Certificate of Occupancy – Everything You Need to Know

When you purchase or construct a property, whether residential or commercial, you’ll eventually need a certificate of occupancy (CO). In this article, we’ll explore what is a certificate of occupancy and how to obtain a certificate of occupancy. Then, we’ll review certificate of occupancy requirements, including those for a temporary certificate of occupancy. Additionally, we’ll compile a set of links to certificate of occupancy resources from selected cities. Finally, we’ll describe how Assets America^® can help, and then answer a few frequently asked questions about COs.

What is a Certificate of Occupancy?

In this section, we’ll explore what is a certificate of occupancy. As its name implies, a CO confirms that humans can occupy your property. Without one, people won’t be able to move into, live in or occupy a property, a major consideration for owners and investors.

Video:  What is a Certificate of Occupancy (CO)?

How Assets America Can Help

Assets America^® can work with you to arrange a construction loan starting at a bare minimum of $10 million and greater.  Usually, these loans pay out in installments. We can help ensure that you receive your current installment as soon as possible.  Specifically, we can get you the final installment shortly after you receive your certificate of occupancy.

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Purposes of a Certificate of Occupancy

COs address four important purposes:

1. Use of a Structure: The CO specifies the property’s class. Some real estate property classes include retail, commercial, residential single family and multifamily properties, mixed used property, and industrial buildings. Naturally, by specifying the structure’s class, a CO prevents using the property in an unintended way.
2. Suitability for Occupancy: When a property receives a CO, people can occupy it.  Specifically, the occupants might be residential tenants, commercial tenants, store employees and customers, etc., depending on the CO classification.
3. Compliance with Building Codes and Zoning Provisions:  A CO serves as proof that a property has complied with all relevant building and zoning codes. Clearly, you might find this handy if a tenant complains about code violations.
4. Release of Final Construction Loan Installment: Most CRE construction loans pay out in phases as the builder completes milestones. Frequently, the final milestone is receipt of the CO, which unlocks the remaining loan proceeds. Also, the CO clears the way to close on the sale of a property and transfer title.

How to Get a Certificate of Occupancy

You must work with state or local government to acquire a CO. Typically, the relevant office resides in a county, town, or city building/housing department. Generally, you must apply for a CO before commencing any work on the property. Also, you will have to pass all inspections and pay any fees or fines on the property. For example, these inspections can include:

• Electrical inspection
• Plumbing/sewer inspection
• HVAC inspection
• Fire safety inspection
• Mechanical systems inspection
• General building inspection

Local agencies and governments employ professional inspectors who can issue COs.

Typically, when you want to apply for a CO, you will hand in a submittal package. For example, it might include:

• A tenant improvement worksheet, which is a cover sheet and checklist of previous steps you’ve taken
• Multiple copies of a plot/site plan. This plan displays the current layout, location of improvements, and access paths for cars and pedestrians. Additionally, you should include any handicap-access plans
• Multiple copies of your detailed construction plans, including the plans for the floor, ceilings, exits, framing, and lighting Also, include the electrical, mechanical, and plumbing plans
• If applicable, copies of Title 24 energy compliance documents 
• A copy of a hazardous materials questionnaire

When you apply for a CO, expect to pay separately for plan checks and permits. Typically, the fees depend on factors such as type of construction, type of occupancy, and square footage. After the building department checks and approves your plans, you’ll receive your permits to begin work. You will have to schedule inspections for construction milestones, such as:

1. Underground electrical and plumbing
2. Foundation
3. Rough electric and interior wall framing
4. Rough trades (mechanical, plumbing, electrical) and ceiling
5. Drywall
6. Electrical service
7. Final Inspection

Ultimately, after passing the final inspection, the utility company will release the electrical meter and you’ll receive your CO.

Certificate of Occupancy Requirements

It’s important to know that different cities, towns, and rural areas can have different certificate of occupancy requirements. Generally, the top certificate of occupancy requirement is to conform with all building codes. Also, you must pay all fees and pass the final inspection.

You will need a CO under several circumstances, including:

• New Construction: Normally, a new building requires a CO.
• Major Reconstruction or Repair: Some municipalities require a CO for major construction that changes the occupancy of the property. In addition, changes affecting safety, such as the configuration of exits, may also require a CO.
• Property Conversion: Usually, you will need a new CO if you convert the use of a property. For example, changing an armory to rental apartments will require a CO.
• Change of Ownership: You may need a new CO when ownership of a multi-residential building or commercial property changes.

Before final inspection, you will have to clear many permitting hurdles, such as:

• Compatibility with zoning rules
• Providing adequate parking
• Observing street setback requirement
• Meeting landscape requirements
• Conforming to signage limits, if applicable
• Acceptable access for the disabled
• Adequate storm drainage

Inspectors may discover problems that prevent them from issuing a CO. Specifically, these problems are situations where the property does not conform to safety or building codes. Doubtlessly, the inspector will provide you with a list of required corrections to bring you into conformance. Moreover, the list will include a deadline, such as 60 days, to correct all deficiencies. Then, when you fix all the problems, you will call for a re-inspection and pay a new fee. Inevitably, if/when you pass, you’ll receive your CO.

If you proceed without a required CO, expect a fine or lawsuit from the local government. Daily fines can accrue until you obtain your CO.

Temporary Certificate of Occupancy

Sometimes, governments issue a temporary certificate of occupancy when a property must resolve only a few minor items. A temporary certificate of occupancy can help builders receive the final construction loan installment. Tenants can begin moving into the property when it receives a temporary CO.

Certificate of Occupancy Resources — By City

Use the following links for city-specific resources for obtaining a CO:

Frequently Asked Questions

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

Usually, once you pass final inspection, you can receive your CO within a week, perhaps sooner. However, some cities are notorious for slow service, so you will need more patience in those locales. Possibly, you may be able to pay a fee to expedite receipt of your CO.

Who needs a certificate of occupancy?

Commercial properties, and often residential properties, require a CO under various circumstances. These include new construction, reconstruction, repurposing, and change of ownership. Once you receive a CO, only then can occupants occupy the property.

Who issues a certificate of occupancy?

A state, city, county, or other local government agency may issue COs. Frequently, it’s the local department of buildings and safety. Naturally, the locally certified building inspectors must first approve your final permit before you can receive a CO.

How much is a certificate of occupancy?

Fees vary from one location to the next, but $250 is a good estimate. Typically, you’ll pay a fee for plan checking and additional fees for each inspection. If you fail an inspection, you may have to pay another fee for reinspection.

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