What Is a Certificate of Occupancy?

Basics of a CO

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Your state or local building codes may require you to obtain a certificate of occupancy for your property. The purpose of this inspection is to make sure your property is fit for occupancy. Your local building department will usually come out to inspect. Here is what every investor needs to know about a CO.

The 5 Basics of a Certificate of Occupancy

To understand if you need to apply for a certificate of occupancy, there are five basic questions that can be answered.

 

1. What Is a Certificate of Occupancy?

2. Who Needs a Certificate of Occupancy?

3. Where Do You Get a Certificate of Occupancy?

4. How Do You Obtain the Certificate?

5. What Happens If You Don't Get One?

1. What Is a Certificate of Occupancy?

A certificate of occupancy is an essential document for every rental or investment property owner. This document usually serves three purposes. It tells you:

1. What the Structure Is Used For: The certificate of occupancy describes what class the property is in. It could be classified as a residential building, including a single family or multifamily property,a retail property, a commercial building, an industrial building or a mixed use property. This classification is to prevent the property from being used in a way it was not intended, for example, using a residential property as a hair salon.

2. That the Structure Is Suitable for Occupancy: A certificate of occupancy serves as proof that a property has complied with all standards and codes and is now fit for occupancy.

Depending on what the structure is used for, this could be occupancy by a residential tenant, by a commercial tenant or by a retail store and its customers. 

3. That the Structure Complies With All Building Codes: Obtaining a certificate of occupancy will serve as proof that the building has conformed to all housing and building codes.

This is helpful if a tenant tries to complain about violations at the property.

2. Who Needs a Certificate of Occupancy?

It is important to check with your local town because each town has different requirements. Some common reasons for needing a certificate of occupancy are:

  • New Construction- Newly constructed buildings usually need to apply for a certificate of occupancy.
     
  • Property Conversion- When a property is changing from one use to another, a certificate of occupancy is usually required. For example, a warehouse that is being converted to residential lofts.
     
  • Change of Ownership- When a multi-family property, industrial property or other commercial space changes ownership, a new certificate of occupancy is usually required.
     
  • Major Construction- Some towns will require you to get a certificate of occupancy for construction that can change the occupancy of the property or that changes the way in which you exit the property.

3. Where Do You Get a Certificate of Occupancy?

A certificate of occupancy can be obtained through the local government, usually in the town’s building department. The request has to be made before any work is actually done. A certificate of occupancy will not be issued, however, until the property has passed all inspection requirements and any fines on the property have been paid.

4. How Do You Obtain a Certificate?

In order to obtain a certificate of occupancy, your property must pass a series of inspections. These inspections may include a plumbing inspection, an electrical inspection, a fire safety inspection and a general building inspection.

5. What Happens if You Don’t Get One?

If it turns out your town laws require you to get a certificate of occupancy for the type of property investment you have or for the work you are doing, and you did not, you could be fined or even sued by the town. This fine could be for each day you had the property but did not have the certificate of occupancy.