The government permissions a site needs before it can be built on, such as zoning, plan sign-offs and permits.
Entitlements is the developer’s word for the permissions a local government grants before building can start. The OCC handbook and the real estate lending rule do not use the word, but the idea runs through both.
It shows up first in value. The handbook says the “as is” market value reflects the property’s actual physical condition, use and zoning designation on the appraisal date. Land zoned for the planned use appraises differently from land that still needs a change, and the appraiser values what exists, not what is hoped for.
It shows up again in loan review. The handbook lists an inability to obtain the zoning or permits needed to develop the project as planned among the problems examiners look for. It also counts permit fees the developer paid up front among common types of equity.
Raw land carries a 65 percent supervisory loan-to-value limit. Bring the lender the zoning letter, the plans that were signed off and the permit list with dates.
How it shows up in the data here
No lender file records whether a site is entitled. Bank call reports group land loans with other construction and land balances held, so entitled and raw land cannot be told apart. Lenders with construction and land on their books are at construction lenders, and tract lenders show under residential development comps. Zoning and permit status come from the city or county, not from this site.
Go further
- Residential development lenders: Lenders compared for lot and tract development.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- Residential development loan package checklist: Lots and houses are repaid one sale at a time. A lender on a subdivision or a group of homes is underwriting how fast those sales will come and what happens to the loan if they slow down.
- Supervisory loan to value limits and HVCRE, explained: Two federal rules shape how much a bank will lend against real estate: a table of loan to value ceilings, and a capital rule that makes some construction loans cost the bank more to hold.
Related terms
- Land loan: A loan to buy land that has not been developed, repaid from other income or from a later sale or development loan.
- A&D loan: One loan that pays to buy land and to develop it into finished lots.
- Horizontal development: The work that turns raw land into buildable lots: grading, streets, sewer and water lines and utilities, before any building goes up.
- As-is value: The market value of a property in its actual physical condition, use and zoning on the appraisal's effective date, with no credit for planned work.
- Appraisal: A written, independent opinion of a property's market value as of a specific date, prepared by a qualified appraiser.
- Finished lots: Lots with streets and utilities in place, ready for a building to be started.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.