A seller of property must be mindful that there may be issues that rear their ugly head once in contract to sell the real property. One such issue that is far too common is the existence of a deficient Certificate of Occupancy/Completion or open Building Permit.
A Certificate of Occupancy (“CO”) is a document issued by a Buildings Department of the Town (or City) in which a building is located that state’s a building’s legal use and/or type of permitted occupancy. Specifically, the CO will indicate the type of use the building is cleared for (i.e. residential or commercial) and how many residences are allowed on the site (i.e. one-family dwelling or two-family dwelling). The CO may include notable additions to the building that were constructed at the same time as the building, such as a garage or dormer. Any newly constructed building must have a CO, but depending on the date that the building was constructed, a CO may not exist. This is because a building may have been constructed prior to the implementation of COs. In such a case, the local Buildings Department may “grandfather” those buildings and not require a CO to be issued for that building.
A Certificate of Completion (“CoC”) differs from a CO in that a CoC will indicate that an addition or alteration made to the building subsequent to the building’s construction (i.e. a garage, dormer, elevated patio or central air conditioning) has been inspected and thereafter approved to the standards of the Town Building Code. Whether a CoC is required for an addition or alteration made to the building depends on the Town Code in which the building is located.
Sadly, some contractors, whether intentionally or not, do not always diligently follow the guidelines and processes set in place by the local Town Buildings Department necessary to have a CoC. Ordinarily, a contractor must apply for a Building Permit to construct an addition or alteration and, once construction is completed, the contractor must then have a Town Buildings Inspector inspect the addition or alteration to make sure it is up to code. If the Inspector finds the addition or alteration to be up to code, then the Town Buildings Department closes out the Buildings Permit and issues a CoC.It is not uncommon for a deficient CO or open Building Permit to be revealed upon the issuance of a Title Report by the Title Company retained by the prospective Purchaser for title insurance. The Title Company will run a search of the database of the pertinent Town Building Department to ascertain whether a CO exists for the building and whether there are any open Building Permits.
Unless the Purchaser specifically agrees in the Contract to purchase the building subject to open Building Permits, the existence of a deficient CO or open Building Permit is an issue that must be addressed well before you close. The curing of a deficient CO or the closing of an open Building Permit can be a costly and time-consuming endeavor. We often recommend that a homeowner contemplating the sale of real property run a cursory search of the Town Buildings Department to ascertain if there are any issues with the existing CO or if there are any open Building Permits. While most Town Buildings Departments do not have online databases, their offices are often open to the public and searches can be run by visiting the Town Buildings Department’s office in person.
If a deficient CO or open Building Permit is found prior to contract or after, and the Contract of Sale does not indicate that the Purchaser will be taking the building subject to open Building Permits or a deficient CO, you may want to hire an Expeditor to help speed along the paperwork process, a cost that will vary depending on the severity of the issue. Expeditors ordinarily are familiar with the requirements and paperwork necessary to close Building Permits and therefore can guide a homeowner as to what needs to be filed and what fees need to be paid to the Town Buildings Department.
However, where the homeowner has entered into a contract to sell the real property, the curing of a deficient CO or closing of an open Building Permit may not always be able to be completed prior to the closing date indicated in the Contract of Sale. This may significantly delay the closing and in some cases even cancel the contract.
In all, it is certainly worth the cost of investigating prior to entering into contract to sell a property whether there is any potential CO or CoC issues with the property. To do so will allow the homeowner to be educated on what issues exist within the property and be proactive in rectifying them.
Joshua R. Berzak
Russo Law Group, P.C.
100 Quentin Roosevelt Blvd., Suite 102
Garden City, NY 11530
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