Commercial Real Estate in Clearlake: GC, Downtown and Mixed-Use Zoning, Lakeshore Drive and City Taxes

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Clearlake is the larger of Lake County’s two incorporated cities. Its commercial land runs along Lakeshore Drive, Olympic Drive and the Highway 53 corridor on the southeast shore of Clear Lake. In 2025 the city rewrote its zoning chapter, so older listings and appraisals may cite district names that no longer exist. Confirm the current zone, any combining district and the sewer connection status for each parcel with the city’s Community Development Department before you rely on a use.

Who controls the parcel

Inside city limits, the City of Clearlake writes the zoning, issues use permits and building permits, and collects its own taxes. Lake County still runs the Assessor-Recorder’s office, so deeds, transfer tax collection and property tax bills go through the county. Parcels just outside the city line, including land toward Lower Lake and Clearlake Oaks, follow the Lake County zoning ordinance, which uses different districts (C1, C2, CH, CR) and different permit tiers. See our Lake County commercial guide for those parcels.

Within the city, sewer service matters to the building permit itself. Section 9-3 covers permits in the area served by the Southeast Regional Wastewater Treatment Plant. A building permit there expires if the foundation is not finished within 60 days, and the sewer connection permit is forfeited with it.

Clearlake zoning for commercial, industrial and mixed use

Section 18-2, adopted by Ordinance 271-2025, sets nine base districts tied to the General Plan. Four of them carry the city’s business uses.

District	Intended uses	Notes
GC General Commercial	Diverse retail and services for residents and visitors, with convenient parking and access	Retail, offices, hotels and sit-down restaurants allowed outright. No density or coverage cap. 35 ft, up to 50 ft with a conditional use permit. 3,000 sq ft minimum lot
DC Downtown Commercial Mixed-Use	Retail, service and entertainment for community and regional demand, plus varied housing in the main commercial district	Up to 25 units per acre, not counting hotel rooms. 35 ft base, up to 65 ft when performance standards are met. Ground-floor dwellings need a conditional use permit
MUX Mixed-Use	Residential and nonresidential uses on the same site, live-work buildings	80% coverage, 25 units per acre unless the General Plan sets less. Warehousing allowed outright. Manufacturing limited to under 5,000 sq ft with a retail outlet
IN Industrial	Wholesale, heavy commercial and indoor manufacturing that keeps fumes and dust inside	Light industry, self-storage and tow yards allowed outright. Trucking and storage yards by administrative permit. 35 ft, no coverage cap

The use tables in Section 18-18 use five levels: allowed (P), zoning permit, administrative use permit approved by the Director, conditional use permit decided by the Planning Commission, and prohibited. Some examples from the commercial table:

A restaurant without a drive-through is allowed in GC and DC. One with a drive-through needs an administrative permit in GC, DC, MUX and IN.
Auto repair needs a conditional use permit in GC and DC and an administrative permit in IN.
24-hour retail is allowed in DC but needs an administrative permit in GC.
Truck stops, tattoo parlors and tobacco sales need a conditional use permit in every district where they are listed.

The city’s code index also lists combining districts for specific plans, scenic corridors and planned developments. The Avenue (AV) district covers older "paper subdivisions" that lack streets, water or sewer. Section 18-14 allows flexible standards there, and some nonresidential uses, but it sets minimum access and fire protection rules first.

Lakeshore Drive, downtown and the height rules

The new code protects lake views in two places. In GC, buildings on the lake side of Lakeshore Drive, where the public can see the lake, stay at 35 feet. In DC, the extra height to 65 feet is unavailable on that side of Lakeshore Drive. It also requires the project to include housing and to keep private parking under 30% of the storefront-level site. The DC section also states that the city does not guarantee parking for downtown residential projects. New driveway approaches there need an administrative use permit to keep sidewalks continuous.

For a buyer, this means a lakefront commercial parcel on Lakeshore Drive and a parcel across the street can carry very different redevelopment potential. Get the zone, the side of the street and the General Plan designation in writing.

