What are Entitlements in Real Estate?

Entitlements in real estate refer to the necessary approvals and legal rights granted by government authorities to develop land or property for a specific use. These rights are essential for any real estate project, allowing developers and property owners to modify a piece of land, construct buildings, and connect to utilities under local regulations.

The entitlement process, while crucial, can be a maze of complexity and confusion. At its core, this approval process involves submitting a development proposal to the local government. It then undertakes a rigorous review, often including public hearings, to determine whether the necessary permits should be granted.

Entitlements, a general term for a long list of potential requirements a developer may need to meet to comply with local regulations, can encompass various aspects of the project. These requirements ensure that the development aligns with community standards and zoning laws:

Zoning Approvals

• • Definition: Zoning Approvals are permissions granted by the local jurisdiction, typically through the local planning department, to use land for a specific purpose (e.g., residential, commercial, industrial). These approvals are based on the zoning ordinance and zoning code established by the local governing body.
  • Purpose: The primary purpose of Zoning Approvals is to ensure that development aligns with local land use plans, including the general plan, master plan, or city plan. This process helps maintain orderly development and protects property values by ensuring compatible land uses within specific areas.
  • Process:
    • Review of Existing Zoning: Developers must first determine their property’s current zoning according to the local zoning code.
    • Rezoning Request: If the desired use doesn’t align with current zoning, developers may need to request a rezoning to the local planning department.
    • Compliance Check: The local planning department reviews the proposal to ensure it complies with the zoning ordinance and aligns with the general or master plans.
    • Public Hearings: Major zoning changes often require public hearings, allowing community input on proposed changes.
    • Approval or Denial: The local jurisdiction, often through the city council or planning commission, decides on zoning approvals.
  • Importance: Zoning Approvals are a crucial first step in real estate development. They determine the legal use of the land and set the foundation for all subsequent development activities. With proper Zoning Approvals, developers can avoid legal challenges and may be able to proceed with their proposed projects.
  • Flexibility: While zoning codes are typically strict, many jurisdictions allow for some flexibility through processes like conditional use permits or variances, which can accommodate unique project needs while still adhering to the overall intent of the local land use plans.

Conditional Use Permits

• Definition: A Conditional Use Permit (CUP) is a special permission granted by local authorities, typically the city council, to use land in a way not routinely allowed in a particular zone. This type of permit acknowledges that certain land uses, while not permitted by right in a specific zone, may be acceptable under special circumstances.
• Purpose: The primary purpose of a Conditional Use Permit is to allow flexibility in zoning for unique projects while still maintaining the overall integrity of the zoning plan. This flexibility enables local jurisdictions to consider projects that may benefit the community but don’t fit neatly within standard zoning categories.
• Key Aspects:
  • Local Community Involvement: The process of obtaining a Conditional Use Permit often involves input from the local community. Public hearings are typically held where local residents can voice their opinions on the proposed project.
  • City Council Approval: In most cases, the city council or a similar governing body is responsible for reviewing and approving Conditional Use Permit applications. They consider factors such as the project’s potential impact on the neighborhood, traffic, noise levels, and overall compatibility with the surrounding area.
  • Conditions and Restrictions: As the name suggests, Conditional Use Permits come with specific conditions that the property owner must meet to maintain the permit. These conditions are designed to mitigate any potential negative impacts on the local community.
  • Balancing Interests: CUPs aim to balance the interests of property owners who want to develop their land in specific ways with the concerns of local residents who may be affected by the proposed use.
  • Revocability: Unlike standard zoning, a Conditional Use Permit can typically be revoked if the property owner fails to comply with the specified conditions or if the use proves to be detrimental to the community.
• Process:
  • Application: The property owner or developer submits a CUP application to the local planning department.
  • Staff Review: City staff review the application for completeness and compliance with basic requirements.
  • Public Notification: Local residents are notified of the proposed conditional use.
  • Public Hearing: The city council holds a public hearing where the applicant presents the project and local residents can voice their opinions.
  • Decision: The city council makes a decision to approve, approve with conditions, or deny the CUP based on the project’s merits and community input.

Conditional Use Permits provide a mechanism for special land uses and play a crucial role in facilitating unique development projects while ensuring that the local community’s concerns are taken into account.

