A nonconforming use variance in real estate is a special case. It is granted when zoning laws change, and an owner’s use of the property no longer conforms to local zoning requirements.
- Nonconforming use variances happen often with commercial properties
- A nonconforming use is not a variance. You need a variance to remediate the problem
- It is tricky to buy and finance a property that has a nonconforming use
Before you buy a nonconforming use property make sure you understand the local zoning laws.
What Does Nonconforming Use Variance Mean?
Simply put, a nonconforming use means that zoning laws in an area changed rendering the property’s original use noncompliant.
This happens a lot, especially with commercial and industrial sites. However, it is rare for residential properties.1
Difference Between a Variance and a Nonconforming Use
A nonconforming use is a violation of zoning laws, and an owner may get a variance to mitigate the problem.
Nonconforming Use Variance Example
A good example of a nonconforming use example is a family doctor who works out of a house in a residential neighborhood. They may be established in the area and had the practice for many years. Eventually zoning may change from a mixed use to strictly residential, so people can’t run businesses out of the houses in the neighborhood.
Fr this example let’s say they doctor wants to retire and sell his practice and the house. The house itself is well maintained and is compliant with all the current zoning laws. Therefore, the structure is compliant, but they must get a variance because of the use.
While this example is straightforward, use variances can get complicated. Also, they often overlap with structure nonconformities. If you think there may be a zoning issue you should get a survey of the property to see if its use conforms to your town’s regulations.2
Can You Build on a Nonconforming Use Lot?
Before you know if you can build on a nonconforming use lot, you need to learn why it doesn’t conform. It violates what local zoning laws? These can get complicated, and they may vary widely from one municipality to another. Knowing the local ordinances is very important in these cases. Most of the time, though, these guidelines apply:
- A nonconforming use variance is continual. Once you stop using the property for that use or it is abandoned for any reason, then any new use must comply with existing zoning laws.
- Generally, you cannot add to or modify an existing nonconforming structure.
There is a distinction between a nonconforming use and structure. If the building doesn’t conform, then you probably cannot do anything other than maintain it. If it is a use nonconforming situation you may be able to expand an existing structure or even build a new structure under certain, specific conditions.
Buying a Nonconforming Use Property
If you purchase a property with a nonconforming use you need to be careful to understand why it is grandfathered from the current zoning laws. You should also learn how it may lose its status. Here are three things to consider before you buy:
- What are the zoning laws in your area?
- How can your property lose its grandfathered status?
- How long has the building been vacant?
One of the common ways a building loses its variance is it sits vacant for too long. Another is you start to use the property for a different purpose. Zoning laws vary greatly by areas. It is important to learn the laws in your area, as well as the history of the real estate you want to buy.
Financing a Nonconforming Use Variance Property
Financing a nonconforming use property is tricky. In fact, many banks won’t give a loan for one. Others will finance a nonconforming use property, but they require more documentation. Also, the interest rate will be higher. If you want to buy a nonconforming use property and need to finance the transaction, you should:
- Find a bank that will finance nonconforming properties. This can be hard, and you should do this first.
- Order a survey for the property. This will tell you all the zoning issues involved with the property.
- Make sure you understand the zoning laws in your area, so that you can answer all the questions your lender will ask.
If you purchase real estate that is nonconforming you should expect many banks won’t consider a loan. When you do find a lender expect to provide significantly more documentation than other similar transactions. Finally, you will pay a higher interest rate because the bank takes on higher risk.
Final Thoughts on a Nonconforming Use Variance
Local governments usually grant nonconforming use variances on commercial, industrial or mixed-use real estate. Therefore, almost all these cases involve investment properties. These complied with local zoning laws at one time, but they don’t now. Therefore, they are risky as investments.
If you want to buy real estate and you think it may not conform, you should get as much information as you can before you close the deal. Learn your responsibility to maintain the grandfathered use and understand the risk if you lose the status.