Converting Commercial to Residential Spaces

Legal Concerns When Converting Commercial to Residential Spaces

The world of real estate is constantly evolving and changing. The pandemic changed a lot about how space is used and what type of space is even needed in different communities. With a growing amount of companies allowing employees to work from home, the need for commercial space is starting to dip in some areas. In response, some have begun revitalizing vacant commercial spaces by turning them into residential properties. This tackles two problems—the cost of maintaining vacant property and the housing crisis.

However, there are issues to consider before property developers and owners can move forward with a full conversion. Knowing which legal issues to expect can help you develop a more realistic timeline and budget.

Zoning Regulations in Your Municipality

Zoning regulations are a major hurdle to clear when you want to use a piece of property for something other than what it is currently zoned for. These regulations specify how land and structures can be used. They may also put limits on the types of structures that can be built on the property.

The goal of zoning regulations is often to preserve the character of a neighborhood or community. For example, in a residential area, it makes sense that people wouldn’t want a factory or busy retail shop to open up—the smog or the increased traffic would disrupt the neighborhood. However, the same can be true when you’re converting commercial spaces into residential spaces. If any of the nearby businesses rely on walk-in consumers, they may not want a home that doesn’t bring any new consumers into the area.

How much of a problem this is depends largely on where you live in Maryland, how strict their zoning regulations are, and how successful people generally are at getting a zoning variance. The process generally involves a public hearing in which community members can either voice their support of or opposition to a zoning variance.

Restrictive Covenants

Restrictive covenants, which limit how a property is used or developed, are written into leasing or sales agreements. If your property has certain restrictive covenants, it could severely limit your ability to use the property as a residential home. For example, you may be forbidden from making certain types of renovations on the property—including those that would bring the property up to code for residential use. 

A home sale contract may even specify that the property is only to be used for commercial purposes, which would completely prevent you from using it for residential purposes. Restrictive covenants, much like zoning regulations, aim to preserve the character and integrity of a neighborhood or community.

Complying With Local Building Codes

Building codes for residential and commercial buildings are incredibly different. In general, commercial building codes are generally much more complex and multifaceted than residential codes. This means that any commercial property you want to convert may have been built to very specific standards to fit niche building requirements. Unfortunately, this could make tearing down or altering the building much more complex.

Additionally, the requirements for residential and commercial buildings are so different that renovation costs may be prohibitive for some property developers. Residential properties involve different building materials, electrical systems, plumbing needs, and even construction equipment.

The rules used to make a building safe enough to live in are often contrary to how commercial buildings are designed. As an example, each state has egress window requirements. The presence of egress windows allows a room to be designated as a bedroom. These requirements could be difficult and expensive to meet.

Getting the Proper Permits and Approvals

Renovating an entire property is time-consuming, expensive, and filled with paperwork. This is even more true when you are turning commercial property into residential or vice-versa. Throughout this entire process, you must be well-informed on the permits you’ll need to carry out your renovation and which agencies are responsible for overseeing the work you’re doing. 

It’s also important to know the timeline for approval on major projects, as this could affect the timeline for the entire project. Bureaucratic hurdles are common, and you should be prepared with a plan to clear them.

While converting commercial property into a residential home can be a challenge, it may also give you your dream home. Knowing the issues you may face can help you plan accordingly.