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What Is a Certificate of Occupancy and Why Is it So Important?

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After months of work, inspections, and a mountain of details, wrapping up a construction project is always exciting.

But you can’t cross the finish line until a Certificate of Occupancy is in your hands.

This guide will explain:

  • What a Certificate of Occupancy is
  • Why it’s important; and
  • How to obtain one

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What Is a Certificate of Occupancy?

A Certificate of Occupancy (CO) is a document issued by a local government confirming that a building is in a condition suitable for occupancy and that it complies with applicable building codes and other laws.

Generally, a Certificate of Occupancy is required for:

  • New construction
  • Changes in ownership
  • Property conversions
  • Major remodeling projects

A Certificate of Occupancy states:

  • That the structure complies with all local building codes
  • That the structure is suitable for occupancy
  • What the structure is used for

When Is a Certificate of Occupancy Issued?

A Certificate of Occupancy is issued when construction is 100% completed and all required inspections and paperwork have been completed.

A Certificate of Occupancy can be temporary or final.

Temporary Certificate of Occupancy or Final Certificate of Occupancy: What’s the Difference?

On certain occasions, a temporary Certificate of Occupancy will be issued.

This can occur when the progress is significant enough to allow the building to be occupied, but enough unresolved items remain that an additional inspection is required.

A temporary Certificate of Occupancy declares that while the structure is generally safe to occupy, it still has some outstanding issues that must be resolved before the final Certificate of Occupancy can be issued.

A temporary Certificate of Occupancy is typically issued for 90 days, and all needed improvements must be resolved before the deadline expires.

Generally, a temporary Certificate of Occupancy cannot be renewed.

The local post office may also require a Certificate of Occupancy before they will begin delivering mail to the property.

Who Needs a Certificate of Occupancy?

While each location will have different requirements, the most common reasons for needing a Certificate of Occupancy are:

  • New construction
  • Major remodeling or construction projects - You may be required to obtain a Certificate of Occupancy for construction that changes the occupancy of the property or that changes the way you enter and exit the building.
  • Property conversion - If a property is changed from one use to another, a Certificate of Occupancy will likely be required.
  • Change of ownership in a multi-family property, industrial property, or commercial space

You will want to be sure to check with your local government in order to comply with their requirements.

Why Is the Certificate of Occupancy Important?

A Certificate of Occupancy:

  • Verifies the property’s use, such as residential, industrial, or commercial.
  • Certifies that a structure complies with all local safety and building codes.
  • Confirms that the structure is safe to occupy.

Whose Responsibility Is it to Get a Certificate of Occupancy?

Generally, it is the responsibility of the seller to obtain a Certificate of Occupancy. Whether you are buying, selling, or moving into a new build, the seller obtains a Certificate of Occupancy to ensure that the building is safe to occupy and meets all the requirements of the codes inspector.

Where Do You Obtain a Certificate of Occupancy?

To obtain a Certificate of Occupancy, a seller submits an application to the local Building Department or Department of Housing.

The application will ask for details about the:

  • Building
  • Address
  • Intended usage

All required fees will be paid at the time of application.

How Long Does It Take to Get an Occupancy Certificate?

Once an application is submitted, it generally takes 5 to 15 business days to receive a Certificate of Occupancy.

There is a shorter processing time for a temporary Certificate of Occupancy.

Certificate of Occupancy Requirements: The Inspections

Before a Certificate of Occupancy will be issued, the structure must pass a series of inspections.

While the Certificate of Occupancy checklist varies depending on the location and project, it generally includes a:

  • General building inspection
  • Fire inspection
  • Plumbing inspection
  • Electrical inspection

General Building Inspection

This inspection will be conducted by the State Health Department and is done to check for any safety hazards.

It includes a thorough inspection of the:

  • Septic system - to ensure there are no leaks or clogs in the lines
  • Soil around the premises
  • Roof
  • Walls - specifically looking for cracks or movement
  • Ventilation
  • Railings on stairs
  • Signage for emergency responder calls

Fire Inspection

In order to obtain fire safety approval, the local fire marshal will conduct an inspection to ensure that the structure meets the necessary requirements such as:

  • Adequate and working smoke detectors
  • Fire extinguishers
  • A sprinkler system

This inspection will also determine the number of people that can safely be in the structure at one time.

Any necessary changes to the building’s fire safety procedures must be met before the fire marshal will issue the paperwork required for a Certificate of Occupancy.

Plumbing Inspection

A plumbing inspection is required to make certain that all plumbing, including …

  • Hot water heater
  • Drains
  • Faucets
  • Fixtures

… is in good working condition.

Electrical Inspection

Finally, the electrical inspection will examine the entire electrical system to ensure:

  • Working outdoor lighting
  • Protected electrical outlets in kitchens, bathrooms, and the exterior of the structure
  • Electrical panel board covers are on, with circuit breakers identified for use

In addition, depending upon the location of your project and the type of structure or business you plan to operate, there may be additional inspections needed.

These may include:

  • Health code inspections
  • Elevator inspections
  • Insulation certificates

What Happens if You Don’t Pass the Certificate of Occupancy Inspections?

If the property does not pass inspection, you will receive a list of items that need to be corrected before the property will conform to all building and safety codes.

You will also be given a specified amount of time to correct these issues, such as within 60 to 90 days.

Once all of these updates have been completed, you will get in touch with the health department to have your property re-inspected.

Often, there is an additional fee for the re-inspection, so having everything up-to-code the first time around is preferable both time and money-wise.

Is There a Penalty for No Certificate of Occupancy?

Yes.

If your local law requires you to obtain a Certificate of Occupancy, and you neglected to do so, you could be fined and possibly sued by the town.

The fine would most likely be retroactive, requiring you to pay for each day you owned the property, but did not have the Certificate of Occupancy.

Does No Certificate of Occupancy Affect Project Payments?

The absence of a Certificate of Occupancy can mean a delay in getting paid.

The majority of construction contracts include language stating that a percentage of the total contract value will be withheld until the project is “substantially completed”.

Oftentimes, a Certificate of Occupancy is required by a financial institution before they will release final construction loan payments or allow a homeowner to close on their new home.

While all of these requirements are actually beneficial to all parties involved, it puts pressure on you as a builder to complete all remaining items, so the project owner can get the money to pay you.

Flexbase can help.

We have the integration capabilities you need to create a construction schedule to perfectly fit your needs, no matter how large or small your project.

And keeping your construction schedule on track means you will stay right on schedule with project payments.

You’ve Passed Inspections – What’s Generally Included on a Certificate of Occupancy?

A Certificate of Occupancy is a short, single-page certificate that includes the following details:

  • Building code
  • Zoning
  • Description of the use of the structure
  • Square footage
  • Maximum persons permitted inside
  • Block and lot numbers
  • Building permit number

A temporary Certificate of Occupancy will also include an expiration date.

Let Flexbase Help Take the Stress Out of Managing Your Project Cash Flow as You Work Toward Obtaining Your Certificate of Occupancy

In the construction industry, keeping your project on schedule is critical when it comes to getting your Certificate of Occupancy and maintaining your cash flow.

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