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When you're selling a building or home, buying property, or dealing with any real estate transaction, you might hear "certificate of occupancy" being bandied about. What does it mean, though? Here's what you should understand so that you know when to get it, how to do so, and why you need it.

What Is a Certificate of Occupancy?

Your certificate of occupancy (CO) is the document issued by a local building department or zoning department. It states that the residential property or home is appropriate for occupancy. To be considered suitable, it must be compliant with the building code applying to that area. This indicates that it adheres to all safety standards.

The document also identifies what class the building or residential property falls into and its use, which is why you usually need a certificate of occupancy. A certificate of occupancy is the building's legal stature stating that it can be used as a home.

For example, the building is often designated as commercial or residential. With that, you could hear it being referred to as the use-and-occupancy certificate, and they are the same thing.

Who Needs One?

There are various scenarios where you may need a new certificate of occupancy. It's important to understand if you must obtain a certificate of occupancy:

Building a New Commercial Property or Home with Appropriate Housing and Building Codes

Building a new building means that it hasn't been lived in or used before. Before construction work begins, you need to know if it's an industrial building or a single-family home.

Typically, a major construction like this means that you are creating new real estate, and the reason for the structure must be determined first.

Generally, a certificate of occupancy is necessary for any new construction before the completion of the construction project.

Buying a Home

Sellers may not need a certificate of occupancy to sell their homes. However, the buyer requires one for any buildings they want to purchase before moving forward with their mortgage process. That being said, for a home sale transaction, the seller is responsible for getting the certificate and bearing the cost.

It should also be noted if repairs are necessary for the structure to be safe. That way, the CO shows proof that everyone is on the same page.

If the seller doesn't automatically offer this certificate, you can request one for any properties you want to buy.

Changing How the Property Is Used

It's important to update your space periodically, but if something new is constructed, it generally means that all building codes and zoning codes are adhered to.

Typically, the property address doesn't change. For example, you may use a building as a commercial storage facility and want to convert it to be an apartment building. To change the legal use of the property, you must get a certificate of occupancy granted to you first.

Renovating and Adding onto the Property

Sometimes, you might require a certificate of occupancy when taking on a major renovation of a home or building. Here, the existing buildings are in good condition. However, you want to make significant changes to the structure, which must be approved first.

For instance, you may want to finish the basement in a building or add on to it so that you can take on a tenant or two.

How to Obtain a Certificate of Occupancy

Generally, you can visit the website of your local building information system. There should be a link to view certificates and see if yours is approved for your site. To gain access, you may need login credentials.

It's important to obtain a certificate of occupancy correctly. You may have to fill out an application with the building department in your city and pay a small fee. Those who build from scratch may have to get the certificate before the work is started.

With that, the local zoning department isn't likely to issue you a certificate because you want it. The property must pass many inspections when being built from scratch. These inspections can include:

  • General building inspection
  • Plumbing inspection
  • Electrical inspection
  • Fire inspection

From there, you have a final inspection before you are issued a certificate of occupancy. A certificate of occupancy could come in shifts because of the different inspections needed. For example, you may need a plumbing inspection and find issues. Then, you get a final one after everything is fixed.

Inspections aren't often required by the city for homes that already have a CO. You may only need one inspection. With that, there are no single standards for approving this document. Each city imposes its own laws, so the inspection process for your site could vary.

Why Is a CO Important?

A certificate of occupancy is often needed to finish the sale of a property. With that, if you're building a new property, you require a CO. Without it, you could be fined for every day that work happens on your property or when it is occupied without the certificate in place.

The CO makes sure that the building or residential home is safe, which is something necessary to attract a new tenant. No one is likely to rent from you without complete proof that it's safe to work or live in and that everything is up to code.

Similarly, the certificate is proof that your property has been inspected. As the buyer, you want the seller to have that certificate so that you're less likely to have huge repair bills that cost a lot.

Barriers You Could Face When Getting a Certificate of Occupancy

If you are building something from scratch and fail to comply with the local requirements, you may not be issued a certificate of occupancy. Usually, if the property doesn't pass an inspection, you're told what must be addressed to adhere to the safety codes in that area. You're then given a specific time frame to fix those problems and request a new inspection.

When selling a home, you could fail to get your CO if there are outdated aspects on the property. Often, those who sell older homes have non-compliance issues with outlets, piping, and wiring. With that, the safety codes change with time. Therefore, obtaining a CO could be impossible without renovating and repairing certain parts of the home.

Understanding the Temporary Certificate of Occupancy

You may be allowed to get a temporary certificate of occupancy if the building/zoning department doesn't want to issue a permanent one yet. For that to happen, the building must be generally safe, and this often expires after three months.

Conclusion

Your final certificate of occupancy is something you must have. In most cases, there's a good reason to have this document. Instead of grumbling about it when dealing with real estate sales or buying, figure out what to do to get it and start the process as soon as you can.

David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his two children, he's writing articles here!