Unentitled land can be one of the riskiest but rewarding investments in commercial real estate. Particularly the entitlement process is fraught with setbacks, even failure. Additionally, significant money must be invested before any revenue can be generated. Therefore, developers must be more vigilant in order to anticipate, plan, understand and manage the potential for many problems throughout the process.

This article will give you a general overview of entitlements, talk about major risks and conclude with tips and strategies to mitigate these risks.

Titles: A Comprehensive Overview

The steps for a typical entitlement are different depending on where you live. A developer must submit a formal proposal and a conceptual design package to the local planning department to allow the project to become:

1. Formally reviewed against the in-place zoning regulations and the planning code;

2. Tested to make sure there aren't any major environmental negative impacts.

3. Other relevant city agencies have reviewed the application for approval and signoff;

4. To gain feedback from the community and to receive support, we need to socialize with them.

If the project passes all the requirements, it will be approved by the local board or city council.

Entitlement Challenges and Risks

Risks to the process: The planning department has a major responsibility to review and evaluate the project's impact on the environment and the population. The developer hires independent consultants to conduct these studies. They examine issues like air quality, transport, wind, shadow, and noise. Each study could uncover issues that could hinder the project's feasibility or cause delays in the process. For example, a wind study could reveal dangerous wind conditions at ground level. This may seem like an easy problem to solve, but in one instance, the situation was so serious that a 40-story building had to be completely redesigned to address the problem. It was a costly and time-consuming process.

A project proposal will need to be reviewed by other agencies than the planning department for further approvals. Local utility providers, fire and parks departments, local public transport providers, and the mayor's offices are all examples of agencies that may require a separate review. For a variety of reasons, any one of these entities could impede the process or make the project more difficult.

There are other process-related risks that you should consider: potential code violations and zoning violations not detected during the design study, planning staff experience and capacity, and any legislation that could be in effect during the process and adversely impact the project.

Community and political risks: In most jurisdictions, the board of supervisors/city council will vote to approve a project recommended by the planning department. The input of the community is also considered. These committee members are elected officials and pay attention to the opinions of their constituents. Supervisors can be a problem if a project is seen as negatively impacting the community, challenging their political goals, or failing to provide sufficient public benefits. They could cause delays, request alterations to the design, or try to stop the project.

Mitigating and Assessing Risk

These tips will help you prepare for successful entitlement processes or to assess whether the project is worth the time and risk.

1. Process Risk Mitigation Strategies

Team Selection

Choose qualified individuals with local experience and a strong reputation to decide the fate of your project. This should be the case for your land use attorney, environmental consultant, and engineering team. These positions are considered "high touch" and should be familiarized with the process and people.

Make a step-by-step schedule to show how entitlement works in your municipality.

If you have the funds, it is good to contact a local land attorney to request a timeline. If you've never developed in the municipality before, it is possible to overlook important processes. For example, it is possible that an agency other than the planning department requires you to obtain environmental approval. This could be difficult to identify. It could prove costly to reach the end of a process only to discover that a second study is required, which can take up to four months. This exercise will help you set deadlines and expectations. You will know the minimum time required to process documents as well as the dates of hearings.

Learn what site can be built and what exceptions you want to make are possible.

Your team (including your engineering and architectural teams, as well as your land use counsel) will begin to identify areas in the plan or design that require exceptions. What are the steps to get approval for the requested exceptions? Are they minor or major issues in the entitlements process? The planning department will likely catch any missed exceptions later. To avoid any unpleasant surprises later on, be thorough in your review.

Identify all entitlement costs.

These costs are usually obtained from your local planning department and range from thousands to hundreds or thousands of dollars. Again, consultation with a local attorney for land use can help streamline the process and avoid any surprises.

2. Mitigation Strategies to Protect Political and Community Risk

Learn about the vision, needs, and desires of your city, town, or district. Are there any development plans, such as a district or general plan? You should review all documents to determine important goals and objectives. If possible, make sure that your project meets these requirements.

What are the key politicians and community groups who can and will influence the outcome of this project? To identify and get to know them, you can work with them or ask for their support. You can spend some time strategizing on when and how to reach them, if any, and refine your message.

If your project has significant community benefits, it is a good idea to first schedule a presentation to a local community group to present the project and highlight its benefits. Then, if everything goes according to plan, you can schedule a meeting with the relevant city officials to present the project to them and to relay any feedback from the group.

Finally, you should review all documents and media from similar projects in the same municipality. These can be approved, delayed, or rejected. The closer they were to the site, the better. It would be even better to meet these developers and learn about the challenges they faced.

To sum it all, understanding and addressing the above information is crucial to understanding and analyzing the different scenarios during entitlements. This process can be navigated successfully, and entitlements will most likely significantly increase the land's value without any physical improvements. The land is now ready for construction, with all the risks and delays associated with entitlements eliminated.