Variances in Zoning Regulations

• Definition: A variance, often called a zoning variance, is a legal mechanism granting permission to deviate from specific zoning requirements. It allows property owners to use their land in a way that would otherwise be prohibited by existing zoning ordinances.
• Purpose: The primary purpose of a variance is to accommodate unique property characteristics or project needs that make strict compliance with zoning regulations impractical or unnecessarily burdensome. Variances provide flexibility in the application of zoning laws, recognizing that not all properties can conform to standardized regulations due to their distinctive features or circumstances.
• Types of Variances:
  • Area Variance: Relates to physical characteristics of the property (e.g., lot size, setbacks).
  • Use Variance: Allows a use of the property not otherwise permitted in the zoning district (less common and more difficult to obtain).
  • Unique Property Characteristics: Variances are typically granted when unique physical features of a property (such as irregular shape, topography, or environmental constraints) make it difficult to comply with standard zoning requirements.
  • Hardship Requirement: Applicants must usually demonstrate that strict application of the zoning code would result in practical difficulties or unnecessary hardship.
  • Minimal Deviation: Variances should represent the minimum deviation necessary to alleviate the hardship while still preserving the intent of the zoning ordinance.
  • Public Interest: The granting of a variance should not be detrimental to the public good or substantially impair the intent and purpose of the zoning plan.
• Process:
  • Application: The property owner submits a variance application to the local zoning board or planning department.
  • Review: Zoning officials review the application to ensure it meets basic criteria for consideration.
  • Public Notification: Neighboring property owners are typically notified of the variance request.
  • Public Hearing: A hearing is held where the applicant can present their case and community members can voice opinions.
  • Decision: The zoning board decides whether to grant the variance based on the merits of the case and established criteria.
• Importance: Variances play a crucial role in zoning administration by providing a legal and standardized process to address unique situations that weren’t anticipated when zoning laws were drafted. They allow for reasonable property use while maintaining the zoning plan’s integrity.

By offering this flexibility, variances help balance the need for consistent zoning regulations with the reality of diverse property characteristics and development needs.

Expert Perspective:

“Real Estate expert Bill Gassett of Maximum Real Estate Exposure provided helpful guidance about development prospects. Bill has worked with new construction and builders/developers throughout his thirty-eight-year career.

One of the most vital aspects of real estate development is understanding what you can and cannot do. Much of that will be dictated by the local zoning laws. Developers must craft their developments based on these regulations.

At times, builders can seek variances in the zoning based on concessions they provide. Communities often work to make compromises that benefit both the developer and the community. For example, a town may grant the builder reduced road sizes in exchange for providing additional green space that either the town or residents of the neighborhood can use.

I have been involved in numerous projects where builders have worked with the community to provide a neighborhood that the builder and the town can be proud of. It is a win-win when builders and local administrators can work together for the greater good.”

Site Plan Approvals

• Definition: Site Plan Approval is a critical process in real estate development where local authorities review and approve detailed development plans showing the proposed project’s layout. This comprehensive review encompasses all aspects of the site’s design, including buildings, parking, landscaping, utilities, and other site features.
• Purpose: The primary purpose of Site Plan Approval is to ensure that the project meets local design and functionality standards. This process helps maintain community aesthetics, ensures efficient land use, and verifies that the development complies with zoning regulations and other local ordinances.
• Key Components
  • Development Plans: These detailed plans form the core of the site plan approval process. They typically include:
    • Site layout
    • Building locations and dimensions
    • Parking areas
    • Traffic flow patterns
    • Utility connections
    • Stormwater management systems
  • Landscape Design: A crucial element of site plan approval, landscape design plans typically include:
    • Location and species of trees and shrubs
    • Green spaces and buffer zonesOutdoor amenities (e.g., parks, walkways)
    • Irrigation systems
  • Design Reviews: Many jurisdictions conduct design reviews as part of the site plan approval process. These reviews evaluate:
    • Architectural features
    • Building materials and colors
    • Signage
    • Lighting plans
    • Compatibility with surrounding development
  • Process:
    • Pre-application Meeting: Developers often meet with local planning staff to discuss project concepts and requirements.
    • Submission: The developer submits detailed development plans, including site layout and landscape design.
    • Staff Review: Planning department staff review the plans for compliance with local regulations.
    • Design Review: If required, a design review board evaluates the aesthetic aspects of the project.
    • Revisions: Based on feedback, the developer may need to revise and resubmit plans.
    • Public Hearing: Some jurisdictions require a public hearing for significant projects.
    • Approval: Once all requirements are met, the planning commission or designated authority grants site plan approval.
• Importance: Site Plan Approval is a crucial step in the development process that bridges the gap between conceptual ideas and actual construction. It ensures that development projects are well-designed, functional, and compatible with their surroundings. This process helps maintain community standards, protects property values, and contributes to the overall quality of the built environment.

