When And Why It Is Important to Require An Updated Certificate of Occupancy When Purchasing A Home

Over the past several years this has become a significant issue in contract negotiations, and for good reason.  Most seasoned attorneys practicing real estate law on the east end of Long Island routinely require a Seller of real property to procure an updated Certificate of Occupancy as a condition of closing.  Although none of the local townships specifically require an updated Certificate of Occupancy be issued upon the transfer of a property (as opposed to nearly all of the incorporated Villages, which do require this), as a general rule, this is a very prudent move.  Properties often have been renovated, expanded or have had accessory structures added over the years, after the original Certificate of Occupancy was issued, without the benefit of a building permit.  Additionally, many properties on the east of Long Island are subject to clearing restrictions.  The issuance of an updated Certificate of Occupancy is proof positive that existing clearing is compliant with any applicable clearing restrictions and that all improvements on the property are lawful. 

However, notwithstanding the above, sometimes Sellers are unwilling to procure an updated Certificate of Occupancy.  This is often due to the requirements of the local building departments, which can require the owner to perform improvements which put the property in conformity with current building and zoning standards, including current fencing and alarm requirements for swimming pools.  Sometimes an owner refuses to procure an updated Certificate of Occupancy because he or she is cognizant of an issue which might preclude the issuance of an Updated Certificate of Occupancy, such as over-clearing or improvements made without permits (i.e. basement conversion to living area, sheds, garage conversions into pool houses; pool house conversions into cottages, etc.).  Further, for structures or improvements which have been erected on the property without building permits, the township will require the submission of a building permit application, the issuance of building permits (for structures or improvements which were built without permits), and a passing inspection, in order to issue an updated Certificate of Occupancy.  This can take many weeks and certainly delay closing of title.  However, a little delay here will ensure that the Buyer is purchasing a property with lawful improvements and in compliance with the all of the local rules and regulations, including any applicable clearing restrictions. 

Given the potential for major problems and potential liability the issuance of an updated Certificate of Occupancy is the safest and most prudent way to insure that an improved property is in full compliance with the Building and Zoning requirements of the Town, and should be a condition of any purchase, with the exception of new construction or a very recently issued Certificate of Occupancy and a thorough review of the property and building department records.

I highly suggest that a Seller of improved real property begin this process at or before the time the property is listed for sale.  I further suggest that the listing real estate agent should address this issue with the Seller when taking a real estate listing such that any issues in this regard can be addressed prior to Contract and such that the Seller is aware that nearly all Buyer’s attorneys and Buyers are going to require this.  I assure you, this issue will most definitely arise during the contact negotiation and a Seller’s failure to agree to procuring an update Certificate of Occupancy is a red flag to any Buyer’s attorney and can lead to the deal falling apart.  Many real estate agents whom I work with already have the process started by the time there is an offer and acceptance, which is good way to insure that any issues in this regard are addressed early and do not delay the closing of title. The agent should advise the Seller of this normal requirement and should include this term on the Purchaser Memorandum, such that all parties and their respective attorneys are well aware of it.  This will lead to a smooth transaction and avoid unnecessary delays.