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Regulations present challenges for commercial real estate

Regulations present challenges for commercial real estate


Anyone with experience in commercial real estate development knows the extensive regulations imposed by every level of government can be burdensome. In the present regulatory environment, keeping up with current requirements and ongoing changes can be especially difficult.

Most developers in Chicago, Illinois, can benefit from working with an attorney experienced in real estate law to ensure legal compliance and mitigate the risk of costly mistakes.

Regulatory concerns

Before commercial real estate development can begin, developers must meet city, state and federal zoning and permit requirements. A Zoning Permit is issued if a proposed project meets local zoning codes, which often place limits on height, size, design, and parking. Developers also must submit detailed construction designs to receive a Building Permit. This permit will not be issued until a building is deemed safe for its intended use. As development progresses, properties are also subject to inspection to ensure other regulations, such as fire codes, electrical codes and plumbing codes, are met.

Throughout planning and building, compliance with environmental regulations is also crucial. Developers may need to meet energy conservation codes, stormwater management requirements and waste disposal standards. Developers will also need to obtain special permits from agencies such as the Illinois Environmental Protection Agency and the United States Army Corps of Engineers if they do any of the following:

  • Produce significant amounts of air pollution
  • Store hazardous materials
  • Work near wetlands
  • Undertake a project that could impact endangered species

As a final consideration, the regulations imposed on other parties, such as commercial real estate lenders, may significantly affect real estate developers. For example, new federal standards for underwriting, portfolio diversification and other lender practices may make it harder for certain commercial real estate developers to obtain the funding they need.

Ensuring compliance 

Real estate developers who do not adhere to regulations may face fines, cease and desist orders and project delays. In the worst case, developers may be required to change parts of the building or structure that are below standard at their own expense. Failure to follow or account for regulations can also impede a commercial real estate project in subtler ways. As an example, a developer lacking a strong plan for ensuring environmental compliance may struggle to secure a loan. Potential environmental liability is one factor the Office of the Comptroller recommends lenders evaluate before awarding loans.

Considering these risks, regulatory compliance should be a high priority. Commercial real estate developers can ensure compliance by partnering with a commercial real estate attorney familiar with relevant local, state and federal regulations.

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