Lieb at Law: Why Buyers Should Require Updated C of O on Closing

Imagine finding your dream house, touring the house, negotiating for the house and then getting an accepted offer on the house. Imagine attending a closing and receiving the keys. Imagine moving into your new house and making it your home.

Fast forward a few years.

Imagine coming home from a hectic day only to find a ticket from Code Enforcement at your doorstep. The ticket states that it’s a vacate order and that you are being fined and must appear in court. In simplest terms, you can no longer live in your home and are being fined $1,000, with each passing week’s continued violation resulting in additional fines, which can escalate up to $10,000 each (these fines vary between municipalities). To reiterate, you need to move out, find a new place to live, correct the violation and apply for a new Certificate of Occupancy; all before considering moving back into your home.

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Did you know that this scenario is completely avoidable? Did you know that certain municipalities require that this scenario never happens? To illustrate, the Villages of Sag Habor, Quogue, Southampton and East Hampton require an Updated Certificate of Occupancy on change in ownership. Did you know that most municipalities don’t require an Updated Certificate of Occupancy on change in ownership? Why not?

Thinking about why not is the wrong question. The right question is why every purchaser doesn’t have their attorney insist on an Updated Certificate of Occupancy on change in ownership, irrespective of a requirement existing in their local Town or Village.

Perhaps, purchasers are misinformed. Perhaps misinformed purchasers think that their home inspection covers a code inspection. It doesn’t. Perhaps misinformed purchasers think that the house will be grandfathered because it was like that when they bought it. It won’t. Perhaps misinformed purchasers are told by their broker that the request will kill their deal. That may be true, but, isn’t a deal to purchase an illegal structure that will give this type of exposure worth killing? Meaning, if a seller is afraid of obtaining an Updated Certificate of Occupancy isn’t that seller acknowledging that the house has illegal features that violate the Municipal Code and potentially will result in exposure to the unwitting purchaser.

Ironically, these same brokers who argue that an Updated Certificate of Occupancy will kill deals are the people who may benefit the most from such a request becoming the norm. Specifically, a broker is required to affirmatively disclose zoning violations on each of such broker’s advertisements per an April 19, 2016 Opinion Letter by the NY Department of State. Yet, this requirement is a nonstarter for many brokers because they understand that complying with this requirement will often result in their seller-client being ticketed for a zoning violation when Code Enforcement sees the advertisement. As a result, best practice in brokerage is to only list property where sellers are willing to legalize such property prior to listing so neither the broker nor seller has exposure. As a result, wouldn’t a norm that all purchasers demand an Updated Certificate of Occupancy on change in ownership take the onus off of brokers to be involuntary code enforcement, who have to otherwise insist on sellers fixing their property, because all sellers would then understand that they must legalize their property irrespective of their broker’s exposure.

Assuming brokers now understand that an Updated Certificate of Occupancy is in their best interest, the only objection remaining is one of cost. However, the cost of an Updated Certificate of Occupancy is minimal. To illustrate, in the Town of Southampton, an Updated Certificate of Occupancy is available for a $250 fee (southamptontownny.gov/DocumentCenter/Home/View/2868).

Now, you may be saying that Lieb, the writer, is crazy and he isn’t appreciating the cost of correcting the many violations that Code Enforcement will find incident to obtaining an Updated Certificate of Occupancy. You are wrong. In fact, the more violations that are found, the less costly a request for an Updated Certificate of Occupancy will be for a purchaser. The reason for this conclusion is that the violations of Code exist irrespective if they are found prior to closing. In fact, the only effect of requiring an Updated Certificate of Occupancy is the allocation of costs to rectify the illegal property between the seller and the purchaser.

Remember, most municipal codes set forth that it’s unlawful to use any building, structure, premises, lot or land until a certificate of occupancy has been obtained. Do you want to purchase property only to be forced to tear it down and rebuild it, while being ticketed all the while? Think about it.

Andrew M. Lieb, Esq., MPH, is the managing attorney of Lieb at Law P.C. and a contributing writer for Behind the Hedges.

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