What is a Temporary Certificate of Occupancy in NYC?

May 27, 2024 by Georges Benoliel

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When constructing a new high-rise condo in New York City, developers aim to obtain a certificate of occupancy from the NYC Department of Buildings. This document verifies that the essential infrastructure is functioning correctly. Obtaining a certificate of occupancy, commonly known as a CO, is costly and time-consuming. Additionally, developers do not see a return on investment until buyers can purchase space in their luxurious high-rise. However, developers can acquire a temporary certificate of occupancy (TCO) or interim certificate of occupancy (ICO) to sell completed units to buyers, even before finishing the building. Buying an apartment with a TCO or ICO designation may provide early access to a new high-rise, but buyers must exercise extra caution.

Are Certificates of Occupancy required in NYC?

Getting a building erected is no easy feat. It takes years of designing, planning, and construction. While all this is time-consuming, getting a CO is an arduous process that requires organizing

inspections with the state to satisfy habitation requirements and ensure the building complies with all applicable laws.

Getting a “CO” or a “C of O” also shows that the building is safe for habitation. The process requires setting up multiple inspections with the Department of Buildings (DOB) to sign off on the fire alarms, sprinklers, plumbing, electrical systems, etc.

Any New York City building constructed after 1938 requires one. If a developer renovates an old building from commercial to residential, they can not sell units until a residential CO is issued.

In cases where parties in a real estate transaction worry about the legality of the current usage of the property that was built prior to 1938, the DOB issues a Letter of No Objection (LNO). This is a letter directly from the DOB stating that they have no objection to the current usage of the property and a New Certificate of Occupancy is not required.

What is a Temporary Certificate of Occupancy (TCO)?

A Certificate of Occupancy (CO) is essential for a property. Without it, the city can force people to leave the premises, which can be problematic for potential buyers. Lenders also require a CO before financing a transaction to ensure that the building meets safety standards and that tenants are secure.

For new buildings still under construction, temporary certificates of occupancy (TCO) and Interim certificates of occupancy are issued to allow partial occupation of the building while construction is ongoing.

In the past, developers used Temporary Certificates of Occupancy (TCOs) to gain approval to move people into completed building parts. These certificates acknowledge that while there is still work, certain areas of the building are safe for occupancy.

The Department of Buildings (DOB) issues these certificates.

TCO Requirements

The Department of Buildings has the following requirements to obtain a Temporary Certificate of Occupancy:

• Temporary or Final Construction inspection signoff
• Temporary or Final Plumbing inspection signoff
• Temporary or Final Electrical inspection signoff
• Temporary Elevator signoff (if applicable)
• TCO Fee (if applicable)
• Applicant must schedule an update of the open inspections
• Approved Schedule of Occupancy
• A Certificate of Occupancy submitted in DOB NOW

How long is a TCO or ICO valid?

The term of a Temporary Certificate of Occupancy (TCO) lasts for 90 days. After this period, the sponsor or developer must renew the TCO to prevent the city from evicting residents.

Applying for and maintaining a TCO can be challenging for large-scale developers. However, a new legislation called Intro 2033 allows homeowners to move into a building floor-by-floor through Interim Certificates of Occupancy (ICO).

Unlike TCOs, developers do not need to renew an ICO, which helps them obtain financing and lease and sell space in the building. This allows buyers to purchase units on finished floors in a partially completed building. The legislation is beneficial for high-rise condo developments with multiple dwelling units. However, buildings with less than eight stories or four separate units cannot obtain an ICO.

While the promise of new housing stock is appealing, buyers should remain cautious.

Should you buy a NYC apartment with a TCO or ICO?

Developers commonly complete residential units floor-by-floor, establishing the necessary infrastructure to make the units inhabitable.

• A Temporary Certificate of Occupancy (TCO) expires after 90 days, during which developers must finish the required work or reapply for another TCO.
• In contrast, an Interim Certificate of Occupancy (ICO) lasts indefinitely.

Sponsors and developers utilize a TCO to continue construction and move people into the completed parts of the building as they line up final CO inspections. While this benefits buyers seeking early access to new construction or a renovated building, there are potential drawbacks.

Purchasing a unit in a building with a TCO or ICO could mean enduring construction for a few months, as while your floor may have electrical, plumbing, and safety infrastructure, the other floors may still be under construction.

However, if you come across a TCO on a building that is several years old, it’s advisable to be cautious. Working with a buyer’s agent and a real estate attorney experienced in selling units with these designations is essential to navigate the process effectively.

What does it mean when an older building has a TCO?

A temporary certificate of occupancy (TCO) can be both advantageous and risky.

In some cases, developers or sponsors may sell all their units before obtaining a full certificate of occupancy and then transfer TCO responsibilities to the building owner. Since it’s easier for the building owner to renew the TCO, they may never pursue a full certificate of occupancy. This means that a building that’s been around for several years with a TCO may have underlying issues. Your real estate broker can connect you with experts to uncover any potential problems with the unit.

There are various reasons why a building owner might avoid obtaining a permanent CO, such as not wanting to update outdated infrastructure or concealing structural problems. Even though the building may seem livable, this situation can result in high-rise or multi-family buildings going without a CO for years.

If the owner neglects significant renovations, the building can remain overlooked for an extended period. The issue here is that the responsibility ultimately falls on you, the homeowner.

How does a TCO alter the home-buying process?

If you’re buying a new construction condo in New York City, you might come across the term “TCO” in the listings. While banks will provide financing for your purchase, it’s essential to know specific points. For example, suppose the developer or sponsor of a building lets the TCO certificate expire. In that case, new buyers may struggle to find lenders or insurance providers willing to transact on the property. Your real estate attorney can help you assess the status of a TCO and how close it is to the end of its 90-day term.

Buyers purchasing a unit with a TCO in place are usually among the first to move into the building, which can be an exciting prospect. However, it also means that you won’t be able to renovate the interior of your condo until a final certificate of occupancy is issued. This is because you need to obtain a permit for any remodeling work, and the city won’t issue a CO if there are any open permits or violations. Typically, new buyers must wait at least a year before starting any remodeling projects.

Like any real estate purchase in New York City, there are essential details to keep in mind. Making the wrong decision can jeopardize your dream of homeownership. Working with a knowledgeable broker who can guide you.

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