Property Development and Construction

Property development and its lengthy construction process can involve complicated laws. People in the real estate development process are chasing investment opportunities. But every successful developer knows they’ll also have to deal with:

• Zoning laws and building permits
• Civil engineers, inspectors, and other professionals
• Lenders, banks, and development finance
• Real estate agents, brokers, and property managers
• General contractors, subcontractors, and project managers

Entrepreneurs who want to make it in the real estate development industry must understand every aspect of the construction phase. Speaking to a real estate attorney can help them navigate these stormy waters with greater peace of mind.

Getting Past the Red Tape

People in the real estate industry will tell you that you can’t act on development plans without accounting for the government bureaucracy and rules. This is true no matter the type of property you’re looking to build. Important legal fundamentals will apply whether your new development is in:

• Commercial real estate for businesses, offices, warehouses, malls, shopping centers, and retail spaces
• Residential property for apartments, condos, and houses

Whether it’s a commercial or residential property, a development company must conduct due diligence to see if the land is suitable for the development process. Developers must do land use and feasibility studies. That’s not only for the land but to make sure that it can clear all the government permits and financing hurdles.

Municipal zoning laws will:

• Determine if the land is for either residential or commercial purposes, or both (mixed use)
• Determine if land zoned for residential use can include apartment buildings, condominiums, single-family dwellings, or a mix
• Determine if land zoned for commercial use can include retail space, office space, shopping centers, malls, industrial warehouses, or a combination
• Regulate natural lighting, air quality, privacy, utility use, parking spaces, traffic, and more

If a real estate project meets zoning requirements, it will still need:

• Building and construction permits
• To comply with local/city building safety codes (for earthquakes, fires, floods, and other natural conditions or disasters)
• To comply with state and federal laws, such as the Americans with Disabilities Act (ADA) for things like wheelchair access and usable elevators
• To pass inspections with municipal authorities

A team of architects, engineers, and contractors will do everything possible to complete it correctly. But then the building will fail to pass a vital safety inspection. Sometimes these challenges can result from inappropriate government conduct rather than from the developer’s mistake. That’s why having a legal expert on your side would help prevent unnecessary or unfair delays.

Financing a Construction Project

Without adequate cash flow, no development project can get off the ground. Financing considerations go beyond the cost to start building. A real estate developer must:

• Compare interest rates for construction loans offered by different lenders
• Ensure that each construction phase will hit specific milestones set by banks before more loan money can be disbursed
• Calculate the anticipated real estate investment returns by making sure the project will generate enough residential or commercial activity to pay construction loans

Sometimes banks might be unwilling to provide the necessary financing to complete property development. This might be because the development process is delayed or running above cost. To finish development, a developer may seek private investors or hard money lenders (high-interest loan sharks).

For these reasons, understanding financing laws can help protect a real estate project. It could mean the difference between a successful developer and a failed builder who loses money on their investment.

Getting Past Demographics and Neighbor Disputes

Even if you clear hurdles with the government and banks, there’s no telling if a picket line will form in protest of a real estate project. These can happen when:

• Locals don’t want a builder to destroy historic landmarks or local spots that are dear to them personally
• Long-time residents are fed up with increased noise, pollution, and traffic from new projects
• Surrounding buildings and private property are damaged by construction debris, dust, and accidents

Even if a developer manages to calm the waters with the local population, all kinds of liabilities can arise on the construction site itself:

• Laborers get hurt on the job or face challenging work conditions while working under a contractor
• Architects, engineers, and other professionals involved with the construction make costly mistakes like improper excavations or causing a collapse
• Environmental conditions like landslides, fires, storms, and earthquakes can disrupt the construction process and create delays or total obstructions

Why a You Should Always Have an Attorney

Real estate investments can take years to pay off because property development is expensive. The time, money, and you must pour into a new development are hard to account for. So, understanding real estate law can be a great form of insurance against issues that could disrupt or otherwise slow construction.

Whether you’re trying to develop commercial buildings or you’re just getting your feet wet in residential development, there is a lot of red tape to cut through. It can be frustrating not to know what permits you need, which government offices to contact, and which banks to trust for financing.

Even if you’ve sorted out all your real estate investment goals and reached major milestones in your development project, you might have trouble. You might find that a few angry neighbors can create a lot of bad press and pressure a city to shut you down.

Having an experienced real estate attorney can help you prevent these problems before they happen. And when they do happen, your lawyer will be there to make sure that others treat you fairly.