Certificate of Occupancy
A certificate of occupancy (CO) is a document issued by a local government agency confirming that a building complies with applicable building codes, zoning regulations, and other laws, and is suitable for occupancy. COs are required for new construction, changes of use (converting commercial to residential, for example), and in some jurisdictions after major renovations.
When a CO is required
New construction: A final CO must be issued before anyone can legally occupy the building. It confirms all construction meets code and passed all inspections.
Change of use: Converting a property from one use to another (warehouse to apartments, house to daycare) requires a new CO confirming the building meets codes for the new use.
Major renovations: Some jurisdictions require a new CO after significant renovations, particularly those involving structural changes or changes to the number of units.
Resale: Some municipalities require a CO inspection before any property can be sold or transferred.
CO problems for investors
A missing or revoked CO can prevent: renting the property (no legal occupancy), obtaining insurance, getting a mortgage (lenders require valid CO), and closing a sale. Properties with unpermitted additions or conversions may lack a CO for the additional space, which can create complications at sale.
For wholesalers
Verify the property has a valid CO, especially if there are additions, conversions, or signs of unpermitted work. A property with CO issues may require the buyer to bring the property into compliance before they can occupy it or rent it, which adds cost and time. Disclose any known CO issues to your buyers.