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The Importance of Zoning

[fusion_dropcap color=”” boxed=”yes” boxed_radius=”0px” class=”” id=””]A[/fusion_dropcap]nyone who is involved in commercial and industrial real estate quickly realizes the importance of zoning. These ordinances largely govern what can and can’t be done with a certain parcel of land. Moreover, they may have an impact on how much the owner’s property bill is.

Zone decisions are important functions of cities, counties and other municipalities. Essentially, parcels of land are zoned for a particular purpose such as residential, commercial or industrial. Some municipalities allow two or more types of zone in the same area while other municipalities strictly forbid this.

Zones are vital in any community. Because of these rules, residences are not built in the middle of industrial parks. This is not only safer, but also sensible since the main purposes of these zones are likely to conflict. However, it’s not unusual to find residential houses and apartments standing close to businesses that provide goods and services.

Zoning does more than just restrict how certain parcels of land may be used. It also may provide requirements for the dimensions and shape of lots as well as for structures. Such ordinances may protect a natural or historical area or permit the habitation of animals on certain properties. Still others make spaces for schools, hospitals and community parks and sports fields.

Common Zoning Classifications

Each municipality that manages these ordinances classifies the various types of zones that they allow. The most frequently used classifications include industrial, commercial, residential and agricultural. Occasionally, some of these classifications may overlap, but this may be prevented in some municipalities.

Each larger classification frequently is subdivided into smaller groups. For instance, a residential zone may be set aside for single-family dwellings while another is considered suitable for apartments. Industrial zones may be divided into categories like research, light or heavy. Commercial zones can be specified to be a cluster of small stores, a large shopping mall, restaurants or gas stations. Office buildings and some warehouses similarly may be categorized as commercial.

Most municipalities will use alphabetical designations such as R1 or C to describe the zone for a particular parcel of land. These designations vary between municipalities, making it imperative to understand the designations that are being used in your municipality.

Appraisals and Zoning

When a property is appraised, one of the things that the appraiser must establish is the zone of the property. If the zoning for the property changes, this can have an effect on the property’s value. This may be either positive or negative, depending upon each unique situation.

For instance, consider the situation of a building that was once used for light manufacturing. The factory shuttered several years ago, and the nearby city’s downtown area is spreading. City leaders decide to re-zone the land, including the parcel on which the old factory stands, as an historic district. The factory cannot be used for light manufacturing any longer, which means that the number of potential buyers for the property has been significantly reduced. This may have a negative impact on the property’s value.

Accordingly, whoever buys that property will likely enjoy a lower property tax rate because of the diminished value. Conversely, land that changes from an agricultural to an industrial zone may see improved property value numbers. This may mean that the owner’s property taxes rise.

When appraising a property, the appraiser must consider the highest and best use analysis. In other words, what would the value of the property be if it were put to its highest and best use? Appraisers must decide what is physically possible on the parcel, what use is permitted by law, what makes the most financial sense and which use produces the highest value. This highest and best use analysis can affect property value, which will affect property taxes.

Contact Assessment Technologies if you are concerned about the zoning of your property. It may be that having the parcel zoned for a different use may lower your property tax liability.