The High Cost of Breaking the Rules

Claire Edwards learned how expensive zoning violations can be when she fixed up a 1920s cottage in Colleyville, Texas, last year. At $115,000, the two-bedroom place was a bargain. Edwards immediately invested another $75,000 in improvements, including repairing the porch, updating the kitchen, and remodeling rooms she planned to use as the headquarters for her accounting business. But just as she was about to advertise her services, she learned that local zoning codes restricted the square footage that she could devote to her business and prohibited her from employing administrative staff at home. As a result, Edwards scaled back her home office to a small space that she uses for client meetings and was forced to rent a second office for her assistants, at a cost of $1,000 a month — not to mention the $5,000 she spent to equip it with phones, fax, and computers. "This went from being a really great deal to a financial nightmare," she says.

More commonly, homeowners run afoul of zoning rules when they try to change the look of their house or the way they use the property. Sometimes the illegal alteration is made unintentionally, as when a homeowner erects a too-tall fence (in San Mateo, California, for instance, street-facing fences can be only 3 feet high). Other times, people may try to hide less visible zoning violations, such as adding an apartment in the basement, by not obtaining the necessary construction permits. Or they may alter an approved project — say, extending an addition a few feet over the setback line, or building boundary — and hope that the town inspector does not notice. Such moves can be risky because there are any number of ways that local zoning authorities can find out. A neighbor may report the infraction, an assessor could hit on it during a visit to update tax records, or it might be noticed during a routine inspection when the house is sold. But however a disallowed improvement is discovered, it may have to be demolished, and a fine may be imposed every day until the work is completed. And take note: Even if a previous owner made the change, you bear the consequences if it is discovered after you bought the property. "When you add the cost of the improvement you're losing, the cost of demolition, and the fines, you can easily be out many thousands of dollars," says Edward Ziegler, professor at the University of Denver College of Law.

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