Zoning: The Space Between
Property Potential & Development

Sometimes the pieces of a development opportunity seem to fall neatly into place:

A property owner is interested. A developer sees potential. A proposed project makes sense for the area. Local officials may even be receptive to the idea. 

Then comes zoning. 

That does not necessarily mean opposition or that the project cannot move forward. The property’s existing zoning may simply reflect how the land has historically been used and not what the owner, developer, or community now sees as its best future use. If fact, the communities’ planners may already have a different use in mind.  

Getting from one to the other, however, can be complicated. 

Rezoning may be only one piece of the process

Minnesota municipalities have broad authority to regulate land use, including agricultural, residential, commercial and industrial uses. Zoning can also regulate density, lot sizes, building locations, and other aspects of development. A change in use may therefore require more than changing a designation on a zoning map. Minn. Stat. § 462.357

Depending on the property and proposed project, the path forward could involve rezoning, a conditional or interim use permit, subdivision or plat approval, site-plan review, environmental review, or other local and state requirements. 

And those processes can overlap. 

This Bloomington housing proposal provides a useful example. A developer sought to rezone two single-family residential properties on James Avenue South to a higher-density residential district for a nine-unit detached townhome project. The properties were already designated for medium-density residential use in the city’s comprehensive plan, but making the specific development possible still required rezoning, site and building-plan approval, and platting.

In other words, the broader land-use vision and proposed development could align while significant approvals were still necessary. 

Agricultural land can add another layer

The questions can become particularly important when land that has historically been agricultural is being considered for a substantially different use. 

Solar development is one example. 

A property owner may welcome the opportunity to generate income from acreage through a solar lease, and a developer may see a site that works well for the project. But the existing agricultural use, local zoning, comprehensive plan, permitting requirements, access, setbacks, drainage, decommissioning, and the future use of the land can all become relevant.

In Sherburne County, for example, officials approved a land-use-map amendment and interim use permit for a 2.475-megawatt solar project involving approximately 43 acres in an agricultural district. The approval included 22 conditions, including requirements related to eventual decommissioning.

The project could move forward, but approval was not a simple yes-or-no answer.

The land-use process and the property agreement need to work together

This is where rezoning becomes more than a government-approval issue. 

The property owner and developer also have an agreement with each other. 

A developer may need time to pursue rezoning, engineering, environmental work, and other approvals before committing to purchase or lease the property. The owner, meanwhile, may be asked to sign an option, purchase agreement, lease, or development agreement long before anyone knows exactly what will ultimately be approved. 

That raises practical questions: 

• How long can the developer tie up the property while pursuing approvals?
• What can the owner do with the property during that period?
• Who pays the costs of pursuing rezoning and other approvals? 
• What happens if the project is approved, but only with changes or conditions? 
• What happens if only part of the property can be developed as anticipated? 
• And what happens if approval is not obtained at all? 

The answers should not be left until after a problem develops. 

Rezoning can also change the economics of the opportunity

There is another reason property owners should understand the proposed development before agreeing to terms: the developer may be evaluating the property based on what it could become, rather than simply what it is today. 

Agricultural acreage valued according to its current use may have very different development value potential if rezoning makes residential, commercial, industrial, or another more intensive use possible. 

That does not mean rezoning automatically increases a property’s value or creates a right to additional compensation. 

It does mean an owner should understand the potential created by the proposed project when evaluating a purchase price, option payment, lease or other compensation. 

The agreement should also account for what the owner is giving up along the way. An option or development agreement may restrict the ability to sell, lease, finance, or pursue other opportunities for the property while the developer seeks approval. 

One change can affect another use

Rezoning also should not be considered in isolation from the rest of the property. 

Existing leases, easements, access rights and other uses may matter. 

A Scott County development illustrates the point. The property was rezoned from an Agricultural Preservation District to a Transition Reserve Cluster District to allow greater residential density. After approval, an existing cell-tower lease presented another zoning issue because the tower was not permitted in the new district, requiring an additional solution before the development could proceed. 

While rezoning created new development potential, it also intersected with an existing use of the property. 

For property owners: that is an important reminder to consider not only what a zoning change makes possible but also what else it may affect. 

Approval can reshape the project

Even when local officials support a new use, the final project may not look exactly like the concept that began the process. 

Conditional uses, for example, may be approved subject to conditions established under the applicable ordinance. Minn. Stat. § 462.3595 

Those conditions can affect issues such as access, setbacks, landscaping, screening, infrastructure, operations or other aspects of a development. 

Projects can also evolve in response to planning review and public input. 

Another recent Bloomington townhome proposal illustrates that process. A development initially proposed at 33 units was ultimately revised to 30 units, with changes that included increased setbacks and additional open space, before the City Council approved the rezoning and related development applications. 

More evidence that the development approval is a process. Agreements between owners and developers may need to be able to accommodate reasonable changes along the way. 

When should a real estate attorney become involved? 

Certainly, legal counsel can become important when rezoning is contested, an application is denied, conditions are disputed, or neighboring property owners challenge a proposed use. 

Though, a dispute does not have to exist before involving an attorney. 

For a property owner, early legal guidance can help evaluate what a proposed development means for the property, review an option, lease, or purchase agreement, consider compensation, and protect future use of the remaining land. 

For a developer or business, counsel can help evaluate the existing zoning and approval path, identify potential land-use issues, secure the property rights necessary to pursue approvals, and structure agreements around what may happen during that process. 

When an owner and developer are working together, early legal guidance can help ensure that the development plan, zoning process, and property agreement are moving toward the same destination. 

Because sometimes the opportunity is obvious. Navigating the zoning requirements can be the complicated part. 

Alger Property Law represents Minnesota property owners, developers, and businesses in zoning, land-use approvals, and other property matters. If you are considering a new use for property or working with a property owner to make a development possible, contact our firm to discuss the legal considerations before the project moves too far down the path.