Legal Hurdles in Real Estate: Navigating Zoning and Building Codes

Legal hurdles can arise at any stage of the real estate development process, and the permitting and approval process for zoning and building codes are often a source of concern. Zoning and building codes can have an outsize impact on your vision for a project, governing the design, construction, alteration, and maintenance of structures. In order to realize a project as imagined, it’s important to understand the regulations in your market and be prepared to ensure compliance.Building code and zoning law compliance will require you to obtain permits and approvals showing the project meets regulatory requirements. As a result, you might need to change components in the planning and pre-development phase, and factor in additional time to manage such documentation. Bureaucratic approval processes are known to cause significant slowdowns on project timelines, but with proper planning, strategies, and tools, these delays can be minimized. 

Legal codes and urban planning compliance often serve a purpose, allowing residents a voice in how communities are built, protecting property values, and ensuring buildings are safe and hazard-resistant. However, the regulations are often felt to be outdated or arbitrary, restricting the scale and scope of ambitious real estate projects. Savvy developers will know when and how to apply for rezoning or variance, keep up-t0-date with shifting state and federal zoning policy, and build positive relationships with local building commissions. 

Here’s everything you need to know about the legal hurdles that zoning laws and building codes present, as well as the strategies and tools your team can use to navigate the process without derailing your project’s timeline. 

Zoning Laws: A Primer For Developers 

Zoning is the set of municipal laws governing how property can and cannot be used in a geographic region, and is enforced through the review of development project proposals to ensure compliance and the issuance of permits. Zones can be changed, but variations must go through a local planning commission and be approved by elected officials or community boards. As a result, zoning laws can have an outsized impact on real estate development projects, influencing the kind of land use, lot size, building height, density, setbacks (how close the building can be to the edge of a lot), and other key design considerations in the process. 

In recent years, a debate over zoning laws has emerged in the United States as local zoning regulations' role in rising housing costs and housing shortages has come under scrutiny. Overly restrictive zoning makes it difficult for developers to build new housing, driving up rents and prices. State and federal lawmakers are more interested than ever in offering incentives to local governments to reduce regulatory barriers around new development, starting with zoning laws. Keeping up-to-date on state and federal initiatives around zoning, and any significant changes to laws in your market, is a good practice for developers looking to pursue ambitious projects in tricky markets. 

The most common obstacles zoning laws cause for real estate development include:  

• Restrictions on Property Use: Zoning laws specify what kind of structures can or cannot be built in a given zone, with designations for residential, commercial, or industrial use. Designations of this sort can be a hindrance to complex, mixed-use development, as structures will need to be zoned for multiple uses. 

• Rezoning and Variance Requests: The process of rezoning or changing the zoning designation of a given property can be intensive. Rezoning is the process of requesting the zoning laws in a given region be changed. Variance is a request to deviate from current zoning laws for any reason. Each municipality will have its own rules for rezoning or variance approval, but typically you would write a letter applying for the change and pay a fee to the zoning board. 
• Environmental and Historical Restrictions: Special zoning considerations around environmental practices and historical conservation can also pose obstacles to development. Historical corridors or specific buildings may either restrict new construction or only allow for new development with a commitment to preserving historic character. Shifting priorities toward environmentally sound construction have inspired new zoning policy, much aligning with the federal government’s Green Building standards. Smart growth and green building initiatives might restrict certain development, but on the other hand, developers willing to use sustainable materials or build green might find planning boards to be more flexible with permit approval timelines. 

Rigid zoning laws have a negative economic impact as well, inflating prices on new or resale homes, and creating an unstable housing market as prices rise faster than area incomes. Lawmakers have made efforts to ease zoning woes for developers and open the door for new housing. For example, the state of California’s strict zoning codes has created difficulties for developers looking to build housing and help address shortages, as much of the region is zoned for single-family instead of multi-family homes. 

The governor signed two new zoning laws in 2022 to allow developers to build housing on land previously used for used retail locations, many of which have gone out of business due to consumers' preference for online shopping. The first law lets developers build housing on land without approval from local governments as long as the property includes affordable housing, and the second law lets developers build market-rate housing on commercial land. 

California is a good case study for the unnecessary hurdles you might face in the zoning approvals process, both on the state and local levels. Staying up-to-date on local zoning ordinances, cultivating positive relationships with planning commissions and other stakeholders, and including appropriate leeway in your project timeline can all help you ensure the approval and compliance process doesn’t derail development. 

