Property zoning: All you need to know

Buying property can be confusing and fraught with unpleasant surprises for even the seasoned investor. One part of every contract that causes some concern is zoning. We are here to provide clarity and peace of mind.

Buying property can be confusing and fraught with unpleasant surprises for even the seasoned investor. One part of every contract that causes some concern is zoning. We are here to provide clarity and peace of mind.

What is Zoning?

When you hear the word “zoning” in relation to a property, it typically refers to the nature of the property and its intended use. Zoning regulations establish order and define the legally permitted uses for a specific property or area. For example, properties can be zoned for industrial, business, residential, agriculture or other specific purposes.

It is important to know about property zoning before purchasing a property because:

  1. Lenders assign different policies to each property type based on the zone it falls into; and
  2. The zoning can impact upon your future use of the property.

Victorian planning zones have recently been reformed. Investors and purchasers will find the following relevant:

  • RGZ – Residential Growth Zone (new)
  • GRZ – General Residential Zone (new)
  • NRZ – Neighbourhood Residential Zone (new)
  • C1Z – Commercial 1 Zone (new – includes some mixed use)
  • C2Z – Commercial 2 Zone (new)
  • LDRZ – Low Density Residential Zone (amended)
  • MUZ – Mixed Use Zone (amended)
  • TZ – Township Zone (amended)
  • RLZ – Rural Living Zone (amended)

When understood and used to your advantage, zoning can be a very helpful aspect of property acquisition.

A property’s zone(s) are listed in the planning scheme and are contained in the Section 32 Vendor’s Statement on the Planning Certificate. Each zone has a purpose and set of requirements imposed upon the property. It specifies matters that the council must consider before deciding to grant a permit:

  1. Whether or not a planning permit is required;
  2. Contains information relating to land uses;
  3. Subdivision of land;
  4. The construction of new buildings; and
  5. Other changes to the land.

A zone sets out land use controls in three sections:

Section 1: Land uses that do not require a planning permit.

Section 2: Land uses that require a planning permit.

Section 3: Prohibited uses.

Some uses are not allowed on land in a zone because they may conflict with other uses. For example, industry is prohibited in the General Residential Zone. In some zones, the development of land and the proposed new use both require a permit. In the Mixed Use Zone, a permit is required to construct a building and to use a building for industry. In other zones, the use may not require a permit, but a permit may be required to construct the building (the development) for the use.

Common Zoning Categories

Purchasers should be aware of the most common zoning categories and the financial regulations that apply to each. As mentioned above, most zones fall into one of four broad categories: residential, agricultural, commercial and industrial. The zoning in each Australian state differs, and each area may be further subdivided as council zoning officers deem fit. Each zoning category comes with its own regulations that must be understood and followed in order to avoid fines and other financial repercussions.

Zoning Complications

If you do not have a basic understanding of zoning laws and regulations in your area, you could run into a problem when attempting to secure a residential loan. If the property is zoned for commercial use and you are not aware of this fact, you could be very disappointed when you are unable to get a standard residential loan for the property. Unlike residential loans, commercial loans typically have higher interest rates and a loan-to-value ratio cap of 65%-70%. Finding out that a property does not qualify for a residential loan can be devastating for first homebuyers or anyone who tries to purchase property without being familiar with how land zoning works. Furthermore, such zoning may restrict you from actually being able to reside in the property, as a place of residence.

On top of that, if you are thinking about a renovation or subdividing the lot, rules and guidelines on what you can do are different for each zone. For example, you might be able to build a second level in a residential zone but you might be prohibited if it is done in a heritage overlay zone.

Don’t sign anything without a full understanding of the zoning regulations in the area or without speaking to us.

Call Dangerfield Exley Lawyers on 13 20 33, or contact us to receive a complimentary contract review.

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