What is Certificate of Occupancy

Certificate of Occupancy: What is it and who needs it?

What is Certificate of OccupancyRemember that time your neighbors did a major renovation and, just before they moved back in to their fully refreshed home, they suddenly added some house numbers that didn’t match and a front stair rail that they took back down just after moving in? Well, what you were witnessing was your neighbor preparing to meet the requirements of a Certificate of Occupancy.

A Certificate of Occupancy is a legal document issued by your local government entity certifying that the building meets all building codes and laws and that the home is suitable for occupancy. The rules and requirements for a “CO” vary among different municipalities.

There are several instances in which a Certificate of Occupancy is required, again, varying by local jurisdiction:

  • The purchase of new construction. Once the builder has completed the residence, and before the home can be sold, an inspector must visit the building to ensure the structure meets all codes and that there are no safety hazards and the home is ready for occupancy.
  • The purchase of a home that has been heavily renovated. Recently we have seen purchase sales where the seller takes previously occupied homes and completes high-end renovations. In many cases allowing the buyer to have a say in the materials being used. In this instance a Certificate of Occupancy will also be required to ensure the renovations were completed in compliance with building codes.
  • Conversions, in which a building is being converted from a commercial use to a residential use. For example, where old commercial buildings are being turned into loft-style condominiums or even single-family residences. The extent of the conversion necessitates a CO.
  • Property repair after damage. If you are ever unfortunate enough to have severe property damage from a fallen tree, flooding, tornado, or the like, the county or other local government may condemn the dwelling (meaning you cannot live in the home) until all necessary repairs have been made and a Certificate of Occupancy has been issued.

And a CO is not just a signal for occupancy, despite its name. In most cases it also will be required before you can complete the mortgage process. Likewise, your homeowner’s insurance company may also require a CO.

So, for instance, if you have had a bridge or construction loan during your build or renovation, your lender understands there will be no Certificate of Occupancy. Still, one will be required before permanent financing (your mortgage) can be put in place.

An exception may be in cases in which a Temporary Certificate of Occupancy is issued. This usually means the municipality responsible for the CO is saying, in effect, this property is ready to occupy, pending minor work, before the permanent CO can be granted. As you might imagine, a TCO is only good for a specified period of time, such as 60 or 90 days. Some lenders will proceed with your mortgage based on a TCO, though that mortgage would be conditional, while other lenders will not honor a TCO at all.

Can you occupy the house without a CO? The answer varies depending on your circumstances (do you need financing, do you plan to never sell the home, etc.) and the local municipality in charge of COs, but it’s not likely a good idea. For one, the municipality may take legal action to ensure you do not occupy the home, even having you removed from it once you are in. Then there are a host of other potential ramifications. For instance, the issuance of a CO often triggers notification of the local tax assessor’s office, and you might get dinged for underpaying taxes if they don’t know the home is finished or improved.

When you are poised to move and under the stress that often entails, a Certificate of Occupancy can seem like an added and even unnecessary hassle, but it is in the homeowner’s best interest. Think of it as a check-and-balance precaution that says your home is safe for occupancy and saleable in the future.


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