What is the certificate of occupancy, and why is it such a big deal?

By Emily Myers | November 1, 2022 - 12:35PM

Without a correct certificate of occupancy, a building cannot be legally occupied.


When you’re buying in New York City, one of the documents you will need to obtain is the certificate of occupancy, which is sometimes shortened to C of O, or sometimes just CO. This document identifies how a building can be used, for example, how the building is zoned for use—be it commercial or residential—and how many households can be accommodated at the address. 

It might not sound all that important, but if you’re buying and the paperwork doesn’t match your plans, the bank isn’t going to approve a mortgage. Here’s one scenario: If you plan on renting out an apartment in a townhouse you won’t be able to do so if the apartment isn’t allowed by the building’s C of O. If you’re the tenant, you can withhold rent if you find your apartment isn’t allowed under the C of O.  And if you are in a building that doesn’t have a C of O it’s possible the city could issue a vacate order. 

The certificate of occupancy is issued by the Department of Buildings and it is needed in townhouses and apartment buildings. There's also a document called a temporary certificate of occupancy or TCO, which means a building is safe to inhabit but still has some outstanding work to do or permits to obtain before a C of O is granted.

Read on for more about what you need to know about a certificate of occupancy.

[Editor's note: An earlier version of this article was published in November 2020. We are presenting it again with updated information for October 2021.]

What makes a C of O and a TCO such a big deal? 

Without either document, no one can legally occupy a building, so if you are in a building that doesn’t have these documents, except in some rare instances, you run the risk of the city issuing a vacate order. 

Not sure about your building's status? You can look up any property's C of O through the city's Buildings Information System. If you’re a renter, the burden is on your landlord to correct any missing documentation, but they can’t collect rent from you if there’s no C of O or TCO. 

Lack of C of O can hurt your financing

If you're in the process of buying an apartment in a building and have found out it lacks a C of O or TCO, you’ll want this addressed immediately. 

“You don’t want to inherit other people’s legal messes,” says Dean Roberts, a real estate attorney at the firm Norris McLaughlin. For starters, problems or delays with the C of O can throw off your mortgage process. Banks need at least a TCO to issue financing. 

"We may consider a TCO for a mortgage loan, however additional stipulation for the loan approval may be required such as verification of the TCO and validating that the dates do not expire prior to the loan closing date," says Brittney Baldwin, vice president and loan officer at  National Cooperative Bank (and a Brick Underground sponsor). Appraisals and underwriting guidelines would need to be met as well.

Pro Tip:

If you’re renting in a building that doesn’t have a Certificate of Occupancy allowing residential use of your space, your landlord may not be able to legally collect rent from you. Additionally, says real estate attorney and buyout expert Steven Wagner, “if your landlord can’t get a Certificate of Occupancy allowing you to reside in your space, you might be able to negotiate a lucrative buyout deal.” To schedule a free 15-minute telephone consultation with Steven Wagner, click here or call 646-780-7272.

What triggers a change in C of O?

There are a few common scenarios in which buyers might run into C of O issues. It’s often an issue with townhouses that may have been upgraded to create additional living space. A two-family turned into a three-family would typically need a new C of O, but you may find owners who neglected this step.

If you're doing significant renovations or purchasing a fixer-upper with the intention of launching into extensive work, you may need to update the C of O, in addition to getting all the requisite permits.

Any renovation that creates a change in the number of rooms, or a change in the use of the spaces will require a permit, which will mean it is worth checking whether a Change in Occupancy has been triggered. A qualified architect will be able to review your plans and flag any potential issues. 

What new development buyers need to know

C of O problems also tend to rear their head for buyers in new construction buildings, which might have a TCO, but can't get a finalized certificate of occupancy until they're completed. This is fairly common. 

"You’ll find that the C of O is always a moving target as far as when it’s going to arrive, so [the developer or sponsor] is doing their best to estimate, incentivize, and keep people in the transaction," says Nicholas Palance, founder of brokerage Highland Advisory.

To avoid the hassles and expenses that come with a delayed move-in date (such as the need for storage and the cost of temporary digs), it may be worth adding an extra three months onto whatever date a developer gives you for a building's approval. 

Buyers can use them for leverage

In your contract for an apartment in a new construction, there may be a clause to allow you to get out of the purchase if the closing does not happen by a particular date. If the C of O or TCO is delayed beyond that date, you may be able to walk away from the deal. 

Palance points out it is especially important to keep a very close watch on TCO expiration dates. 

“I had a $10 million deal derailed because an expired TCO renewal came one day after the buyer was able to back out of the contract. In a declining market, a drawn out process presents an opportunity for the buyer to renegotiate a lower price with the leverage of walking away. In many cases, this can be avoided,” he says.

There are also situations where a building’s C of O may be inaccurate, for example, if you have a condo conversion where the developer only obtained a TCO, or co-op buildings that are somehow in violation of the C of O. Keep in mind that unlike condos, individual apartments in co-op buildings don't have certificates of occupancy; there's simply one C of O for the entire building, meaning your fate might be in management’s hands.

How to correct C of O problems

The easiest solution is to hire an experienced expeditor to help speed up the paperwork. Be aware the pandemic has slowed this process down considerably. Roberts recommends budgeting 50 percent more time than you would normally for processing paperwork at the Department of Buildings. He’s currently dealing with TCO issues and says it’s “a complete nightmare.” 

Rather than issue new TCOs the agency is currently not issuing fines or penalties for not having the TCO, but Roberts says that doesn’t address all of the “collateral issues”—for example, if you want to borrow to finance a condo purchase. 

Usually any C of O problem will surface in the title search. "It's one of those things that needs to be addressed well before you close. As a buyer, first assess how serious the problem is and see if it's fixable," Roberts says. One solution is to have the seller put money aside in escrow to allow you to fix the problem. Expeditors don't work for free.

Earlier versions of this article included writing and reporting by Virginia K. Smith.


Senior Writer/Podcast Producer

Emily Myers is a senior writer, podcast host, and producer at Brick Underground. She studied journalism at the University of the Arts, London, and graduated with a MA Honors degree in English Literature from the University of Edinburgh. As host of the Brick Underground podcast she has earned three awards from the National Association of Real Estate Editors.

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