Cannabis, vacation rentals and other Clearlake-specific rules

Cannabis. Clearlake maps cannabis separately. Commercial cannabis businesses must sit in the CB combining district, and storefront or delivery dispensaries must be in the CBR combining district. Within those overlays, the use table shows dispensaries by conditional use permit in GC, DC and IN. Articles 18-17 and 18-43 hold the details.
Adult businesses. These are confined to the Adult Entertainment combining district. Minor adult merchandise sales in GC, DC and IN are limited to 25% of floor area.
Lodging. Hotels and motels are allowed outright in GC and DC and need a conditional use permit in MUX. Bed and breakfast inns are allowed in GC, DC and MUX.
Vacation rentals. Residential short-term rentals need a vacation rental permit under Section 18-19.280. The permit ends when the property sells. Occupancy is capped at 12 overnight guests, a 24-hour manager must be within 30 miles, and listings must show the TOT certificate number. Operating without a permit carries a penalty of ten times the application fee.
Mobile homes. The use table notes bar placing mobile homes more than 10 years old.

Transfer tax, business tax and property tax

City transfer tax. Clearlake imposes its own real property transfer tax in Chapter III, Section 3-2: 27.5 cents per $500 of consideration over $100, or $0.55 per $1,000. The Lake County Assessor-Recorder fee schedule (effective January 1, 2026) lists the county tax at $1.10 per $1,000 and does not list a city rate. Section 3-2.8 says the city article supersedes the county article inside Clearlake. Ask escrow and the Recorder how the two are split or credited on your deed before you set closing costs.

Lodging tax. The city’s transient occupancy tax is 9% of rent, up from 8% before October 1992. Operators collect it.

Sales taxes. The code includes a public safety transactions and use tax (Article 3-6) and a road maintenance tax (Article 3-7). Check current combined rates with CDTFA for any retail tenant.

Business license. General business licensing sits in Chapter VI. We did not verify the rate schedule. Separately, landlords offering more than five dwelling units for rent need a business license under the rental housing article.

Property tax. A sale generally triggers Proposition 13 reassessment to the purchase price, so rebuild the tax line before underwriting.

Due diligence that matters in Clearlake

Start with our commercial due diligence checklist, then add:

Confirm the parcel is inside city limits and get its 2025 zone and any combining district (CB, CBR, AV, SP, PD, scenic corridor).
Read the tenant’s use against the Section 18-18 tables. The permit level, from P to conditional use permit, sets your timeline.
For Lakeshore Drive frontage, confirm which side of the street the parcel is on and the height that applies.
Confirm sewer service and any open connection permit. Building permits within the Southeast plant’s service area carry the 60-day foundation deadline.
For motels, apartments or mixed-use buildings, check rental registration and inspection certificates under Article 9-4, which covers hotels and motels.
Ask escrow how the city and county transfer taxes will be charged.
Check Chapter XVII floodplain rules for low-lying lakefront parcels.

Questions people ask

Did Clearlake change its zoning recently?

Yes. Ordinance 271-2025 adopted a new district list: RR, LDR, MDR, HDR, MUX, DC, GC, IN and O. Older documents may use earlier names.

Can I build taller than 35 feet downtown?

In DC, up to 65 feet with housing and limited storefront parking, but not on the lake side of Lakeshore Drive where the lake is publicly visible.

Where can a cannabis dispensary operate in Clearlake?

Only in the CBR combining district, and then by conditional use permit in GC, DC or IN. Other commercial cannabis needs the CB combining district.

Does Clearlake have its own transfer tax?

Its code sets 27.5 cents per $500. The county fee schedule lists only the county’s $1.10 per $1,000, so confirm the split with escrow.

Is a drive-through restaurant allowed?

Yes, with an administrative use permit in GC, DC, MUX or IN. The Director decides it, not the Planning Commission.

What is the hotel tax in Clearlake?

9% of rent, collected by the operator under Article 3-3.

Does Diamond handle commercial property in Clearlake?

Contact Matthew Martinez to discuss buying, selling or leasing commercial property in Clearlake.

Sources & notes

Note: Some use-table cells came from a text version whose columns were hard to read. Confirm each use against the city’s adopted tables. Business license rates and the combined sales tax rate were not verified.

This page is general information, not legal or tax advice. Last reviewed October 2026 by Matthew Martinez.

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