How to convert commercial property to residential

by Wilson

Visitor Question: A friend of mine owns a building that is currently considered commercial property and wants to change it to residential. The land itself is zoned for residential and he lives there permanently. How do we go about changing it. He lives in Ohio if that helps.

Editors Reply: Wilson, at least on the surface of it, this is an easy community development question to answer. It appears that your friend does not need to do a thing. In other words, he is already completely in conformity with the zoning ordinance.

But since you asked this zoning question, there is probably more to the story. We will comment on some other possibilities, both for your benefit and that of other website visitors.

The issue is who is considering it commercial. If it is the assessor, this is where your friend can save some money on real estate taxes every year by appealing the assessor's decision or simply inaction. Almost everywhere that taxes real estate does so at a higher rate for commercial property than residential. And every assessor's office has a procedure to allow a property owner to present evidence for changing the assessment. Usually this process is more like a meeting with either one county staff member or maybe a board of three to five citizens than any kind of formal hearing, so it is easy enough for most people to do. If your friend is scared of this interview, you could accompany the friend.

In this case your friend would simply point out that the zoning is residential, the land use is residential, so the assessor should reflect that. If there are other residences nearby, your friend could describe their location and proximity to his place, but really calling attention to both the zoning and the use of the property should be all that is required to get rid of any higher tax rate on commercial property.

Some places allow informal conversations with the assessor's office so that no actual appeal would even be necessary. If your friend lives in a county that permits this, it should be simple enough to handle with just a meeting in someone's office or perhaps even a phone call or video call.

Now if your friend is hearing that real estate agents consider the property commercial, and they are using that argument to try to convince him to sell, that is a different issue. Agents vary widely in their understanding of zoning, land use, and even real estate tax assessment. We would suggest disregarding their opinions in this regard. If your friend wants to sell, encourage finding a real estate agent who will understand right away that marketing the property as commercial would be unethical.

Here we should add that sometimes real estate advertising says that commercial rezoning is possible or might occur. We don't think that is unethical if it is carefully worded so that no one reading the ad will think it's a sure thing. Zoning changes are never a sure thing until the final action is taken. Just the hint of the possibility of applying for commercial zoning may be enough to increase the sales price. (Note that some state real estate boards may prohibit doing this, regardless of careful wording.)

We suppose another possibility is that it is a code inspector that is considering the building commercial. In that case, the inspector might try to enforce different property maintenance codes and especially different fire codes that rarely apply to residential land uses. If this is the situation, it should be quite easy to convince the inspector (an employee or possibly a contractor of the city) to simply check the zoning district and therefore conduct any code enforcement actions on the basis of codes that apply to residential land uses and not commercial ones.

In some locations, utilities may have different and potentially higher rates for commercial property than residential property. This could occur especially if there are special assessments to support something such as sidewalks, stormwater routing, or even a special business district. If this is true of the place where your friend lives, it should be a simple matter to contact the utility in question, point out the zoning classification, and demonstrate the residential use.

In sum, we cannot think of any matters that are concerning to your friend that will be difficult to resolve. Just to reiterate, he is in compliance with zoning already and does not need to do anything to establish that. Beyond that, any steps that he takes would be due to saving money and not to meeting any type of legal requirement.

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