What is a Certificate of Occupancy?

An essential property management term

Key Insights from the Article

  • Definition and Importance: A certificate of occupancy (CO) is a green light from your local government that your building is safe to occupy. Essentially, it’s a document issued by a local building department or agency certifying that a building complies with applicable building codes and laws, which makes it safe for people to inhabit.
  • Scope and Variability: The requirements for obtaining a CO can vary significantly depending on the location, type of property, and extent of work done on the property. For properties that haven’t undergone significant changes, such as renovating a home to change its property type from a single-family residence to a multifamily home, you likely won’t need to worry about getting a CO unless you’re selling the property.
  • Process and Documentation: The process for obtaining a CO involves inspections, documentation, and sometimes rectifying any identified issues to meet local standards.

Definition of a Certificate of Occupancy

A Certificate of Occupancy is issued by a local government entity or building department, confirming that a building is suitable for occupancy.

COs are often issued for new housing and commercial buildings, specifically when renovations are required to change a property type. For example, converting a large single-family residence into an apartment building.

It’s an essential step because inspectors pore over a building to ensure that residential and commercial properties meet all local building codes, zoning laws, and government regulations to safeguard building inhabitants from harm.

The Importance of a Certificate of Occupancy

The CO is essential for several reasons:

  • Legal Occupancy: The CO allows people to use the building for whatever purpose it’s zoned for. Depending on the property, it could be used for residential or commercial purposes.
  • Compliance: COs ensure that the property complies with all local building codes and ordinances, affirming that safety and health standards are met.
  • Insurance and Financing: Many insurance companies and lenders require a CO before providing coverage or financing.

The Process of Obtaining a Certificate of Occupancy

While some building information systems allow viewing certificates online, obtaining a CO usually involves directly working with your local building department. Here’s a clearer breakdown.

The Standard Process:

  1. Application and Fees: You must submit a formal application with the building department, likely accompanied by a fee.
  2. Inspections: Crucial for new construction, these inspections ensure your building meets safety codes. They typically include:
    • Fire safety inspection
    • Electrical safety inspection
    • Plumbing compliance inspection
    • An overall building inspection
  3. Passing Inspections: Each inspection focuses on a specific area. If issues arise, you’ll need to address them before a re-inspection.
  4. Final Approval: The building department will issue your CO once all inspections pass.

Key Points to Remember:

  • CO Not Issued on Request: Unlike a simple online check, obtaining a CO requires your property to pass a series of inspections.
  • Inspections for Existing Buildings: While less common, existing buildings might require inspections for renovations or changes in occupancy.
  • Local Variations: The specific application process and inspection requirements can vary depending on your city’s building codes.

Impact on Property Management

For landlords and property managers, the Certificate of Occupancy is critical. Property leasing might be legally questionable without it, potentially leading to fines and penalties.

Moreover, a CO can impact:

  • Rental Operations: If you don’t have a valid CO, especially if you renovated a property and changed its property type, it’ll be difficult to legally lease.
  • Property Value and Financing: A CO is required to obtain financing in many areas. If a lender can’t prove that a building is safe to inhabit, they have little incentive to lend.
  • Insurance: You’ll need to prove a property is safe to occupy to get insurance.

A Certificate of Occupancy is more than just a piece of paper; it’s a critical document that impacts various aspects of property management, from legal occupancy to insurance and financing. Understanding its importance, the process of obtaining it, and its implications can help property managers and landlords navigate the complexities of real estate management more effectively.

With digital tools like TurboTenant, landlords can streamline the process of managing their properties, provided their buildings are all up to code and merit an inspector deeming them safe for occupancy.

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