Commercial Project Due Diligence

Updated: Mar 29

Are you Starting a new business or relocating your existing business? These are the questions you should ask BEFORE signing a lease!

Not every commercial space available for lease is compatible with all potential business uses. Yes, we know you are eager to make a space your own. And yes, we know that one space you've been driving and walking by for the last year seems like it should be the perfect fit. But... we've seen far too many businesses pour their hard-earned (or borrowed) start-up investment into a space without checking all the planning and building regulations first. This only ends one of two ways - months of delays, or worse, a business that never opens.

What we will discuss in this post:

How to approach due diligence for a commercial project
When a permit is required
Questions that should be asked before signing a lease
Agencies that may be involved in the process
Terms you should be familiar with when communicating with design professionals and agencies.

There are two ways to approach this task:

You do the leg work. You speak to your realtor and the various sources below (along with anyone else they reference) and expect to spend some time looking up some of these code or ordinance requirements and discern how and if each requirement applies to your project.
You hire an Architect. We speak to the people below nearly every week and look up our local codes and ordinances so often they are permanent browser tabs on our computers. We can put together a thorough summary of where your project stands, which requirements apply and what your project's next steps will be for a smooth process.

When do I need a permit?

Many businesses will move into existing spaces with no permits and no questions asked. Other projects will need the full gambit of planning, building and environmental health permits. How do you know what is needed? Check with your local agencies to be sure, but these are some basic tells one way or another:

No Permit Required

'like use' to 'like use' - The space was previously used for a business of the same type or nature as your proposed business. (i.e., the space was a retail clothing store, and you are trying to open a new retail clothing store in the same space)
The only anticipated construction will be replacing finishes - No change to the wall configuration or any mechanical, plumbing or electrical systems.

Permit Required

New Construction
Your proposed business type is not allowed outright within the proposed zone - this will require a planning permit
Change of Occupancy - Every time the occupancy of a space changes, the building department is required to review the new calculated occupant loads to ensure the code defined life safety is maintained. The code breaks Occupancy Types down into Assembly, Business, Education, Factory, Hazard, Institutional, Mercantile, Residential, Storage and Utility, with further types defined within each. Any time a space moves from one to another, a permit is required even if no construction is actually done because the anticipated occupant loads have changed.
Change in Wall Configuration - The building department will have to review for proper life safety exiting (along with any other changes made to the systems)
Change to any of the systems - Mechanical, Plumbing, and Electrical

Example Site Development Permit — Example Planning Site Development Permit Drawing

Questions to ask & who to talk to: the basics of commercial project due diligence:

If you are doing the Due Diligence, your first stop will be the permit center. Here you will need to speak to AT LEAST the building department AND the planning department... yes, they are two different people who look at your project from very different perspectives. If you are opening a restaurant or food service space of some kind, you should also check in with Environmental Health.

Start here:

The Planning Department (this is a different person than the building department representative at the permit counter)

Zoning - This is the most important item to check - is your proposed business compatible with the 'Zone' applied to the area in which you'd like to build or move your business? Is your business permitted 'by right' or does it require a permit of some kind? Planning permits can be onerous and vary widely from the staff or director approval up to a Planning Commission hearing.
Parking - Is the existing parking lot adequate to meet the minimum parking load required by our local zoning ordinance? This has killed way too many projects for our potential clients. The city will prescribe how many spaces are required based on your use type(s) and the square footage of your space regardless of how or by whom the space was used by last. There are very rarely, if ever, variances granted on this item - and even if you want to go down this road, it will require a Permit which will potentially go through several rounds of a prolonged review process and may take over a year alone if you are looking at one in the City of Redding.
Trash Enclosure (Public Works) - If your project requires a planning review and there is not currently a trash enclosure, be prepared to add one. And this will likely have to be built to a city or county standard which tend to be CMU block walls with steel gates at a minimum - certainly an expensive surprise!
Signage Permit - This is actually a separate permit all together, but important to note. Redding has very specific sign standards and require a permit for all new signage. This is generally handled by the sign manufacturer, but it does need to be planned for and of course will have its own fees.

The Building Department (this is a different person than the planning department representative at the permit counter)

Existing Drawings on file - request copies of them ASAP. If the building or previous project was permitted by a licensed professional (architect or engineer), the agency will have to send a formal request to the professional asking to reproduce their drawings. The professional has 30 days to reply before the agency can release the drawings to you (or anyone asking on your behalf), so start this clock as soon as possible.
Life Safety Exiting - How many people are calculated to be in the building, and how do they safely exit the building in case of an emergency. It is important to note that these 'occupant loads' are not directly related to the actual people you anticipate to be in the space, but are based on square footages. This is a building code calculation that someone over the counter may ballpark for you, but should be vetted with Life Safety drawings put together by a licensed professional.
ADA - Everyone's least favorite topic! IF you plan on spending less than the current hardship cap ($200,399.00 in 2024), then 20% of your construction budget must be set aside for accessibility upgrades (parking stalls, accessible paths of travel, accessible restrooms, etc.). IF you plan on spending more than the current hardship cap (above), then your building/space must be fully compliant.
Restroom Count - A change in function causes a change in calculated occupants causes a verification of the adequacy of the existing restrooms. The plumbing code has a table (different from the building code, but still based on square footage) to be used in generating the anticipated plumbing loads and therefore the minimum number of fixtures required per use.

Environmental Health Department

Grease Trap - If you are opening a restaurant, does the suite or building already have a grease interceptor? Is it appropriately sized and compliant?
Exhaust Hoods - If you are opening a restaurant, know which appliances are required to be under an exhaust hood and whether or not the space you are looking at already has an adequate hood, or if you need to budget for a new or enlarged hood.
Food Service Requirements - This is a whole separate code that is applied to all food service spaces and describes the number and types of sinks, cleaning facilities, etc. that are required.
Septic System - If you are not in a location where city sewer is available, is the septic system sized for your use?

Example of the information required for a Use Permit — Example Use Permit Preliminary Analysis

Terms:

Authority Having Jurisdiction (AHJ) - Sometimes referred to as Agencies, these will usually be your local government departments who will be responsible for reviewing your project to determine whether or not your plans are in conformance with their regulations. AHJs can include the Building Department, Planning Department, Environmental Health Department, Public Works, and many more depending on how complex your project is.

Due Diligence - When prepared by a professional, Due Diligence typically takes the form of a report or set of diagrammatic drawings that will describe the constraints of the project. Every project will have some constraints - from maximum building sizes, to lot location, to occupant loads, there are numerous regulations that should be reviewed for conformance before any design work is begun. Investing in your due diligence (where by hiring a professional, or spending your own time researching) will pay dividends when you project proceeds smoothly with all parties on the same page with regards to the minimum expectations.

Jurisdiction - An area of land governed by a particular agency - for example, if you are building in the Redding area, you need to know whether your parcel falls under Shasta County's jurisdiction or the City of Redding's jurisdiction, and sometimes it can be both.

Occupancy - Occupancy classification is the formal designation of the primary purpose of the building, structure or portion thereof.

Zone - The zone map divides a jurisdiction (city, county, etc.) into areas where specific types of development are allowed outright, allowed by permit, or restricted. Zones vary widely, but common zones include R (residential), C (Commercial), I (Industrial), MU (Mixed Use), and many variations and extensions thereof.

Zoning Ordinance - The local codes, maps, and laws that govern how development occurs in a given jurisdiction (County, city, etc.). Most zoning ordinances can be easily browsed through third-party websites like Municode, although updates may be a bit slow.