USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
appeals boards that have authority to grant a property owner a variance or special permit to either develop or use a parcel of land in a man - ner that does not conform with local land use regulations. 4.4 Obtaining Entitlements to Develop a New Project If a development complies with zoning codes, it can proceed “as-of-right” . If not, a developer may apply for variances or special permits, or seek modifications to the zoning code in order to proceed, which typically involves a public hearing. A method utilised by developers to build larger than the zoning allows is to acquire “air rights” from other properties to increase the allowable building size of their project. Air rights typically exist when the buildable square footage of “lot” is not fully utilised by what has been built, with the undeveloped square footage constitut - ing the so-called air rights. 4.5 Right of Appeal Against an Authority’s Decision Decisions made by local land use boards and legislative bodies regarding zoning and land use are generally appealable by commencing a judi - cial action within the appropriate locality. How - ever, jurisdictions typically establish high stand - ards of review on appeal, such as whether a determination was made in an arbitrary or capri - cious manner or whether it was “fairly debatable” and supported by substantial evidence. 4.6 Agreements With Local or Governmental Authorities It is common practice for developers to enter into agreements with local governmental author - ities or agencies to facilitate the approval of their proposed development projects. Agree - ments may provide that a developer will make improvements in public transit infrastructure,
create privately owned public spaces or con - struct public-housing units in exchange for the right to “overbuild” the property. 4.7 Enforcement of Restrictions on Development and Designated Use Permits or certificates, including a Certificate of Occupancy (COO), are required to use and occupy a building (see 7.7 Requirements Before Use or Inhabitation ). Inspection(s) by the local building department and the resolution of any issues are required before their issuance. Prop - erty owners that open their buildings to the pub - lic without obtaining the necessary permits or certificates may be subject to fines and penalties as well as other actions. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Real estate investments in the USA may be held in virtually any type of legally recognised busi - ness entity. Entity structuring has three main components: compliance, legal and tax. In the authors’ experience, most real estate owners or investors prefer using either a limited liability company (LLC), “subchapter S” corpo - ration, or a limited partnership, as their entity. While these entities offer similar benefits, there are nuances that apply. Choosing the type of business entity to be utilised should be explored with knowledgeable professionals such as an attorney and an accountant. LLCs are popular among real estate investors for their “pass-through” taxation, limited liabil - ity, asset protection and flexibility in operations and profit distribution. However, they also offer easier transferability of ownership compared to
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