grandfathered residential use zoned commercial use

[The Warrior Monk]

county planning and development indicates the grandfather use can go on in perpetuity even if destroyed if rebuilt within two years, but that raises the as vacant issue, also agree regarding my residential certification in making this call

With regard to being rebuilt, many zone codes allow legal, preexisting, nonconforming uses to be rebuilt during a specified time period, or least obtain a building permit within that time period. However, just because something can be built doesn't mean that it is always the HBU.

Regarding competency, I recommend being careful with valuing non-residential zoned parcels. I started strictly as a residential appraiser and obtained a CG credential years later. There is often a vast difference between appraiser residential an commercial properties, and a casual reading of the zone code often doesn't make that apparent. For example, just because a use is noted as an allowable use doesn't mean it is permitted. Common reasons have to do with water availability, septic issues (public or private, and if private what is the sanitary flow of the property, etc.), parking, building envelope, etc. These issues are applicable to residential properties also, but most residential appraisers don't come across them often. These issues occur commonly in nonresidential properties very often. If a residential appraiser isn't aware of these, and other, factors, the potential for error in valuation is great.

Every are is different, but because this specified property is surrounded by commercial development, this raises a major red flag. Even if state license law and client requirements allow for the appraisal of this property, I strongly recommend, at minimum, consulting with a commercial appraiser that is familiar with the property in question, or at least the general area.

 

[George Hatch]

The other gopher hole with non-conforming uses is the question of how the local jurisdiction handles it if/when a non-conforming occupancy goes vacant for an extended length of time. Such as can occur during a foreclosure/resale situation. Locally, we have some jursidictions where if the property sits vacant for 6 months then the permissibility of the non-conforming occupancy expires. In other jurisdictions it's 12 months, not 6.

So mentioning this in an appraisal report might be a good thing for an appraiser because if the lender reads the report they can know not to evict the borrower before foreclosure or allow the property to sit vacant for too long before reselling it. And believe me, lenders do make such mistakes on their own, so you don't want to provide them with the excuse they never knew because the appraiser never mentioned it.

Again, these are not tough questions for an appraiser to look for in a zoning code or to ask a zoning official, and the observation that "the local zoning ordinance does not include provisions for the expiration of a non-conforming occupancy and the official at the city;s zoning department said they treat each situation individually through the application process" if/when that's the case. But the point is that the appraiser does need to know to look out for these kinds of issues.

 

[The Warrior Monk]

Most jurisdictions were I work require the building permit to be obtained within 12 months. Of course, there are nuances that can come into play. Usually the rebuild is "in place," but various other factors could play in where the new improvements may be required to be modified in some manner, especially when the improvements have to be scrapped completely, and if there are, say, environmental or safety issues involved.

 

[CANative]

The other gopher hole with non-conforming uses is the question of how the local jurisdiction handles it if/when a non-conforming occupancy goes vacant for an extended length of time. Such as can occur during a foreclosure/resale situation. Locally, we have some jursidictions where if the property sits vacant for 6 months then the permissibility of the non-conforming occupancy expires. In other jurisdictions it's 12 months, not 6.

So mentioning this in an appraisal report might be a good thing for an appraiser because if the lender reads the report they can know not to evict the borrower before foreclosure or allow the property to sit vacant for too long before reselling it. And believe me, lenders do make such mistakes on their own, so you don't want to provide them with the excuse they never knew because the appraiser never mentioned it.

Again, these are not tough questions for an appraiser to look for in a zoning code or to ask a zoning official, and the observation that "the local zoning ordinance does not include provisions for the expiration of a non-conforming occupancy and the official at the city;s zoning department said they treat each situation individually through the application process" if/when that's the case. But the point is that the appraiser does need to know to look out for these kinds of issues.

Highest and Best Use Analysis:

The four tests used for H&BU analysis are (a) legally permissible, (b) physically possible, (c) financially feasible, and (d) maximally productive. The following analysis describes the zoning, and then each of the four tests will be applied to determine the as-vacant and the as-improved highest and best use.

Zoning- Located in the C2 (Community Commercial) District. The purpose of this district is to provide a full range of retail and service establishments to communities. This district has many permitted uses (allowed by right) and several uses which would require either a Minor or a Major Use Permit. Single family residential is not among any of these uses unless the residential use is in conjunction or combination with a commercial use. Development standards include a minimum lot size of 8,000 square feet (when public water and sewer are available) with an average lot width of 80 feet for interior lots and 100 feet for corner lots. The subject has a corner lot and is 1,920 square feet. The subject property does not meet either requirement but assuming it was a legal lot of record at the time current zoning regulations were implemented the use as a single family residence can continue until that use is changed. If the property is abandoned for more than two years the use would revert to a commercial use. Additionally, the exceptions to the ordinance will allow for the sub-standard size lot to be developed with a conforming commercial use to the extent allowed by development standards.

