When San Diego Real Estate Investments and Land Use Regulations Collide

Author: Staff

Investing in San Diego real estate offers many great opportunities for returns, but it also poses many potential risks for losses and liabilities. Planning an investment requires researching and investigating risks associated with a particular property. This includes the property’s zoning designation and associated land use restrictions. The Land Development Code (LDC), located in Chapters 11 through 14 of the San Diego Municipal Code, sets forth the zoning regulations and procedures for properties located within the city. Zoning regulations allow certain types of construction and prohibit other types, but it is sometimes possible to get approval from the city to make an exception to the regulations, known as a variance. As a general rule, a variance cannot grant approval to a land use that has already been found to be in violation of the city code. This is why careful research on existing permits affecting a property is so important.

Zones and Regulations in San Diego

Most San Diego properties have one of five “base zone” designations:  open space, agricultural, residential, commercial, and industrial. Each base zone has multiple “overlay zones” that further specify allowed uses. For example, the LDC identifies six overlay zones for commercial base zones:

– Commercial–Neighborhood (CN):  retail and services for residential neighborhoods.
– Commercial–Regional (CR):  large-scale office, retail, and other businesses.
– Commercial–Office (CO):  focused on “employment uses.”
– Commercial–Visitor (CV):  tourism and recreational uses.
– Commercial–Parking (CP):  off-street parking adjacent to other commercial areas.
– Commercial–Community (CC):  small- to medium-scale retail and other business uses.

Each property’s zone designation notes additional regulations affecting the size and density of allowable improvements on the property. Regulations may also limit the height of structures, require that structures be set back a minimum distance from property lines, or make requirements related to parking, accessibility, and other factors.

When an owner sells a property, they are obligated to disclose any known land use violations or related issues. Buyers also have a responsibility to research potential issues as part of the due diligence process. Certain issues might not be known to a seller but could be determined from a review of public records.

Variances

The LDC allows variances for proposed developments that would otherwise violate zoning restrictions. According to § 126.0801 of the LDC, variances are available for properties with “special circumstances,” such as “size, shape, topography, location, or surroundings,” which make “strict application” of the zoning regulations impractical. A variance cannot merely grant “permission to violate” zoning or other regulations, as § 121.0308 makes clear.

A variance application goes through Process Three, described in §§ 112.0505-0506:  (1) application to the City Manager, (2) staff review, (3) hearing before a hearing officer, (4) appeal to the Planning Commission, and (5) appeal hearing before the Commission. The officials who make these decisions have broad discretion. An application for a variance, according to a 1940 decision by the California Supreme Court, is “a matter of grace,” meaning that the city does not violate anyone’s rights by denying an application.

Unintentional Land Use Violations

The “matter of grace” distinction becomes apparent when one looks at a situation in which a property buyer was late in discovering land use violations on their property. In 2010, the San Diego Reader reported the story of homeowners who closed on their first home, located just outside the city. Soon afterward, they received a notice from the county claiming that part of their house—built before they owned the property—violated land use regulations. A series of miscommunications appeared to be the reason they did not know of the issue before closing. The outcome of the story serves as a cautionary tale for real estate investors of the importance of due diligence.

More Blog Posts:

Changing or Challenging Zoning in San Diego: A Brief Overview for Real Estate Investors, Titles and Deeds, April 17, 2018

Zoning for San Diego Real Estate Investors: A General Overview, Titles and Deeds, March 30, 2018

What is Necessary for a Title Review for a Commercial Real Estate Transaction? Titles and Deeds, January 7, 2018