What Is Land Entitlement: A Guide to the Land Entitlement Process
What is land entitlement?
If you’re unfamiliar with the real estate development process, turning a piece of land into a new office building may seem as easy as moving some dirt, pouring a foundation, and constructing a building.
I wish it were that simple.
The route from point A to point Z is never that straightforward. Site plans and construction documents need to be drawn, extensive site due diligence must be conducted, and approvals and permits must be obtained.
Land entitlement is the legal process by which a developer or landowner gains all necessary approvals for a real estate development plan.
And if you’ve never navigated entitling land, or you’re working through a project in a new municipality, the process is daunting. It’s long, costly, convoluted, and downright frustrating.
But it's essential if you ever want to get a building constructed.
Understanding the entitlement process isn’t just reserved for traditional developers either. Real estate investors should also grasp land entitlement – it can be highly profitable to buy land, entitle it to a higher and better use, and sell it to a builder or developer. And as a business owner, you may at some point expand, and you need to build a new headquarters.
Neither could happen without a solid understanding of land entitlement.
The point is, if you’re entering this part of the development process, or may in the future, keep reading. This article will tell you everything you need to know.
Who needs to get real estate entitlements?
Land entitlement is often discussed in the context of developing raw land, but the rule of thumb is that entitlements are needed anytime you’re changing a property’s use or appearance.
So, whether you're building a house, redeveloping an old site, building an industrial property, or an apartment building via ground-up development, you're required to receive the proper permits and approvals.
Not every development project will carry the exact approval requirements, either. Some municipalities have stricter development standards than others. And the size and scope of a project will also dictate what steps you need to take.
An overview of the land entitlement process
Because the term land entitlement describes such a broad process, it's essential to understand the component steps required to achieve full legal development approval.
Site plan approval
A site plan offers a graphic depiction of all existing and any proposed improvements you would make as part of your development. In essence, a site plan functions as a map for your project, incorporating all aspects of construction, utilities and stormwater, and landscaping in a single drawing.
Although it usually begins as a sketch, a site plan is later refined after the planning department comments during a pre-submittal meeting. Then, as you conduct more site due diligence and the project takes form, the sketch is formalized into a complete site plan and readied for submittal.
A site plan needs to receive full approval before a developer can move forward with a proposed project.
Zoning is a land use concept where local edicts govern development regulations for parcels of land. Allowable uses, the density and type of development, and even development and design standards are all governed by zoning ordinances.
Some municipalities apply zoning even further by creating what are known as zoning districts – laying out communities or even specific neighborhoods into separate overarching use zones.
Central planners see zoning ordinances and zoning districts as a means to grow cities and towns as conveniently and efficiently as possible.
As a developer, zoning regulations create several challenges. First, if a piece of land’s allowable use does not conform to your desired project, you’ll need to pursue a rezoning request. Second, restrictive zoning code often makes development projects more expensive – and as a result, developers must pass those additional expenses onto the end-user through higher rents and more expensive houses.
If you do need to pursue a rezoning, the approval process may look somewhat as follows:
- Neighborhood meeting & pre-application conference
- Rezoning application submittal
- Staff level review
- Second neighborhood meeting (if needed)
- Planning commission review – present proposed site plan, land use, and zoning request
- City council public hearing & council decision
The rezoning process is prohibitive – at any time during rezoning, you may be required to make corrections, undergo further deliberations with sub-committees, and resubmit applications for additional review, which could result in more expenses and further project delays.
Therefore, depending on the municipality, plan an additional 6-12 months for your project if a rezoning is required.
In some cases, a proposed development project doesn’t require a complete rezoning. However, if your design doesn’t meet the standards under a municipality’s zoning code, you may need a waiver or variance to avoid specific requirements.
A variance could be required for exceptions to the code like minimum building size or dimension requirements, building height or the number of stories, or setback requirements. Because a variance is deemed more administrative, the local board of adjustment typically handles these cases.
Conditional use permits
Zoning ordinances designate certain types of uses legally allowed, by-right, for a given piece of land. In some cases, some uses may be allowed, but only with the permission of a conditional use permit.
A conditional use permit allows a developer to deviate from the zoning codes set of uses without going through the entire rezoning process. Like a zoning variance, a conditional use permit is considered more administrative and handled by the local board of adjustment.
If a site doesn’t already have access to utilities, you’ll likely be required to get utility approvals to extend power, gas, water, and sewer to the parcel. Frequently, the developer will have to work directly with the utility companies to make this happen.
Some sites may be positioned such that utilities are not readily accessible, and the off-site improvements required to run utilities are cost-prohibitive.
In that case, you may opt to install a well and septic tank instead, assuming the soil study determined the soil was suitable. Individual permits would be required for any well and septic installation as well.
Maybe you have to extend existing rights-of-way that connect to your property. Or perhaps you’re building new roads as part of your development master plan. In both cases, road approvals would be required before construction can begin.
Depending on how your parcel conjoins with public roads and infrastructure, you may also be required to get a property ingress and egress approval from whatever entity maintains the road.
In addition, if your proposed development is anticipated to increase traffic substantially, a traffic impact analysis may be necessary.
On the surface, landscape approvals seem a little silly. But every municipality has a series of landscape requirements to ensure that new development and distinct neighborhoods maintain a certain aesthetic.
A proposed landscaping plan needs to be reviewed and approved before a project can progress.
Land subdivision & recombination
The legal definition of subdivision varies between municipalities, but generally, it's the process of dividing a parcel of land into two or more lots for development.
Conversely, land recombination is the process of combining two or more individual lots of land into a new configuration for future development.
Each process has its own set of guidelines and required approvals depending on the municipality – and both need to be navigated before a proposed real estate development project can commence.
How to manage entitlement risk
You won't be able to mitigate risk completely. And unfortunately, sometimes, your project approval may almost be entirely out of your hands. However, there are ways you may be able to identify some of the entitlement risks ahead of time and potentially influence the approval process.
There are a couple of critical considerations to keep in mind:
- Understand a municipality's future land use plan – Many municipalities have a comprehensive long-term vision for how they see a city growing. The future land use plan offers a glimpse into this vision and can bolster arguments for rezoning cases, etc.
- Understand the neighborhood – Every neighborhood has a distinct feel and culture. Neighbors may be nosey, and some may even be a pain to work with but appeasing them will be critical to development success. What concerns does the local community typically have, and how can they impact your project?
- Assess the political risk – What projects have been approved lately? Is there anyone on the city council that might stonewall certain types of projects? Unfortunately, political risk is, in many cases, an unfortunate byproduct of the real estate development process.
- Leverage your civil engineer & other 3rd parties – Does your civil engineer have connections with key approval authorities within the municipality? Do they have experience navigating the local ordinances and design standards? Lean on your subject matter experts throughout the process – trust but verify.
You'll never have complete control over the land entitlement process. But through adequate risk assessment and mitigation measures, you may be able to save time and money and improve the likelihood of a project being approved.
Leverage the experience of a real estate consultant
The real estate industry isn’t built to serve business owners or project stakeholders.
Full-time real estate developers often keep information tight to their chest. Engineers, brokers, and attorneys have their specific niche of expertise and don't frequently stray outside their lanes.
And that leaves small business owners and investors fumbling through the real estate development process with minimal direction.
Land entitlement hiccups are unavoidable. But expensive and time-consuming land entitlement deal killers – they’re enough to keep you up at night, especially if they were avoidable.
A real estate consultant, especially one who has development experience as both a principal and advisor, is an invaluable member of your project team.
Learn more about our real estate consulting services and how they can help make your project as profitable and smooth as possible.