What is a Certificate of Occupancy in Real Estate and When Do You Need One?

If you’re selling your home, you may be wondering if and when you need a certificate of occupancy (CO) that shows your home is safe to occupy. Or, maybe the requirement came up during your home sale and you’re wondering what it is and why you need one.

In this article, we explain what a certificate of occupancy is and when you might need one during your home sale. To provide you with the most complete information, we talked to the experts:

• Eugene Lackey, Supervisor of Building Construction Inspections for the City of Cincinnati
• Shannon McEwen, the Assistant Manager of Building Permits for Clark County, Nevada
• Sandro Perez, Building Inspection Superintendent in Pleasant Prairie, Wisconsin

Let’s get started.

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What is a certificate of occupancy?

A certificate of occupancy is a document that confirms that your home is in compliance with local laws and safe to live in.

A certificate of occupancy typically serves three purposes:

• Describes the legal use and type of property. This indicates how the building is classified for zoning purposes (residential, commercial, industrial, retail, etc.) and ensures it is used as intended.
• Verifies that the property is up to code. This proves that the building is in compliance and up to date with local building codes.
• Confirms that people can safely live there. This confirms that the building is safe for occupancy according to local laws.

The document will also show:

• The property address

• The square footage of the structure
• The property’s zoning code
• The name of the property owner
• Any notes relevant to the safety of the property

To get an idea of what a certificate of occupancy looks like, check out these examples from Pennsylvania, Wichita, and Los Angeles.

When might you need a certificate of occupancy?

Whether you need a certificate of occupancy to live in or sell your house depends on a few different factors which vary based on local rules.

Commercial and residential properties require different certificates. Each type of residence – single-family home, multifamily home, condo, etc. — needs its own certificate detailing the property type.

Some local regulations require a certificate of occupancy any time a home changes hands, whether it is sold to a new owner or rented to a new tenant. Others don’t issue certificates of occupancy at all for residential properties. This is true of the city of Shreveport, Louisiana says the city’s Executive Director of the Metropolitan Planning Commission Alan Clarke.

A few examples of when municipalities might require a certificate of occupancy are:

Converting property type or use: If you’ve converted your property type or use, a certificate of occupancy may be required before it can be lived in. For example, if you’ve converted a multi-family home into a single-family home or vice versa, you might need a certificate of occupancy that reflects the code change. The same applies if you’re converting a business property (or church, barn, storage container, etc.) into a residence to sell it as a home.

Major renovations: You may need a certificate of occupancy to sell a home that you’ve made major renovations to – maybe you’ve gutted and restructured the layout, added a second story, or brought a condemned property up to code.

New construction: If you build a new home to sell, a certificate of occupancy will be part of the sale.

New owner or occupant: Your area may require a certificate of occupancy for a new homeowner or tenant. Or you may be required to get one if you’re selling multifamily property.

Does your property already have a certificate of occupancy?

A certificate of occupancy was likely issued when your home was built; you should be able to use the original one when you sell your home — unless the building code changed, you made substantial renovations, or the property had been condemned.

In some municipalities, if you have an existing certificate of occupancy, you don’t have to get a new one — within reason — and can continue to use the one that’s on file with the building department. If there’s a records office at your municipality, call them and see what they have already.

Where do you get a certificate of occupancy?

If you do need a certificate of occupancy, you can get it from the local zoning and/or building department. Call them up. Drop by. Their job is to help you.

Your town should have a website where you can find the building department’s contact information and a list of the documentation and inspections that will be required. Otherwise, call your township office or city hall, which you can easily Google. Ask your real estate agent if you aren’t sure where to go.

“To get a certificate of occupancy for an existing home you can apply for one at your local building department. In some cases, you need a set of architectural plans to apply,” states Lackey.

Architectural plans, which show the current layout of the property, may be needed for:

• A newly built home that doesn’t yet have a certificate of occupancy
• A home on which extensive renovations were done

Before you can obtain a certificate of occupancy, your property must pass a series of inspections.

