How to Live in Commercial Property

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Commercial property is called “commercial” for a reason: its intended use is for business purposes, not for living. Some commercial buildings like old urban warehouses make really popular residential conversion projects, but unless the building is officially given residential status, then living in it will not be lawful.

Real Estate Zoning: Things to Know

Zoning classifies all the land and buildings in a community for a specific type of use including residential, commercial, agricultural, industrial and combination or “mixed-use” properties that have two or more designations. A live/work unit would generally be zoned for mixed use.

Each designation has limits as for what the property can be used; for example, an owner or occupier could not start a manufacturing business from a residential apartment building, nor could they move their family into a building designated for office use. Anyone who wishes to convert a commercial building into his next home is going to have to get the property re-zoned for either residential or mixed use.

Can a Building Be Re-Zoned?

While it’s theoretically possible to get a commercial building re-zoned, it’s a fairly tough process. Zoning exists to protect both residents and property values, and to ensure that buildings are used for their proper purposes. Without zoning, a highly polluting industrial plant could open up next door to an elementary school or a business receiving truckloads of deliveries could pop up in the middle of a residential street.

Generally, it’s easier to get a re-zoning approval under certain conditions such as if the building is located at the fringes of two different use zones and the commercial building is situated only one street away from a residential zone. It would also be helpful if there were a clear need for residential or mixed-use space in the area.

Who To Speak To About Zoning

Zoning approvals are handled at the local level, and the application process from state to state and town to town. Some communities will have plenty of properties already designated for combination usage so a buyer can easily find what he needs. In other places, it's essential to apply for the necessary zoning permits before using the commercial building as residential space. Those permits may be handed out like candy or they may be as rare as hens' teeth – it depends on local policy.

Owners have no control over whether their zoning request will be approved. The starting point is to speak to the local zoning department. If zoning permits are issued only infrequently, then it may be sensible to reconsider the project.

Ultimately, the safest option may be getting in touch with a real estate agent who specializes in commercial conversion or mixed-use properties, and who knows the local market well. They can guide an interested buyer in the right direction.

Other Things to Consider

Even if a potential owner or tenant finds a property that’s zoned for mixed use, they can expect to do some additional due diligence. The odds are fairly good that the building will have additional restrictions on what, precisely, can be done from the live/work unit and there may be restrictions on renting out part of the home. It's important to check with the local zoning authorities and read the lease.

Besides zoning laws, most communities will restrict what a person can do with the building itself. Subdividing the building, changing the lot size, changing the external appearance of the building or creating multiple residential units within the former commercial space will all require specific approvals. Developers should hire a real estate attorney and make sure they have all the paperwork in order before they proceed.

Final Word of Warning

The one thing that an owner or occupier cannot do is move into a designated commercial property and use it as their home. If a person is caught with an illegal residence, they will face serious legal and financial repercussions – they may be fined or evicted, for example, or they may be required to legalize the building by getting the right permissions at their own (not insignificant) cost.

If the property suffers a fire, flood or other major event, then it's likely that the insurance company will refuse coverage. If someone is hurt at the illegal building, then the owner could be facing civil or criminal charges.

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