The value of land is ultimately determined by the use that an owner or occupier can utilize the property for. In appraisal terms this is called “the highest and best use.” The Appraisal Institute of Canada defines the term highest and best use as:
“The reasonably probable and legal use of property, that is physically possible, appropriately supported, and financially feasible, and that results in the highest value.”
For most residential properties this use is obvious and is indicated by the present house on the property. But even this can change over time. The Vanderbilts were one of America’s wealthiest families in the 19th century and owned several mansions in Manhattan. As the highest and best use of their properties changed to high rise development they sold these houses.
Though this point is obvious, many real estate agents do not take the time and trouble to research for their clients the zoning and related planning documents of properties for sale and purchase. In many cases their latent development potential possibilities are either present or, more likely, possible in the future.
How to Research Zoning Laws?
Spending a few minutes on a municipalities website can provide some good insights and separate one agent’s analysis and service from another.
As an example older houses in Victoria meeting certain criteria can be possibly converted into multi unit buildings. Other properties are suitable for additional small laneway houses. Other properties may be occupied by single family homes yet zoned for duplexes, or allow or prohibit suites.
Even the seemingly straightforward single family house has zoning and other issues of which the owner should be aware. These would include setback building areas, tree cutting and heritage bylaws that might make it difficult to cut down trees, minimum lot sizes that might create potential for future development singly or with neighbours and the like.
A good agent will research zoning bylaws, official community plans, and be generally knowledgeable on issues that affect the use and enjoyment of properties considered for sale or purchase , or at very minimum advise their client to do so. In most cases these issues do not affect value significantly but like the registered easement that cuts across the back half of a property and prevents building, there are always surprises.
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