So many sites are vacant or partially built – so many sites in trouble financially; so much to consider when considering seizing the distressed asset…
Zoning too? Of course:
a). Can the partially built building be finished – or, has the project lost its building permit?
b). If the permit has expired, can it be renewed – or, have the rules changed, such that the building as envisioned (and lent on) be finished?
c). If a new permit is required and if the rules have changed, what are the new guidelines – and, is it a question of the Building Code or the Zoning Resolution?
d). Good news. There’s a foundation complete and the building permit is still valid. This (generally) means that the project is “grandfathered” from a zoning change! All set, right? No: Grandfathering is only good for 2 years – if the project is stalled for longer, then the building permit must be renewed at the Board of Standards and Appeals. And, the owner must be able to show not just the foundation and the permit, but that “substantial completion” and “substantial expenditures” have been made.
e). The building being seized in foreclosure has been completed – it just lacks a temporary certificate of occupancy. Terrific. Except that the condo market is gone – or the site no longer makes sense for office use – or the planned hotel can’t be occupied by the intended “flag”. Ah. Zoning again: Can the building be converted to a different use? Can the building built as a hotel be used for a residential use instead? (Hint. A residential building needs a 30-foot rear yard; hotel needs on 20.) Can the mid-rise office building become a hotel?
f). Oy! The asset to be seized is in an Historic District. What’s the lender to do now?
g). What about the tax exemption? The borrower says that an application was in the works. Is the property still eligible?
h). The borrower has said, “Don’t foreclose, you need me, ’cause I’m the one who got the ‘special permit’ and the DOB ‘interpretation’ that allowed the project…” True? (Generally, no.)
The relevant land use regulations should be a key part of the lender’s assessment when considering – or in the throes of – foreclosure — along with everything else!