What happens during the certificate of occupancy inspection?

To obtain a certificate of occupancy a professional inspector employed by your local government must visit your property to confirm that your home complies with local building codes and is safe to live in. While it’s an official inspection, it should not be confused with the home inspection, which is typically ordered by the buyer’s lender.

“A home inspection is a pre-sale inspection and is informational only. That inspector has no jurisdictional code enforcement authority. A municipal inspection is a permitted project inspection and the inspector has jurisdictional authority to pass or fail your property and issue orders to correct the problems. They’re two totally different animals,” explains Perez.

For a certificate of occupancy inspection, the municipality will send out an inspector who will compare the structure to the current building code and check for violations. Some elements of the inspection include:

• Plumbing
• Electrical
• General building facets
• Fire safety systems, if needed
• Other safety items such as whether your staircase has an attached banister

Here is an example of how the inspection process might look:

1. An inspector from your local government visits your home.
2. You’ll get a report at the end of the inspection.
3. If you pass, you obtain your certificate and move forward with your sale or renovations.
4. If you fail, you’ll get a list of issues that need to be fixed and a timeline to make the repairs.
5. Once repairs are complete, you’ll need to pass a reinspection before you can obtain a certificate of occupancy.

How much does a certificate of occupancy cost and who pays for it?

Typically, when one is required for a real estate transaction, the certificate of occupancy is ordered and paid for by the seller. How much you’ll pay depends on where you live, but the average fee is $250. This fee doesn’t include the costs of the inspections or any required repairs. You may negotiate with the buyer to share the cost of repairs.

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How long does it take to get a certificate of occupancy?

After your property has passed inspection, it can take up to a week to receive your certificate of occupancy. Or it could take longer depending on how busy your local building office is. You may be able to expedite your certificate of occupancy for a fee.

Are you required to make the repairs listed in the CO inspection?

While the repairs recommended by the lender’s home inspection may be negotiable, any repairs required by the CO inspection are mandatory. A buyer may be willing to help pay for repairs – either way, you cannot receive a certificate of occupancy or proceed with your home sale until they are made.

“The bottom line here is that if your municipality requires a certificate of occupancy, you cannot sell, live in, or use the property until the certificate of occupancy is issued,” says McEwen. You’re at the mercy of city officials, including the inspector, and must make the repairs required to pass the inspection in order to obtain a certificate of occupancy prior to selling.

Can you proceed with your home sale without a certificate of occupancy?

If local ordinances require you to have a certificate of occupancy and you proceed with your home sale without one, you could be fined or sued by the municipality, and your buyer’s mortgage company might halt the deal because the property isn’t considered safe to live in.

Remodeling? You may need to get a certificate of occupancy

As we stated earlier, whether you’ll need a certificate of occupancy for your home sale depends on your municipality and the extent of the renovations. Typically, the more you’re changing, the more likely you are to need one. The best way to find out if you need one is to call your local building department.

“Most likely you won’t need one if you aren’t changing the occupancy classification – if the building is being used for business or residential – or the building code that applies to the property,” states McEwen.

Perez says his municipality requires a certificate of occupancy if the property was never occupied or the occupant had to live elsewhere while the home was remodeled. That’s usually only the case with a new build or an intensive remodel, not a simple one.

“For minor remodeling projects, we usually give them a certificate of compliance – showing the remodel is up to code – as opposed to a certificate of occupancy,” Perez explains.

A certificate of occupancy is about safety and peace of mind

A certificate of occupancy ensures a property is up to code and safe to live in, protecting the new residents from safety issues. It also protects the seller, the municipality, and the lender from any liabilities that may arise.

Before taking the first step of listing your home, call the local building or zoning office to see if you need to obtain or update a certificate of occupancy. An experienced real estate agent can help you figure out if you need a certificate of occupancy, and – if necessary – prepare for an inspection and negotiate repair expenses with the buyer. HomeLight’s free Agent Match can connect you with a top agent in your market who is familiar with local laws and common inspection issues to help your sale go more smoothly.

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