How to run due diligence on specific things?

Question

Here are two examples of the type of thing I'm talking about...

1. I was the property manager of a trailer park beginning in April 2015. When the new owners bought it, they had to get a permit from the Health Department for a Mobile Home Park. When we went to do this, we were informed that we were unable to obtain this permit until we move all of the trailers at least 5 feet off the fence. The previous owners had been exempt from this due to a grandfather clause. How would we have been able to know that ahead of time?

2. I recently got a listing from a wholesaler of an apartment complex being sold off-market. In the listing, it said that the County was making them put in 2 new parking spaces before allowing anyone to live in the complex. The only way I know this is because the wholesaler told me in his listing. But what if he did not?

Is there any way to know these type of specific things ahead of time?

Patrick Liska · Answer

1. Trailers should still be grandfathered in, just because it changed owners doe not give them the right to come in and make you move the trailers, if you were creating new spots then you would have to conform to the new law.

2. same as above, county can not just come in and say you need to more parking spots to an existing building that has been approved for the amount of spots, the parking is grandfathered, the only reason they may have to add two spots is if during the time they owned the property they added an apartment to the building illegally and they were now caught having an extra apartment.

These are zoning / building issues, you can always call the town construction department or zoning department and ask if there are any known/ outstanding issues with a property during your due diligence.

Account Closed · Answer

As part of your due diligence, you should be verifying zoning and entitlements.  That means calling/meeting with the appropriate governmental authorities and asking whether the property is conforming or non-conforming.  This goes hand in hand with environmental and engineering surveys, reviews of title and survey, etc.  All of this should be completed within your free look.  If you can't get these questions answered within the time you are given, you should seriously reconsider purchasing the asset.

Joel Owens · Answer

Laws vary by county and state. Some areas have a zoning conformance letter you can get. Also some deeds might have use restrictions that run with the land.

Mobile home parks many cities and counties can't stand them as it uses up a lot of land  and property tax value tends to be low while use of fire and police with constant calls tends to be high. County and city councilmen and women often get inundated with calls from home owners that they are eyesores and want them gone. So unless area tends to be more weak suburban to rural they tend to be frowned upon. Grandfather clause or not the government if they want something gone will figure out other ways to make the owners life tough so they eventually sell to a developer to do a new project for the land. The county or city tends to get a more beautiful product, higher property tax values for density, and jobs created.

Roman Rytov · Answer

Patrick, I hear your point and I don’t claim to be an expert in the zoning area. All I meant to say is that some new regulations are grandfathered to the new owners and others are not.

Patrick Liska · Answer

@Roman Rytov, if you buy a house and zoning laws change, say the house is 5' from the property line and new zoning says the houses have to be 10', does that mean you have to move the house over 5' ? this is the same case with a trailer home, all there connections are set and have complied in the past when they were built, changing ownership is not a change in pre existing non conforming spots. if a trailer is removed and a new one put in, that new trailer would have to conform to the new zoning requirements. the function of the trailer park has not changed to another use, therefore i believe the new owner could have fought that and is not something that usually needs to be looked at before purchasing a property. and as you also said, in your county maybe they want you to do that, but can they legally? a trailer home is just that, it is a home and if you read the zoning for Winter Springs Florida zoning for trailer homes it says to follow the requirements of the R1A zoning - which is a single family home, so i argue again, would you have to move your single family home ? now i do not deal with trailer homes/ parks and my town does not have any, i do sit on My towns Zoning board, and requiring the moving and re plumbing of trailers because there is a new owners does not sound right to me.

Roman Rytov · Answer

@Patrick Liska, I'd respectfully disagree with your statement on #1. Changing ownership puts the new owner in the current compliance requirements even if no changes to the property have occurred. At least it is the true in our county and in regards to restaurants and getting the COO from the city. The new architectural/safety regulations that occurred during the previous ownership can be waived for the old owner but once the property is leased to a new establishment they have to comply to the current regulations. Your situation may vary but it's not universally true.

How to run due diligence on specific things?

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