In one sentence
A report confirming how the property is zoned, whether the current use and improvements comply, and what happens if they are damaged or rebuilt.
The longer version
Zoning reports, often called PZRs after the largest provider, compile the zoning designation, permitted uses, parking and setback requirements, variances, and open violations. The key finding is conforming, legal nonconforming, or nonconforming.
Legal nonconforming status raises the rebuild question: if the building burns, can it be rebuilt as-is? Lenders resolve that through the report, zoning letters from the municipality, and zoning endorsements to the title policy.
Common questions
- What is a zoning report?
- A report from a zoning consultant confirming the property's zoning, whether the current use and improvements comply, any open violations, and what could be rebuilt after a casualty.
- What is a legal nonconforming use?
- A use or structure that was lawful when established but would not be allowed under current zoning. It can usually continue, but restrictions on rebuilding after damage are what concern a lender.
- Why do lenders care about zoning?
- Because a property that could not be rebuilt as it stands after a fire or storm may not be worth what the loan assumes. The report also supports a zoning endorsement on the title policy.
Keep reading
- The CRE due diligence checklistEvery phase of diligence, organized the way deals close.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- What lenders check in a closing binderFour reviewers, four different reads.
- Due diligence softwareThe request list, the owners and the dates in one place.