Certificate of Occupancy - Real Estate Term of the Week

     

certificate of occupancyCertificate of Occupancy - What is it?

A certificate of occupancy (aka CO) is a document certifying that a building is suitable for living. Compliance with certain building codes, which vary from city to city, is essential to getting a certificate of occupancy.

Common situations where obtaining a certificate of occupancy is necessary:

  • When new construction has taken place, whether it be an add-on or brand new construction
  • When changing a building's use; such as converting a garage or commercial unit into a residential living space
  • Some lenders require a certificate of occupancy when refinancing
  • Before renting any residential property, a valid certificate of occupancy must be on file
  • Please check with your local building department for a complete list

How to obtain a CO:

After all required building permits have been pulled with the city and all requirements have been met, an inspector will come out to review the work done. If the construction was executed properly, a CO will be issued. Note: some cities automatically issue the certificate of occupancy while others require an application.

Additional Info:

It is imperative to comply with all local building requirements. Not having a certificate of occupancy may hinder a homeowner's ability to sell and may render their insurance policy invalid. Additionally, many complications can arise if a property is rented without a CO, not to mention it's against the law.

Earlier this year I met with a Los Angeles homeowner who converted his detached laundry room into a guesthouse decades ago. No building permits were pulled, therefore no CO was filed. Facing bankruptcy, he needed to sell and didn't have the money to bring the unit to code. After it sat on the market for months, he realize that he wasn't going to receive an offer because A) buyers don't want to take on that burden and B) buyers wouldn't be able to get a loan or insurance on the property. He needed to sell to a cash buyer, such as myself, to move on.

As I mentioned earlier, please check with your local building department for full details. 

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Jennifer Shenbaum

About The Author

Jennifer Shenbaum is a real estate investor based in Southern California. She is a veteran of the housing market crash of 2007. Best of all, she offers free remodeling ideas to all who ask.