Undeveloped land must go through a real estate entitlement process with local regulatory agencies and the community at large before development can begin. Investors typically buy land with development in mind to eventually turn the property into a home, apartment complex, or other commercial venture. But first, the land must be approved, or deemed entitled, for the specific structures and uses being requested.
The land entitlement process is complicated and confusing. It can take a long time at great expense to work through, and there are no guarantees your development plans will be approved when the process is completed. Simply put, an entitlement can either give you the green light to build or put a halt to the entire project.
What is a Real Estate Entitlement?
The real estate entitlement process is the only way to be granted approval to develop land from a local municipality. The agreement between the owner of the land and the government allows the property to be used for specific building types and industries. A land entitlement details the property’s function, density, and setback requirements.
Investing in unentitled land with the hopes of developing the property into a money-making venture is among the riskiest of real estate deals. The process of obtaining land entitlement is costly and filled with potential for setback and failure, but it is necessary to begin the development of the property.
How the Land Entitlement Process Works
The specific steps for the real estate entitlement process will vary depending on each community and municipality. Land entitlement typically requires developers to file a proposal for the land, design plans, and a wide range of environmental and technical studies.
Once all information and forms have been filed with the community’s local planning department, the following steps will be taken to work towards formal approval of the development project.
1. Formal review of a development plan to make sure it is compliant with zoning regulations, the local planning code, and all development laws and regulations.
2. Comprehensive independent testing of potential negative environmental impacts
3. Local agencies review, sign off, and approvals
4. Feedback and support from the local community
Risks, Challenges of Real Estate Entitlement Process
There are a number of inherent risks and challenges that can delay or stop the planned development of unentitled land throughout the real estate entitlement process. Various elements of the process itself and the community at large can stop a development plan at any point in the entitlement process.
Environmental studies conducted by independent consultants are used to determine the impact development will have on the environment and the affected population. If any of these studies reveal environmental issues involving air quality, transportation, wind, shadows, noise, or any other problems, it could challenge the development’s feasibility. Reconciling these issues can often delay projects for months or even years, costing the developer a great deal of money and time.
Development projects also need to make their way through a myriad of local agencies for a wide range of additional evaluations and approvals. Separate reviews may be required for utility providers, fire departments, parks, and recreation, public transportation companies, or even the mayor’s office. Any discrepancies or other hold-ups from any one of these agencies will delay or challenge the entitlement process for just about any reason. Missed code or zoning violations during the land entitlement process also have the potential to derail projects.
This is why preparation and organization are crucial before starting the real estate entitlement process. The more knowledge and awareness of local regulations and culture land developers can gain, the easier it will be for them to be able to minimize any potential issues that will threaten to slow or stop the development process.
Community, Political Risks
The chances are good that even after passing all tests and filing all appropriate paperwork that complies with local code and zoning regulations, the property development will still need the final approval of a city council or board of supervisors to complete the land entitlement process.
The final vote for approval is typically based on the recommendations of the planning department and input from the community. If a proposed development does not sit well with the community, supervisors can challenge the project, causing delays while adjustments are made, or putting a stop to the development plans entirely.
Mitigating Risks in the Real Estate Entitlement Process
Understanding how the real estate entitlement process works and in-depth knowledge of the local commercial real estate market will help prepare developers and investors for the rigors of achieving land entitlement. Specific ways to help mitigate the risks and challenges that come with the land entitlement process include:
Qualified Team with Local Experience
Developers going through the real estate entitlement process would be wise to select agencies, consultants, attorneys, and other team members on the project that have extensive experience in the industry and understands the local environment and any challenges that may come up.
Municipality Entitlement Process
Each community and municipality works a little differently. Going into the process with a clear understanding of the local regulatory processes and guidelines will help expedite the process and help prevent roadblocks and obstacles. Set up a timeline and schedule for the process based on the local facilitation of the specific municipality.
Entitlement Process Budget
Developers heading into the entitlement process need to be aware of all the costs associated with it. Consulting with a local land use attorney will help break down all of the costs associated with the process.
Know the Community
Identifying and communicating with the area’s most influential politicians, community leaders groups can help to smooth over any issues or resistance that may come up. Taking the time to do the homework needed to better relate and communicate with those who have the final say on the project can make the difference between approval and not.
Contact MyeListing for Commercial Real Estate Listings
MyeListing is a valuable free resource for listing and viewing commercial real estate properties. Find and list land at various stages of the real estate entitlement process without ever having to pay a registration or usage fee. Contact MyeListing for complete information and to find or list your commercial property.