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Operating Illegal Commercial Business

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Deborah Burns

Thread Starter
Freshman Member
Joined
Aug 27, 2003
Professional Status
Certified Residential Appraiser
State
Maine
Need help to figure if this would be a viable residential appraisal order to accept...Per Town Code Officer: Owner is operating (for 3 years) a commercial business beyond the scope of permitted uses in that Residential Zoning District. Town plans to change their Comprehensive Plan within the next 2 years..maybe 2010 - to accommodate these uses . 99% sure it will pass. In the meantime, the Town (in writing) will not take enforcement action against owner..so Town is allowing these illegal uses. I am thinking this is not a residential appraisal, and will decline. Use is a residence that is now a horse farm with boarding, lessons...etc. Is this a residential or commercial appraisal or a non-appraisal due to illegal uses.
 

Greg Graybadger

Junior Member
Joined
Jun 28, 2006
Professional Status
Certified General Appraiser
State
Idaho
Deborah, can you give us some more details: Is this an owner-occupied residence with a couple of their own horses and a couple of boarders whose kids come by for riding lessons? Or is it a 20-horse boarding operation with a manager's living quarters and 40 vehicle visits per day? You seem to realize that this is an HBU issue. I believe that the lack of enforcement does not change the fact that it is a non-conforming (illegal) use. The expected change in the plan would be relevant if it was expected sooner, but 2 years seems a bit speculative. I would probably consider the commercial use to fail the "legally permissible" test.
 

Deborah Burns

Thread Starter
Freshman Member
Joined
Aug 27, 2003
Professional Status
Certified Residential Appraiser
State
Maine
Yes - owner-occupied residence with 30 horses...25 boarders...lighted, covered enclosed ring, no managers living quarters. Vehicles with farm name on sides advertising boarding/lessons.
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
Is the purpose of the appraisal for lending? Is the owner/operator of the stable/barn using the income to qualify? Are there leased stalls and horses? Does the home owner have insurance for visitors? Does the owner make visitors sign a waiver? I would make a decision based on the effective date of valuation. I would not be concern with a future event for new zoning that has not been adopted. If the owner checks out will the operation continue? These are the quesions I would be asking.
 

Greg Graybadger

Junior Member
Joined
Jun 28, 2006
Professional Status
Certified General Appraiser
State
Idaho
I could see this either way: As residential, the horse activities are incidental to the residential use, which is the only use which meets the tests for HBU. You would value it as a residence with amenities for horses. Income approach not applicable.
Alternatively, it is a commercial property with de facto approval in writing and scheduled for rezoning to perfect the legal permissibility. Assuming a financial benefit from the commercial activity, commercial use is a higher, better use. As such, the residence is incidental to the commercial use, but accommodates an on-site manager or owner/operator. As a residential appraiser you may be vulnerable to a challenge of your competence to correctly determine the HBU, or of your potential bias (since one conclusion gives you a job and one does not).
To further muddy the water, I would expect that the operator's tax returns show a loss to the business. If so, this is also inconclusive, since it shows an intention to generate a profit (indicating commercial) and a failure to do so (indicating not commercial). Sorry I can't give you a more useful answer.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
The operative term is "legally permissible uses". If the town allows them to do it that qualifies as permissible, just as much as if it was allowed by default.

The big question is whether the use could be continued by an outside buyer. In other words, does the use contribute to the marketability and value of the property, or does it go with the current ownership?

Another question is whether the town would allow a resumption of this non-conforming use in the event it ceased for any length of time, such as, the length of time it takes for a loan to go bad and the property to be foreclosed upon and resold. I've seen some situations in our region where if the non-conforming use went dark for 6 months that was the end of it.
 

Deborah Burns

Thread Starter
Freshman Member
Joined
Aug 27, 2003
Professional Status
Certified Residential Appraiser
State
Maine
I totally agree with Kevin/George..."whether the use could be continued by an outside buyer". I will need to find that out from the Town. And also...if the town would allow the non-confoming use in the event it ceased for any length of time...

You have been a huge help to me with this. Thanks so much.
 
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