- December 1, 2014: Vol. 26, Number 11

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In the zone: Overlooking zoning ordinances can result in higher costs, delayed closings and lower asset value

by Charles Mulligan

When discussing real estate due diligence, people in the industry typically think of property condition assessments, environmental site assessments, title insurance and appraisals. Often absent from the discussion are zoning compliance reviews. This can be a critical oversight, as nonconformance or noncompliance with zoning ordinances or other municipal codes can result in higher costs, delayed closings and impairment of an asset’s value.

Since zoning and other land-use regulations are generally not considered encumbrances or defects on a property’s title, they are not covered by title insurance. While some protection is afforded by purchasing a zoning endorsement, the insured is still not protected from enforcement actions related to unrecorded violations. As such, it is critical to conduct zoning and municipal code due diligence to minimize regulatory risks associated with the transaction.

There are two primary aspects of zoning conformance: property use complian

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