Highest and Best Use…..Selfish or Logic

In the last few weeks, local politics has been filled with misinformation related to the use of land and zoning.  Knowing a little can be dangerous, but implying highest and best use is somehow a selfish thing…I’m not sure how to respond.

All zoning lists the potential uses for property, if you meet other criteria.    There lies the difficulty.  Beginning with a developed property or properties in the historic district, just how difficult would it be to change a site radically?   Condominiums are possible with existing buildings, but not in the way you might think.   I’ve actually talked about splitting properties to allow the sale of individual spaces.  This makes sense if thinking of control of maintenance or appearance, but also adds a level of control to the building.   In a historic district, small condominium or shared maintenance agreements for existing buildings are almost a kind of small-scale zoning created by owners.    Fearing the idea of these isn’t logical, but I understand some might think massive properties might take over parts of a desireable area like the historic district.

The highest and best use is just the likeliest or most logical use for a property to accomplish an owner or investor’s objective.   Most of the time, the highest and best use is also the most profitable use, but not always.   Consider a property with one highest and best use, but limited by size, restrictions on combination or a historic district with rules making it very difficult to change a building.   By change, i mean demolish or remove one building to erect another in its place.   The cost of acquiring a property, designing a renovation and, if a building is already in place, demolishing the old to build a new is generally going to be prohibitive in the vast majority of cases.    In a market with prices for an existing older building in the $200 to $250/ft range, adding the cost to reconstruct would likely push the cost per foot over $400 per square foot.  While it might appear to be a hypothetical highest and best use, no developer or investor is willing to lose half a project cost at sale.

Selfish uses of property really just mean logical use.  I spend most of my time considering the best way to make the most of a listing.  How can it be changed?  Is the current owner’s use maximizing the property?  If the use is changed, is the cost to change worth the potential benefit?   Are code updates required?  What about parking?   Sometimes a change of use requires addition of parking spaces.  If there aren’t spaces or land to creat spaces, the use might just be an impossibility.

I’m a little surprised anyone would see highest and best use as a bad thing, unless they just aren’t considering the logic, but then my career is, in part, helping clients find the most logical use for their properties.

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