AMA - Zoning Versus Development Agreement

The Real Estate Espresso Podcast

AMA – Zoning Versus Development Agreement

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AMA – Zoning Versus Development Agreement

Today is another AMA episode, that is, Ask Me Anything. I love to answer your questions, and if you have a question you think is going to be of broad interest, send it in. I’ll answer it live on the air. Send your questions to Victor at VictorJM.com. That’s Victor at VictorJM.com.

Today’s question comes from Steve who asks, “What are the benefits of a development agreement instead of a special zoning code when it comes to getting your project entitled?” Well, Steve, this is a fantastic question.

First of all, let me start by saying that I’m not a lawyer and I’m not a land use lawyer, and I don’t play one on a podcast either. This is really a great question. What I can offer is a perspective through the lens of a developer who spends a lot of time working on getting projects entitled each and every day.

Now, there is a hierarchy of regulations that all need to come into harmony in order for your project to get approved. Before we answer your question, we need to understand the hierarchy of regulations that come into play.

Zoning is the mechanism used by most cities to determine permitted uses on a property. It will specify the uses. It will also specify things like density and height restrictions and setbacks and so on. The Zoning Code is a bylaw of the municipality, but then you have to remember that cities don’t actually have the power to enact laws by themselves. They get their power from the State in which they reside, or, if you’re in Canada, the province in which that city resides.

The actual ordinance at the city level is often ratified by a legislative act at the next level up, either the province or the state level.

Within each city there is a masterplan, sometimes called the official plan. This is usually a ten-year vision of how the city is planned to evolve. The plan lays out land use and the specific areas of the city, along with the evolution of the transportation plan.

Zoning can be changed through a zoning amendment, but if the zone that you seek doesn’t exist or if it’s not consistent with the official plan, you may also need an official plan amendment before you can get your zoning amendment.

If what you’re seeking to do doesn’t match with the existing zoning you could get a zoning amendment or you could get what’s called a development agreement. This is sometimes called a planned-use development. It’s a detailed site plan for the entire property in question. In that instance, the specific design is allowed, which includes the envelope and the density of the very specific buildings. The zoning code, to some extent, is set aside and the planned-use development takes precedence.

The legal framework is contained in the development agreement between the city and the developer. The process is simple and straightforward. The development agreement is drafted in consultation with city staff. The site plan is reviewed by the Planning Commission, and then referred to city council for a vote. If it’s approved by council, then the project is approved.

The next thing you need to do is go get a building permit to build the structures that are described in the development agreement and you’re only going to be allowed to do what’s in that development agreement.

A special zoning, on the other hand, means drafting a zoning that allows for specific use on a single property. It might be a derivative of an existing zoning code For example your property might be zoned R1 and under R1 maybe you can’t make it work, but there might be a special consideration for that property so the city comes up with a special version of R1 and in our example let’s call this R1T. R1T is similar to R1 but it might have a few changes maybe some different setbacks or different height restrictions.

Now again, I’m not a lawyer and I don’t play one on a podcast. There is in some jurisdictions legal precedence including appeals court judgments. At least one appellate court held that development agreements may not be inconsistent with the zoning ordinance. In that instance, local public agencies may not, under the guise of a development agreement, authorize a use that’s not allowed within the zoning ordinance so you might need to change the zoning before you go to development agreement.

Now coming up with a new zoning ordinance requires an amendment to the zoning code and as you can imagine the city’s not going to be wanting to be amending the zoning ordinance for every new building that doesn’t quite match up to the existing zoning ordinance.

One of the benefits of the development agreement is it can mitigate against the political whims and regulatory changes. It offers a more stable and certain environment for the developer to execute their project, the levels of review, consultation, and drafting are going to take a lot longer when changing zoning ordinances compared with a simple development agreement that’s isolated to a single property.

But it does get murky. Each state treats this question of development agreements a little differently. Zoning is usually less prescriptive than a development agreement. Many states have adopted enabling statutes that allow and in some cases even encourage the use of development agreements. These enabling statutes do have similarities where each state imposes specific conditions, procedures, and requirements. Your development agreement better follow the requirements of the enabling statute.

For example, in Florida, development agreements have to include, among other things, legal description of the property, the duration of the agreement, which in Florida cannot exceed 30 years, what are the permitted uses, the densities, the intensities, the building height, the setbacks, and so on. And which public facilities will service the development. A well-drafted development agreement will check all the boxes for each of the requirements in the enabling statute.

As a general rule, I prefer to have a development agreement over a zoning amendment. Some jurisdictions will require you to get both, and in that case, you have the worst of both worlds. You have to do what seems like the exact same work more than once on the same project. Whenever you go into a project, you want to consult the city early on and a land use attorney to make sure you understand the process you’re going to need to follow. If you get this step wrong, you might experience what seems like moving goalposts and changing rules.

I want to thank you, Steve, for a fabulous question and for the listeners at home, have an awesome rest of your day. Go make some great things. We’ll talk to you again tomorrow.

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