By thoroughly reviewing development plans and landscape designs and conducting design reviews, local authorities can collaborate with developers to create projects that enhance the community while meeting the needs of property owners.

These are the four major hurdles real estate developers must navigate in the legal process of obtaining real estate entitlements. Here is an abbreviated version of other due diligence items that might need to be handled:

• Subdivision Approvals:
  • Definition: Permission to divide a parcel of land into smaller lot
  • Purpose: Controls the division of land for development
• Environmental Impact Approvals:
  • Definition: Certification that a project meets environmental standards
  • Purpose: Mitigates negative environmental impacts of development
• Building Permits:
  • Definition: Permission from a regional building authority to construct, renovate, or demolish structures
  • Purpose: Ensures compliance with building codes and safety standards
• Density Bonuses:
  • Definition: Allowance to build at higher densities than typically permitted
  • Purpose: Incentivizes certain types of development (e.g., affordable housing)
• Historic Preservation Approvals:
  • Definition: Permission to alter or develop historic properties
  • Purpose: Protects historically significant structures or areas
• Utility Connection Approvals:
  • Definition: Permission to connect to local utility systems or permits to drill wells for water
  • Purpose: Ensures adequate infrastructure capacity for new development
• Parking Variances:
  • Definition: Permission to provide fewer parking spaces than typically required
  • Purpose: Accommodates unique site constraints or encourages alternative transportation
• Special District Approvals:
  • Definition: Permission to develop within specially designated areas
  • Purpose: Manages development in areas with unique characteristics or goals

Expert Perspective:

Paul Sian at Cincinnati & Northern Kentucky Real Estate provided some insight on the permit process: Permits are an important part of the process when having work done on a home. Whether new or existing home, a home without permits can mean a lot of problems down the line. Permits help make sure the work is being done properly and being done by licensed professionals. The lack of permits where required can also result in homeowners insurance denying claims that resulted from unpermitted work. The bottom line is don’t avoid permits to save a few dollars up front.

Why Are Entitlements a Requirement?

Municipalities require entitlements to ensure orderly, safe, and sustainable development within their jurisdictions. These legal permissions serve multiple crucial purposes. They help maintain consistency with local zoning laws and comprehensive plans, preserving community character and protecting property values.

Entitlements also ensure that new developments, such as roads, utilities, and public services, have adequate infrastructure support. They provide a mechanism for assessing and mitigating environmental impacts, preserving natural resources, and addressing potential health and safety concerns. Furthermore, the entitlement process allows for public input, fostering transparency and community engagement in shaping local development. Ultimately, entitlements balance private property rights with the broader public interest, promoting responsible growth and community well-being.

Who Handles The Entitlement Process?

The professional guiding a project through the entitlement process is typically known as a Land Use Planner, Entitlement Specialist, or Development Manager. This role requires a unique blend of technical knowledge, communication skills, and project management abilities.

These professionals usually have bachelor’s degrees in Urban Planning, Real Estate Development, Architecture, Civil Engineering, or Public Administration. Many positions prefer or require a master’s degree. Additionally, certifications like AICP (American Institute of Certified Planners) or LEED accreditation can be valuable.

Key skills include a deep understanding of land use laws and regulations, proficiency in GIS software, strong communication and negotiation abilities, and the capacity to interpret architectural and engineering plans. They must also be detail-oriented, patient, and diplomatic, as the entitlement process often involves navigating complex regulations and mediating between various stakeholders.

Experience is crucial in this field, with most positions requiring at least 3-5 years of work in land use planning or real estate development. Familiarity with local zoning laws and development regulations is essential, as is the ability to adapt to changing project needs and regulatory environments.

Something to Think About

The next time you drive past a newly constructed subdivision or a bustling shopping center, take a moment to appreciate the unseen journey that preceded the first shovel of dirt. Behind every new development lies a complex web of entitlements—an intricate dance of zoning approvals, conditional use permits, variances, and site plan reviews. While often invisible to the casual observer, these legal hurdles represent months or even years of meticulous planning, negotiation, and community engagement. From navigating local regulations to balancing community interests, developers must clear numerous administrative and legal hurdles before breaking ground.

So, when you see a new building rise from an empty lot, remember that it’s not just the product of bricks and mortar but of a lengthy, intricate process that shapes our built environment and communities. The entitlement process, though complex, ensures that our cities grow responsibly, balancing progress with preservation and private interests with public good.