When purchasing New York City real estate in a newly developed or recently renovated building, buyers should understand the role of a certificate of occupancy...
When purchasing New York City real estate in a newly developed or recently renovated building, buyers should understand the role of a certificate of occupancy. Most importantly, buyers should be aware that a missing or delayed certificate of occupancy may impact your real estate transaction.
Difference Between a Temporary and Permanent Certificate of Occupancy
A certificate of occupancy (CO) states the legal use and/or type of permitted occupancy for a building. All new buildings must have a CO, and existing buildings must have a current or amended CO when construction will change their use, egress or type of occupancy. Additionally, a building may not be legally occupied until the local building department issues a certificate of occupancy or temporary certificate of occupancy (TCO). In New York City, the New York City Building Department (DOB) is the issuing entity.
The DOB issues a final CO when the completed work matches the submitted plans for new buildings or major alterations. The document confirms that the work complies with all applicable laws, all paperwork has been completed, all fees owed to the DOB have been paid, all relevant violations have been resolved, and all necessary approvals have been received from other City agencies.
If the DOB determines that a property is safe to occupy, but there are outstanding issues requiring final approval, it may issue a TCO. As the name suggests, TCOs are only valid for a short period of time, generally 90 or 180 days. However, they can be renewed in certain circumstances. For various reasons, some properties keep their TCO’s for much longer.
New York City Building Department Requirements for CO
If a building “complies with all applicable laws, all paperwork has been completed, all fees owed to the Department have been paid, all relevant violations have been resolved, and all necessary approvals have been received from other City Agencies,” the DOB will issue a CO.
The requirements include, but are not limited to the following:
Final Construction inspection Sign-off
Final Plumbing inspection Sign-off
Final Elevator Sign-off
Final Electrical Inspection Sign-off
Final Building survey
Final Builders Pavement Plan
No open applications
No open violations
Owner’s Cost Affidavit
An approved Schedule of Occupancy in DOB NOW: Build.
Verifying the Certificate of Occupancy of an NYC Property
Given that substantive renovations and alterations require DOB approval, it is always wise to check the DOB website to see if work permits have been issued and closed and verify that there is a valid CO for the property. Most NYC certificates of occupancy can be easily located online via the DOB’s website.
Buildings built before 1938 aren’t required to have a CO – unless later alterations changed its use, egress or occupancy. If the property is exempt from the CO requirement, property owners can contact the DOB’s borough office where the property is located to request a Letter of No Objection (LNO), which will confirm the legal use of the building.
Delays in Obtaining a Certificate of Occupancy
New buildings often face delays in obtaining a TCO or CO, which may impact the closing date or create other challenges in the buying process. Most notably, buyers can’t close on a purchase in a new development until DOB issues a TCO. Lenders will also usually ask to see a building’s CO or TCO prior to issuing a loan. Similarly, delays in obtaining a TCO can cause issues when obtaining title insurance.
The good news is that buyers can address these issues in their contract with the developer/seller and lower their legal risk should any issues arise due to the lack of or any delays in getting a TCO or CO. For instance, the purchase agreement may include a CO contingency, as well as state that providing or obtaining a CO or TCO is what triggers setting a closing date.
While a final CO may not be required to close a transaction, it is also important to understand that buying a property subject to a TCO does carry risks. If the developer fails to obtain the final CO or extend the TCO before it expires, occupying the building becomes a violation of the New York City Administrative Code (NYCAC) and any occupants may be subject to a vacate order. Accordingly, if you purchase a property with a TCO, it is imperative that the developer or sponsor confirm in writing that it will take all necessary steps to obtain a final CO.
Key Takeaway
While they may seem like a mere formality, certificates of occupancy play an important role in real estate transactions involving new or renovated buildings. Given the frequency of project delays, it is imperative to work with experienced counsel who can help protect your legal interests.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Bruce Feffer, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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