business

A Fork in the Road

Timing, rezoning, and legal costs need to be considered by a family business that is about to be displaced by a highway project

By Karen E. Klein

Q: We operate a small, family construction business out of our home and our sons work with us and live next door. A city bypass road is scheduled to come through here within five years. Though our property has been zoned residential for 30 years, the property around us is zoned business and industrial. Should we sell now under the residential designation, or seek to rezone the property, pay higher taxes, and collect when the road comes through?

---- P.B., Delaware, Ohio

A: It sounds like you're hoping to rezone the property as a means of getting a higher price, or assessed property value, for your home business under a condemnation award. Obviously, if you're forced to relocate your company, you should be compensated fairly and getting the best possible price will take the sting out of the substantial cost of moving. We'll include some general advice here, but make sure you take your situation to an attorney specializing in condemnation law and a commercial real estate agent familiar with local property values. The specifics of city and state ordinances and market values are important to put into the equation.

The first specific you'll want to present is whether or not you've actually been notified of the city's intent to take your property. In some jurisdictions, the property value for purposes of condemnation is based on the value at the time the notice is issued, says Todd Elliott, a real estate agent and land-use expert at Hillcrest Realty in West Hollywood, Calif. Other state and local laws are more liberal and allow for a determination of the property's value following notice. If Ohio law is more restrictive -- and if you have already gotten official notice of condemnation -- rezoning won't do you any good. If you haven't received notice yet but will be locked into the property value at the time the notice goes out, you may want to switch into high gear and seek a rezoning swiftly.

COSTS AND REWARDS.

  However, you'll need to first determine -- and here's where the real estate broker will come in handy -- whether it makes dollars and cents to seek the zoning change in the first place. "It may make sense to seek the change in zoning if the value of commercial/industrial property in the area is substantially greater than residential property," Elliott says. Seeking a zone change will cost you something as well, so you'll want to make sure that the change in value to the property outweighs the costs for filing fees, possible consulting help, and the higher taxes that you mention.

If you move forward with a request for a zoning change, you'll need to make sure that your area's general plan will support it, although if adjacent property is zoned industrial/commercial there's a good chance that it will. Still, for assistance in processing a request for a zoning change, you may want to hire a company that has experience with preparing land-use applications locally. Ask your municipal planning department for referrals to companies that work with them frequently. Good luck.

Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 6th Floor, 2 Penn Plaza, New York, NY 10121. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE