Real Estate Entitlements

Entitlements are the most underappreciated, and often the most difficult part of the development process.

Cullina Management llc understands obtaining real estate entitlements is critical when acquiring vacant land, re-developing a property, or confirming allowable use of the existing improvements already on a property. Entitlements are simply specific permissions granted to property that relate to its use. Unlike general rights that every property owner enjoys, such as the Constitutional right against unlawful search and seizure, entitlements relate to the specific use of the land as granted by an appropriate governing agency. Real estate entitlements may apply to improved properties (those which have already buildings and landscaping on them), but we most often consider entitlements when we’re buying or selling unimproved land.

Entitlement requirements typically originate in a county or city’s general plan. The general plan establishes land use and development requirements applicable now and in the future. General plans set aside specific areas for residential, commercial and open space areas within their jurisdiction for the benefit of residents and businesses. Since real estate development is a long term activity, these plans often identify land use goals and requirements for several decades into the future.

General plans typically paint in broad strokes, but they establish requirements for more specific documents such as zoning and land use regulations. Building codes provide further detail for standards of construction, materials and maintenance. Some communities also require compliance with architectural review boards as part of building code compliance. Covenants, Conditions and Restrictions (CC&Rs) might also be put in place by developers of office parks and residential communities. Although not the same as government regulations, they are a contract entered into when purchasing a property and are therefore binding. Finally, when we grade, build, remodel, or landscape, permits are required to confirm that design and construction complies with all applicable requirements and that inspections are performed throughout the improvement process to verify compliance.

Let’s look at examples of real estate entitlements we might need to build a custom home on a vacant lot. The list of entitlements will, of course, vary based on specific state, county, city and other requirements.

• Subdivision Map (approved Tentative and Final maps)

• Architectural Design Approval (per CC&Rs or similar requirements)

• Grading Permit

• Tree Removal/Relocation Permit

• Building Permit

• Utility Connection Permit(s)

• Sewage Disposal System Permit (if septic system required)

Before approval is provided for these entitlements, supporting documentation is required to verify that the property is suitable for the intended improvements.  Studies and reports often conducted and prepared include the following:

• Boundary and topographic survey

• Phase I and Phase II Environmental Reports (to check for ground contamination)

• Geotechnical and soils analyses

• Tree and surface vegetation inspection

• Perc test report (if septic is required)

• Well tests (if well is to be water supply)

• Detailed site preparation and building plans

• Architectural review

Since every site is unique, specific entitlements and related studies and reports can vary greatly.

Acquiring entitlements is the responsibility of the whoever plans to develop the property. It is common for sellers to conduct a few tests and inspections (e.g. environmental testing) that reduce a buyer’s risk and increase the value of the land. Many developers require that entitlements be in place before they buy a property. They often prefer an option contract or extended escrow that gives them access to the property and enough time to obtain entitlements before escrow closes.