning verification letter is simple. Every local government in our area has a robust website giving easy access to its zoning administrator — and each one of them is willing to explain its procedures with citizens.
What you don’t know about the zoning status of a potential property purchase really can hurt you. Limitations on the use of the property can deprive owners of the benefit of your bargain. Purchase contracts should include zoning contingencies and purchasers should insist on receiving a zoning verification letter from the zoning administrator before they are obligated to close. Boards of Zoning Appeals, Planning Commissions, Supervisors or City Councils cannot, and should not be expected to, protect purchasers against their own lack of zoning due diligence.
Maryellen F. Goodlatte is a nationally recognized attorney with the firm Glenn, Feldmann, Darby & Goodlatte. Maryellen’s practice centers on real estate with a focus on Land Use Planning and Zoning. Visit the firm on the web at: www.gfdg.com