Should you buy or rent your business premises? According to the article, Business Owners Should Aim To Own Their Premises, the merits of ownership outweigh those of leasing, especially if you purchase a residential building and rezone it to have commercial rights.
One of the benefits of property ownership highlighted in the article is that your bond payments become fixed for the duration of the term as opposed to rising rental costs. Furthermore, if the building was previously zoned as residential and has since been rezoned, it’s quite possible that banks will consider home finance for the commercial property - even more so when you, as a business owner, take up residence in part of the building.
What is property zoning and rezoning?
Whenever new property is built or purchased, the district’s regulation of buildings defines the legal uses the property may be put to. Properties can be zoned into three basic categories: residential, business and industrial. Each of these has its own subcategories; for example, “residential 1” zoning specifies that properties can have a density of only one dwelling (house) per stand or erf.
Rezoning occurs when the classification assigned for the use of a piece of land is adjusted so that it permits the desired new purpose. So, if you bought a piece of land or property that only permits residential use, you need to submit a rezoning request to your municipality before you can conduct business in the area.
When do you need to file for rezoning
Home-based businesses are more common and more widely accepted than ever. From professionals setting up a working space in their home to spaza shop owners conducting trade from their garage, the work-from-home phenomenon represents one of the fastest growing trends in business today.
If you’re running a business on your own, with limited or no staff, and don’t have scores of customers dropping in at your home, you usually do not need to submit a rezoning request. But, if you need to put up signs indicating the name and nature of your enterprise, have many suppliers and employees, and have a large base of customers regularly visiting your premises, you need to apply for rezoning.
Do note that, if the area is not zoned for business, the neighbours and residents may oppose the new development. Objections from the local community can delay your rezoning application or can result in it being rejected altogether since council members tend to give preference to the concerns of residents.
If you’re in the market to purchase residential property with the aim of rezoning it for profit, be aware that it is usually more complicated than acquiring property that is already rezoned. Due to several legal implications, your rezoning application may not even get approved.
Depending on the type of application, the following steps - written in collaboration with Private Property - apply before you can get your project off the ground:
- Pre-application consultation and familiarising yourself with the local council’s specifications
- Submission of official application document – the Land Use Management Application form
- Announcing application to the public and gathering / responding to feedback
- Technical analysis of adjustments that you need
- The council reaches a decision
- Informing you and the public about the outcome
- Depending on the outcome, you and the public will have the chance to appeal
While the rezoning of residential property is welcomed by municipalities, all property investors need to ensure that their plans meet the zoning requirements of the area. If your proposal falls outside the minimum criteria for rezoning, your best bet is to buy residential property in a mixed development zone, which will be easier to repurpose.