Zoning refers to the nature of a property and the intended or permissible use. Zoning regulations define the legally permitted uses for a property or area – ie industrial, business/commercial, residential, agriculture or other purposes. Lenders use different policies for property based on the zone.
If a property is zoned for commercial use, and you may intend to use it for residential use, you may be faced with a situation where you may be prohibited from living in the property – or you may not be eligible for a residential loan. Commercial property loans typically have higher interest rates and a lower loan-to-value ratio cap.
Different zones will have different rules and guidelines relating to improvements and renovations. You may be able to add a second level to a home in a residential zone – but you may not be allowed to do this if the property is in a heritage overlay zone. Zoning overlays augment the zoning classification in order to conserve historical significance, promote a future vision, or protect citizens from environmental risks such as flooding.
Careful research on the zoning of any property in which you may be interested is worth while to avoid any unpleasant surprises. Check the council’s zoning map, and look not only at the property in question, but also at the surrounding areas – are they zoned for commercial use? How close are they to the property that you are interested in? Understanding the zoning status also helps for planning new builds/additions as they will determine height and square footage regulations as well.
Properties or sections of land can be rezoned – sometimes because the current zoning status no longer fits with the current location. In order to rezone land, government zoning councils must go through a formal amendment process.
If you are interested in an investment property, don’t sign anything without having a full understanding of property zoning regulations in the area. You can easily check zoning details for a particular property by hopping onto the Land Government website for the area in which the desired property is located. Alternatively, consult a professional property broker or estate agent for advice.