Resolving Certificate of Occupancy Issues in Real Estate Sales

A property seller must be mindful of potential issues in contracts to sell their real property. One issue that is far too common in real estate sales is a deficient Certificate of Occupancy or open building permit. Our real estate attorneys in New York explain how to resolve the problem.

Certificates of Occupancy

A Certificate of Occupancy (CO) is a document issued by a buildings department of the town (or city) where a building is located. It state’s a building’s legal use and/or type of permitted occupancy. Specifically, the CO will indicate the use the building is cleared for (e.g., residential or commercial) and how many residences are allowed on the site (e.g., one-family dwelling or two-family dwelling).

The CO may include notable additions to the building that were constructed at the same time as the building, such as a garage or dormer. Any newly constructed building must have a CO, but depending on the date that the building was constructed, a CO may not exist. This is because it may have been constructed prior to the implementation of COs. In that case, the local building department may grandfather those buildings and not require a CO to be issued.

Certificates of Completion

A Certificate of Completion (CoC) indicates that an addition or alteration made to the building after its construction (e.g., garage, dormer, elevated patio, or central air conditioning) has been inspected and approved to the standards of the town building code. Whether a CoC is required for an addition or alteration depends on the town code in which the building is located.

Sadly, some contractors, intentionally or not, don’t always follow the guidelines and processes set in place by the local buildings department for a CoC. Ordinarily, a contractor must apply for a building permit to construct an addition or alteration, and once construction is completed, the contractor must then have a building inspector ensure it’s up to code. If the inspector approves, the town building department closes out the building permit and issues a CoC.

Deficiencies Hold Up Your Real Estate Sales Transaction

It’s not uncommon for a deficient CO or open building permit to be revealed in a report by the title company retained by the prospective buyer for title insurance. The title company will search the database of the pertinent town building department to discover whether a CO exists and whether there are any open building permits.

Unless the buyer specifically agrees in the real estate sales contract to purchase the building subject to open building permits, the existence of a deficient CO or open building permit is an issue that must be addressed well before you close. Curing a deficient CO or closing an open building permit can be costly and time-consuming. Our real estate attorneys in New York often recommend that a homeowner contemplating the sale of real property run a cursory search of the town building department to see if there are any issues with the existing CO or any open building permits. While most town building departments don’t have online databases, their offices are often open to the public, and searches can be run in person.

Expediting a Deficiency

If a deficient CO or open building permit is found before or after the real estate sales contract, and it doesn’t indicate that the purchaser will be taking the building subject to open building permits or a deficient CO, you may want to hire an expeditor to help speed the paperwork process, a cost that will vary depending on the severity of the issue. Expeditors ordinarily are familiar with the requirements and paperwork necessary to close building permits and can guide the homeowner in the process of filing documents and paying fees to the town building department.

However, curing a deficient CO or closing an open building permit may not always be possible before the closing date indicated in the contract. This could significantly delay the closing and or even cancel the contract.

Be Prepared Before a Sale

It’s certainly worth the cost of investigating whether there are potential CO or CoC issues with a property before entering into a real estate sales contract. Our real estate firm helps educate you on real property issues and how to resolve them proactively.

The knowledgeable and compassionate team at Russo Law Group, P.C., provides professional services and advice regarding real estate law, business law, estate planning, elder law, and more. Take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. provides peace of mind.

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