Therefore, the improvement is legal, non-conforming (grandfathered). The residential use may continue, but if the site were vacant, a residential improvement would not be allowed and any improvement would need to conform to the commercial/retail/service uses allowed by the zoning. The County Planning Department has issued a “rebuild letter” confirming that the improvements can be rebuilt if destroyed.

As Vacant-
Legally permissible: Primary residential use is not an allowable use. Residential use is allowed in conjunction with or in combination with a commercial use. Therefore, commercial or mixed-use (commercial/residential) is legally permissible.

Physically possible: The site can support an improvement as evidenced by the existing improvement. The lot size is substandard but would qualify for development under the exception clause noted and described above. Therefore, development of an improvement is physically possible.

Financially feasible: Given the recent fire disaster and the adverse economic impact such an event is expected to have in the community, it is not likely that there will be demand for new commercial space in the near or mid-term; rebuilding will occur on damaged sites, and there may be some relocation of existing business to communities not affected by the fire. This implies no marginal demand for new commercial space; as such, it is not reasonable to presume the cost of new construction would be recaptured in the market.

Therefore, the as-vacant H&BU conclusion is: H&BU is to hold for future, commercial/mixed-use development. The timing of such development would reasonably be expected to be no sooner than 2-3 years.

As Improved-
Legally permissible: While a new residence is not allowed, the existing residence is grandfathered. Therefore, residential use is a legally permissible use. As noted, if the residential use is abandoned for more than two years, the use would change to commercial.

Physically possible: A residence exists, and it functions as a home. Therefore, the residential use is physically possible.

Financially feasible: The site, as improved, is worth more than the site, as-vacant. The improvements contribute value to the site and have remaining economic life to continue to contribute value. Therefore, the current improvement should be retained.

Maximally productive: An analysis of both residential and commercial sales data indicates that a small single family residence (grandfathered) or a small commercial property such as an office building (which is among the permitted uses in the C2 district) are competitive and with no one use being significantly more valuable than the other. While the current improvement can support both uses, the improvement is configured as a functional residential home; no changes need be made to continue this use. Alternatively, as a small commercial office, there would be some anticipated costs; although not necessarily significant, they would be real nonetheless. In the formal “maximally productive test”, if both small residential and small office/commercial spaces are valued equally, but the existing configuration is as a residence with a cost associated to convert the use to commercial or mixed-use, then the maximally productive use is to retain as a single family residence.

Based on all of the above, the highest and best use, as improved, is as-is: retain and use as a single family residence. As noted, conversion to a commercial/mixed-use property is a potential and an individual buyer may make that decision, but the data does not indicate that likely buyer would convert to commercial. Therefore, the residential use of the improvement is the highest and best use.

 

[George Hatch]

^^^^ More than adequate.

Personally, I tend to frame if from the outside - in, meaning, I mention the various possibilities first before commenting on where the subject fits in; but that's really just a matter of style.

For instance - the long form might look like:

As Improved-
Legally permissible: The site is zoned OP - Office Professional which allows for use as general or professional office, medical/dental offices, other professional services. Other permissible uses include religious, schools, civic and related uses as well as certain other uses with user permit. Other development criteria under this zoning includes minimum parking requirements of 3 spaces/1000sf of building area, maximum lot coverage ratios of 50% and a maximum building height of 2 stories or 35 feet. The subject's current use as a 1920s single family residence is not among the allowable uses under the current development criteria, however this use apparently predates the current development criteria and remains a permissible, albeit nonforming use. The city's policies regarding non-conforming uses are addressed in the zoning code, but basically they allow such uses to continue indefinitely, although if vacated for more than 12 months the right to occupy may be rescinded at staff's discretion.

The short form could be a lot shorter"

As Improved-
Legally permissible: The current O-P Office Professional Zoning allows office uses of various types as well as related uses, but does not allow the development of SFRs. The subject's existing use as an SFR apparently predates the current development criteria and can therefore be considered a permissible, albeit conforming use. The city's policy is to allow such uses to continue indefinitely, so long as they aren't abandoned for a period of more than 12 months.