If you’re constructing, selling, or modifying an existing real estate property; then chances are you need a certificate of occupancy first. So, how do you get a certificate of occupancy? And why do you need one as a real estate investor?
In this blog, I’m going to talk about how to get an occupancy certificate, what exactly is an occupancy certificate, when do you need to get it, and how long does it take to get a certificate of occupancy in the U.S?
Let’s find out!
What is a Certificate of Occupancy?
To put it simply – a certificate of occupancy is very similar to a college certificate.
If that sounded vague, then another way to put it is that a certificate of occupancy is an official document issued by an official government that certifies what the purpose of a real estate property is, and whether or not that property is fit to serve that purpose.
So, the main information that you would find about a real estate property in its certificate of occupancy includes:
- The type of property is a single-family home, multi-family home, apartment building…etc.
- The main use of the property: residential use, commercial use, industrial use…etc.
- The condition of the property: electric wiring, plumbing, structure integrity…etc.
This document is used to track the condition and status of your property and needs to be updated accordingly whenever any changes are made to the property that may impact the information aforementioned.
Looking to modify your property to increase its rental income? Read this blog!
So, now that you know what is a certificate of occupancy, let’s talk about the reason why a certificate of occupancy is needed, and when do you need to get one.
Why Do You Need a Certificate of Occupancy?
Simply put, a certificate of occupancy is needed to ensure that your property is in a livable condition and does not pose any risk to people living or working in it, as well as to keep track of the type of property it is and its use.
Since this is an official government-issued certificate, it is also a legal requirement for owning a real estate property, and failure to obtain one will in most cases result in you getting fined.
What’s more, is that the amount you’re fined depends on the timeframe during which the property was operational without having an up-to-date certificate.
For that reason, it is often advised that real estate buyers should request that the seller of the property that they want to close on is able to present a certificate of occupancy for said property. This is in order to avoid carrying over accumulated fines related to the certificate of occupancy upon purchasing the property.
When Do You Need a Certificate of Occupancy?
So, if you own a real estate property or want to own a real estate property, then you must be wondering, when do you need to issue a certificate of occupancy?
There are several occasions when a certificate of occupancy is needed:
When constructing a new property
When a new real estate property is constructed, it is always a requirement to have a certificate issued for the building.
This ensures that the newly constructed building follows all of the municipality’s guidelines and rules and that it is a safe building to live or work at.
Read: Building Your Own Investment Property
When selling a property
If you’re selling a property that you own, most buyers will require you to present a certificate of occupancy for the property they want to buy.
As mentioned earlier, this helps them avoid inheriting any accumulated fines on the property.
It’s important to note here that, while your property might already have a certificate of occupancy which was issues in the past, it is advised to always keep your certificate up to date as the laws and requirements related to it can change at any time, and your property will need to pass a new inspection to make sure it follows the new requirements.
When buying a property
While a certificate of occupancy is typically the seller’s responsibility to obtain, we do advise buyers to make it a requirement when closing a deal.
However, sometimes a seller may decline to issue one or to pay the fees associated with obtaining it. In this case, the buyer might have to come to an agreement to pay or split the fees.
And if the seller is still refusing to issue one for the property, then it’s probably not a good sign, and the seller might be aware and is hiding the fact that the property will not pass an inspection or that it may have accumulated fines on it.
When modifying or changing the use of a property
When you’re making major modifications or additions, or when changing the way that the property is being used, then you need to update your occupancy certificate to reflect these changes.
For example, if you’re building a basement for the property, or if you’re expanding with a guest house or a garage, or if you’re changing the location of your property’s entrance – all of these are considered as considerable changes that require you to update your certificate.
Read: Best Ways to Customize Your Rental Property for Your Tenants
Similarly, if you want to change your primary residence, for example, and you want to turn your old residence into a rental or income property, that also needs requires you to issue a new certificate of occupancy.
How to Get a Certificate of Occupancy?
Does any of the above cases apply to you? That means that you now need to know how to get a certificate of occupancy.
To obtain one, you will need to head to your municipality or city’s local zoning or building department to apply for an application (you will also need to pay a fee).
If you’re constructing a new building, then an occupancy certificate will be required before the construction work starts.
Once you apply for a certificate of occupancy, a number of inspections will be scheduled for the property.
Once the property passes all required inspections, you can finally go and obtain your certificate of occupancy from the relevant department.
Types of Inspections
But, what types of inspections do you need to pass to get an occupancy certificate?
When it comes to the types of inspections required, it depends on:
- The location: each state and municipality have their own set of laws and guidelines that properties need to follow in order to obtain a certificate of occupancy.
- The type of property: each type of property has a different set of rules that qualify them for an occupancy certificate.
- The use of the property: depending on the way you want to use the property, and especially in the case of commercial or industrial uses, you’ll need to pass a set of requirements related to the specific use of the property.
Learn: The 2021 Rental Property Inspection Checklist
Regardless, the following inspections are required for all real estate properties:
- Fire-safety inspection
- Electrical wiring inspection
- Plumbing inspection
- General property inspection
How Long Does Certificate of Occupancy Take?
If you’re selling a property or constructing a new one, and you need to obtain a certificate of occupancy to commence with your investment, then you’re probably wondering how long does it take to get a certificate of occupancy?
Luckily, obtaining an occupancy certificate will not ruin your plans if everything goes smoothly – meaning if you pass the inspections the first time.
Typically, once you’ve passed all inspections, it only takes around 5 to 10 business days for the certificate of occupancy to be issued by the relevant authority.
However, if you fail one or more of the inspections, then you will be given a timeframe of 60 to 90 days to fix or change whatever it is that needs to be changed in order to pass the inspection.
In that case, the inspector will give you a checklist of the things that you need to change in order to pass the next inspection.
I Have a Certificate of Occupancy, Now What?
Once you’ve obtained your certificate of occupancy, you’re now ready to commence with your business or investment plan.
Whether you’re a buyer or a seller – and once all the occupancy certificate is out of the way – if you’re looking for a place to buy or sell your real estate property, then look no further than Mashvisor!
Mashvisor is a real estate platform that offers a wide set of tools to help all real estate investors, both career-professionals as well as beginner investors, by helping them search for properties to buy, analyze existing properties for their returns, or sell their properties to interested buyers who are ready to close the deal.
Whether you’re interested in browsing a large database of properties based on their type, location, and use, or if you’re looking for all-in-one calculators and analytics tools to help you analyze your next investment and understand its projected returns – Mashvisor has all the tools you need to make your next real estate investment a success!
Now that you know how to get a certificate of occupancy, and how important it is when it comes to buying, selling, or investing in real estate, do you think your property has what it takes to pass the inspections?
Also, do you have any past experiences with obtaining an occupancy certificate and you would like to share them with other investors like yourself? Let us know with a comment below! You might help the next investor pass their inspections and close a deal!
And make sure to check out our platform and the rest of our blogs at Mashvisor!