The Importance of the “Due Diligence” Period During Development

Issues which must be addressed during the due diligence period to determine the project’s feasibility include:

  • Zoning – Can the property be developed with the intended uses? Is rezoning required and is it possible? What limitations are in place in the zoning ordinance regarding: intensity of use; height restrictions; ground coverage; parking requirements; building and parking setbacks; bufferyards; impervious surface ratios; greenspace requirements; noise, light and odor criteria? Is there a site plan approval process with the local zoning authorities? How long does it take and what do they review? It is important to remove risk by making sure that any site plan review process is completed prior to closing on the property.
  • Utilities – Are all utilities available? Who provides them? Are they city owned and regulated or private? Where are they? Are there extensions of any particular utility needed as part of this development? If so, what and how much will it cost? What are the accessor impact fees that you will be subject to as a result of your development? Many communities are underwriting their infrastructure development costs through the imposition of “access and impact fees.” These fees can run in the six digits on restaurant and hotel projects and add directly to the first costs on a project.
  • Easements – What easements exist on the property and how do they affect the use of the property? Does the property require easements from adjacent properties for stormwater access, sewer or other uses? Are they available?
  • Signage – Are signs allowed on the site? How many? What size? What height? What type?
  • Traffic – Does the site have access to the public streets? Do you have access to a signalized intersection? Can you get one for your site alone? Is your access to the road system limited? What are the long range plans for improvements to the roads in the area? Will your access be limited in the future by a planned median? Will the city require your development to provide off site improvements to the road system as a result of your traffic? Do they assess road impact fees similar to the utility impact fees?
  • Stormwater Drainage – Does the area have a regional drainage and detention plan? Is the site subject to on site detention? Is the site subject to flooding or other stormwater problems from upstream? Are easements required from downstream property owners for your drainage? At what cost? Will the city help secure them through condemnation if necessary?
  • Hazardous Waste – Has an environmental assessment been completed on the site? Are there hazardous wastes on site which must be removed? At what cost?
  • Soil Investigation – What are the soil conditions on site? Is there solid rock six inches below grade? Is the soil stable or subject to expansion? Is there adequate bearing capacity for the soil? What is the impact of the soil on the construction of the foundation system? Does this mean extra cost over normal construction processes?
  • Site Design – Can the site support the project needs? Given all the site limitations, can the site support the project and all required parking? Does the site allow for the type of design and character which the developer desires?
  • Architectural Control – Are there covenants in place or ordinances which dictate the design of the project or otherwise affect your design freedom? What are they and what process must be used to secure approval of what you want to do? How long will it take? Many times, it is wise to secure the approval of the design from this committee prior to closing on the property. There is no reason to buy a piece of property and then find that you can’t put your typical building there because it doesn’t meet someone’s subjective opinion of appropriate design.
  • Building Permit Processes – What are the local building codes? How do they impact your project? How long does it take to secure a building permit? What fees are attached to the permitting process? How do they handle the inspection process during construction? Do they require spacial or extraordinary inspections on a regular basis? Do they require the contractors to be licensed?