Certificate of Occupancy: What You Should Know When Buying and Selling

Summer is quickly approaching, and you are looking to renovate your house. Perhaps you’ve already hired contractors to build an addition, extend your deck, renovate your bathroom or build a pool in your backyard.

Depending on the type of work you have planned, your contractor may need to obtain permits. The failure to obtain proper permits (and closing them out when the work is done) may prevent you from selling your house down the road in that it may prevent you from obtaining a final certificate of occupancy for your home as renovated. As a home owner, it will be your obligation (regardless of when you became the owner) to secure a final certificate of occupancy prior to closing on the sale of your home.

A certificate of occupancy is a document issued by a local government agency or building department certifying that a house or building is in compliance with applicable building codes and other laws, as well as indicating it is in a condition suitable for occupancy.

Making sure a home has a valid certificate of occupancy is not only important as a seller, but also important for buyers. For buyers who are getting a mortgage in connection with their purchase, a bank is unlikely to lend money as long as there are open permits or without a final certificate of occupancy.

In some instances, a new owner may have to obtain a permit for a work already completed. This situation typically arises when there are permits that were not obtained for work done by a previous owner, or the previous owner failed to close out permits and obtain a final certificate of occupancy. Often a municipality will not allow new work to begin until the owner closes out any previous open permits or obtains a permit that should have been obtained for work already completed.

An attorney who represents either the seller or the buyer should raise these issues during contract negotiations. An attorney representing a seller should confirm that all work was performed in accordance with applicable laws. An attorney who represents the purchaser should make sure that the contract states that the property will be conveyed without violations and that a valid certificate of occupancy is a condition to closing.

Occupying premises without at least a temporary certificate of occupancy is unlawful. So, whether it’s your finished basements, decks, patios, sheds, retaining walls, or swimming pools – it is important that you secure a proper permit and close it out when work is done so that you can obtain a certificate of occupancy.

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