Last Updated on May 11, 2022 by Fair Punishment Team

Most of us may have never considered buying or renting a commercial property as our home. With rising demand for housing, commercial property has become a big contender. Not just for big real estate giants but also for first-time buyers.

Commercial properties seem to have great advantages, including lots of light and space. However, these properties aren’t designed for living in them full time, and you need to be sure to understand legal requirements before you turn a commercial property into a home.

But can you really live in a commercial property? In this article, we explore what you need to know about the legal status of commercial properties.

What Is Commercial Property?

Let’s start with the legal definition of commercial. Generally, commercial property is defined as real estate fur business enterprises. Specifically, this refers to land or properties that you can use to generate an income.

A commercial property might also be a large residential rental resource, or places like malls, manufacturing outlets, offices or even industrial estates.

Real Estate Zoning: Designation Of Commercial Property

Any property in a region falls under the local laws and regulations, also called zoning, of this particular authority. 

Most properties fall under the zoning classifications of residential, industrial, commercial and mix-used designations. As part of federal and country statutes, these laws can be changed or abolished by the local authority.

Real estate zoning is set by the authorities who use a master plan to partition land and assign them their use. The rules around zoning and how they are assigned can be complex, but you need to be aware of some as they can impact the designation for your property.

Real state zoning can be assigned depending on a drive to promote economic development, manage resource and noise pollution, or regulate the city’s traffic.

Each region has their own real estate zoning laws. Some regions also include exemptions, for example they might limit building height regardless of set zoning standards, or authorities might also restrict the use of residential land to ensure more manufacturing businesses are set up.

This variation can also lead to some regions treating an apartment as commercial property, though commonly it would fall under residential zoning because many individuals occupy the space for a certain time.

These restrictions also significantly affect property prices, and some real estate imposes premium charges depending on the limits set by the local authority.

What If Your Commercial Property Is Not Zoned For Residential Use?

As laws vary greatly from state to state, depending on local regulations, it’s difficult to give specific advice. Generally, a property needs to be designated as residential property, or mixed-used property which means you can use it as residential and commercial real estate.

Even in the residential designation, some states break down the kinds of properties further, including apartments, trailer parts or family homes. Each type also has its own rules and restrictions on what the property could be used for. 

If you are looking at buying a commercial property it’s worth bearing in mind that just because a commercial listing includes an apartment or other living space doesn’t make it legal mixed-use real estate. That’s why, check with the local planning office to ensure all the right permits in place.

What Happens If You Ignore The Zoning Laws?

As a buyer you can’t get around zoning laws because you are legally bound to use the property as designated. However, if you are caught living in a commercial property you own, you will likely be fined and asked to either get a permit for the different use or remove the residential unit. 

Also bear in mind that in the event of a flood, fire or any other catastrophe, your insurance will refuse to cover you for the damage. This can leave you out of pocket with hundreds of thousands of dollars. And even worse, if the dangerous situation caused a death, this could lead to criminal or civil charges.

What if you chose to live in a rented commercial property? Even if you chose to rent a commercial property to live in it, it’s likely that your landlord also has their own rules which you agreed to with your signature in the lease. If you break the rules of the lease, you could risk eviction. 

Re-zoning: How To Change Commercial Real Estate Into Residential

The best way to turn your commercial property into a space you can live in is to either get a permit for mixed-use, or re-zone it. Rezoning however isn’t a simple process as zoning in itself exists to protect people, the property itself and also the community. 

If zoning laws were not in place, towns and cities would eventually become crowded and unsafe for your wellbeing, for example, you could end up with an industrial facility next to a school which could cause serious harm to children.

Sometimes there are very good reasons though why re-zoning requests would be granted, and you will need to bring forward significant reasons for the higher need of a mixed space or more residential property in the area.

Applications for re-zoning requests should be made to the local authority in the town nearest to the property. Some regions already have set aside plans for certain properties which makes it easier for owners and buyers of commercial properties to get their re-zoning request approved.

You may have to sign up for a permit before you can use your commercial real estate as your residential home. These permits can be as restricted as certain local policies that are in place.

As you cannot control the outcome of the zoning request, you should at least consult with your local zoning authority for any guidelines to follow. This will give you an indication of what you need to include, and if the request is unsuccessful you can then go back to the drawing board and make amends.

Alternatively, you can contact your real estate agent for more information and advice. They are familiar with the local area and any policies for commercial conversions.

Other Commercial Real Estate Restrictions

Even if you own or rent a property designated for mixed-use, you are expected to do some additional due diligence. It’s likely that your building has some additional restrictions with regards to what can be changed or updated in the building for living or working units.

There may also be limits on renting out certain parts of the home. It’s best to check with your local zoning authority or read the lease carefully to ensure you are fully aware of any restrictions. 

In addition to zoning laws, most communities also restrict what you can do with the building itself. Changes like creating multiple residential units in a commercial space or subdividing the building all require you to have specific approvals in place.

Conclusion

Whether alone, with family or your partner, when it comes to deciding where to live it’s a good idea to do as much research as you can. Commercial properties, when changed to residential status, can be a good option but it takes a lot of paperwork and running to get permissions and approvals in place.