Building Codes: What Developers Need To Know 

Building codes are the minimum design and construction requirements to ensure safe and resilient structures. From a public safety perspective, codes reduce casualties and costs associated with building damage, and minimize indirect costs such as business disruptions and lost income. The codes are meant to protect against hazards through safe wiring, fire prevention, structural integrity, and other recommendations or requirements. 

Industry insiders and construction professionals alike are often frustrated by building codes, which many feel only enforce the bare minimum standards and don’t offer enough to address labor shortages and lack of quality craftsmanship. In order to be in compliance with building codes, you will need to set aside additional time for design, documentation, and inspection considerations. As a way to meet the standards, you may also need to hire specialized professionals and make strategic decisions in regard to materials or equipment. 

Here are a few of the areas of development where you should expect to run into building code challenges that require compliance: 

• Adhering to Safety and Quality Standards. Every building will need to comply with some level of safety and quality standards. Though many choose to do the bare minimum in terms of compliance, corner-cutting craftsmanship will undermine your project long term. Work with trusted vendors to ensure better quality and compliance, and get familiar with the local building officials and authorities who are often the ones interpreting and enforcing building codes, 

• Updating Old Structures. The renovation and remodeling of older buildings is on the rise, but developers looking to take advantage of historic infrastructure or participate in the adaptive reuse trend should be aware that extra hurdles can emerge in getting these structures in line with modern codes. Historic preservation can further complicate the process, as developers will need to uphold the character of the property while ensuring safety and accessibility, potentially requiring additional time and budgetary considerations. 
• Navigating Local and International Codes. Building codes vary based on region, state, and country. If your team is working across multiple jurisdictions or managing more than one project at once, the planning and approval process might end up being more complex. Documentation management will prove valuable in keeping track of regional building codes and ensuring an entire portfolio is in compliance. 

Building codes and zoning laws present potential hurdles and complications for your team, but legal hurdles don’t have to cause major disruptions to your project timelines. Proper planning and strategic use of technology can help you navigate the hurdles and keep development moving forward. 

Navigating Legal Hurdles: Practical Strategies For Real Estate Developers 

Implementing the appropriate strategies and tools can help your team navigate bureaucratic tasks more efficiently and prevent the approvals and permitting process for zoning and building codes from disrupting your project timeline. 

Here are a few ways your team can navigate zoning and building codes more smoothly. 

Legal Consultation. Seeking legal advice to understand and comply with building codes is a necessity for developers. Non-compliance with zoning and building codes can lead to costly penalties or legal disputes that slow down development, so having professional assistance navigating these concerns can be critical. Attorneys can help you understand a zoning law or building code’s nuances, argue for special permits or variances, and negotiate with government stakeholders.  

Conduct Due Diligence. As with any other aspect of project planning, it’s critical you conduct due diligence and ensure plans are permitted under local zoning regulations before purchasing the property or commencing development. Being up-to-date on the zoning regulations before a project is planned is a better approach than trying to make adjustments and go through the rezoning or variance process later. If your project is more complex and will require additional review for zoning approval or an intensive inspection process, make sure you have the budget and bandwidth to undergo the process before acquisition. 

Build Strong Relationships. Local zoning and building departments are a critical part of the zoning and building code approval process, and cultivating strong relationships with stakeholders can be useful. Zoning laws can be changed, and the approval process will go more smoothly if officials and community members involved have a clear understanding of your development vision. Modern real estate software can help you put together comprehensive reports and offer real-time data on projects to increase project transparency and bolster confidence in past project success. 

Northspyre’s robust schedule management feature can help you incorporate the zoning and building code inspection, approval, and permitting processes into your project timeline. Project managers can create specific requirements for each task, ensuring all zoning and building code-related requirements are met and documented. 

COVID-19, ongoing housing shortages, and other factors are compelling local, state, and federal government organizations to reconsider policies around zoning and building codes. Keeping up with the trends in regulations in your given market can be a useful habit, allowing you to conduct better due diligence before the acquisition stage of a project and helping you find markets where evolving regulations offer new areas of opportunity. 

Developers who approach zoning and building codes with a plan will be able to navigate a complex process more smoothly, preventing legal hurdles from disrupting timelines or causing budget overruns. Building knowledge about regulations, and deploying key strategies or tools to overcome potential obstacles, is yet another way you can set your team up for success. 

Download the How Real Estate Developers Can Recruit Top Project Managers guide to learn how you can build a team ready to tackle any or all hurdles in the development process.