What is a certificate of occupancy? Why homeowners or investors may need one

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It’s natural for homebuyers to want to make sure the house they’re purchasing is safe to live in. The good news is that in many places, there are regulations home sellers need to adhere to regarding disclosure. In some municipalities, this means having a certificate of occupancy, or CO, a special permit proving a property is habitable and meets all code and usage requirements.

Let’s take a look at what you need to know about a certificate of occupancy, including what it is, where to get one and who pays for it.

What is a certificate of occupancy?

A certificate of occupancy is a document that proves a structure, such as a house or office building, is safe to inhabit. In addition to the property address and owner, a certificate of occupancy will include the following three things:

  • Legal use and type of property – This indicates what the property is classified as from a zoning perspective, such as whether it’s for residential, commercial, industrial, retail, or mixed-use purposes. This ensures the property is being used as intended, such as a residential property being used as a primary residence.
  • Verifies property is up to code – This serves as proof that the property is in compliance and up to date with housing and building codes.
  • Property is suitable to be occupied – This confirms that the property conforms to the codes and standards set by your municipality and the structure is fit for occupancy.

When you may need a certificate of occupancy

In general, making minor renovations to your property may not require a certificate of occupancy. However, there are a few scenarios in which you may need one, depending on local rules and regulations.

  • You completed a major renovation. If you’ve made significant changes or improvements to your property — for example, you’ve fixed up a property that was condemned — you’ll likely need to obtain a certificate of occupancy to be able to sell it. If you complete a family room addition with electric and a pocket bathroom, you might need to get a certificate, as well, in addition to a building permit upfront.
  • You changed the property type. Each type of residence, such as a condo, multi-family or single-family home, has its own permitting and records that detail the type of property to ensure it is used the way it was intended. (The same goes for commercial properties.) Owners who get a permit to convert their property to a different class and then sell it will need a certificate indicating the change. For example, if you’re converting a single-family home into a multi-family one, you’ll need to get a certificate after the work is completed to reflect that.
  • You have a newly constructed property. A certificate of occupancy is required as part of the sale of a brand-new home or building.
  • You changed property owners. Some municipalities require a new certificate of occupancy each time you sell a property, or when a new tenant moves into a rental property. To ensure you’re following regulations, check with your local building or zoning authority.

How to get a certificate of occupancy

To get a certificate of occupancy, contact your local building or zoning inspection office and ask what documentation you’ll need to provide. In most cases, the information you’ll need is posted on your local government’s website.

Whoever applies for the certificate needs to be present for all required property inspections. Your municipality will send an approved inspector to check out fire safety, electrical wiring and plumbing systems, plus any general additions such as doors and exits. These will be compared to building codes to determine if there are any violations.

Once an inspection has been completed, you’ll receive a report that outlines the details of your property and whether you pass. If so, you can claim your certificate and sell the property (assuming there are no outstanding fines you need to pay). Otherwise, you’ll receive a list of issues that need to be addressed before the sale can be completed. Your municipality will decide how much time you’ll be given to complete repairs. Then, you’ll need to complete another CO inspection in order to move forward.

Because different municipalities operate differently, the fee to get a certificate of occupancy varies significantly. The cost, which is typically paid by the seller, also depends on the size and type of property. For example, in Tamarac, Florida, it costs $260 for a safety permit, plus $86 and $3 for every 1,000 square feet of space in the building. Compare this to Chicago, where it costs $100 plus an additional $0.12 per square foot.

Getting a certificate of occupancy can be a lengthy process, especially if you need multiple inspections, but it’s important to have one if your municipality requires it

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Written by
Sarah Li Cain
Insurance Contributor
Sarah Li Cain is an experienced content marketing writer specializing in FinTech, credit, loans, personal finance,and banking. Her work has appeared in Fortune 500 companies, publications and startups such as Transferwise, Discover, Bankrate, Quicken Loans and KeyBank.
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Mortgage editor