Certification of occupancy is a major part of the building inspection process and helps to ensure the tenants' safety. Without a certification of occupancy, it is hard to know whether the building has been properly inspected and approved for residential use. In some cases, the landlord may face substantial penalties for the failure to obtain a certification of occupancy, depending on the jurisdiction and the situation.
The certificate of occupancy is a legal document issued by local governments to the owners of buildings that certify the building has been inspected, complies with local zoning and is safe for occupants. In most states, it is illegal to rent or use a building whose construction or renovation has not been certified for occupancy. A certification of occupancy is issued at the end of the building permit process and ensures the building's structural integrity, the safety of its electrical and plumbing work and the appropriateness to local zoning.
Depending on the local state law, landlords are usually liable for a fine if they fail to get a certificate of occupancy. In Connecticut, for example, the city can apply a fine of up to 20 dollars per day for up to 200 days, resulting in a maximum fine of $4,000. In most cases, renting or allowing occupation of a building without an occupancy certificate is a violation of local building codes, which are enforced by the buildings inspector or planning department.
Defense to Eviction
Landlords can also get themselves into trouble during eviction proceedings if they've failed to certify the delinquent tenant's unit for occupancy. In some states, including New York and New Jersey, tenants may use a landlord's failure to certify a unit for occupancy as a legal defense to eviction. In New Jersey, courts have ruled that landlords cannot even file for eviction until they have first received a certificate of occupancy. In New York, landlords may file for eviction of delinquent tenants, but tenants can be released from their liability to pay rent if their landlord has not received a certificate of occupancy.
Tax Increases and Bank Loans
In some cases, the absence of a certificate of occupancy means that the property has not been assessed by the local tax authorities for improvements or renovations. Because property taxes are based on the assessed value of the property, landlords will usually see a substantial increase in their property taxes if the local government finds out their property has been under-valued for taxation. In addition, banks may refuse loans to the landlord either for the building's purchase or for additional improvements unless they can produce and verify a certification of occupancy.