What Is This Clause?
A clause stating that the builder's failure to obtain a Certificate of Occupancy (CO) — the government document certifying a home meets minimum building codes and is safe to inhabit — does not give the buyer the right to delay closing or terminate the contract.
How It Works
A Certificate of Occupancy is issued by the local government after inspectors verify that a newly built home meets applicable building codes. It certifies that the home is safe for people to live in. Without a CO, a home has not been officially approved for residential use.
A certificate of occupancy irrelevance clause states that the absence of a CO cannot be used as a basis to delay closing. In practical terms, this means the buyer may be required to close on and begin making payments for a home that the government has not certified as safe for habitation.
Some builders obtain a Temporary Certificate of Occupancy (TCO) instead, which allows occupancy but with outstanding items to be completed. Contracts may treat a TCO as sufficient, even though it means certain aspects of the home have not passed final inspection.
Why It Matters
You may be required to close on a home that has not been certified as safe for habitation by local authorities.
A temporary CO means certain building code requirements have not been fully met.
Without a CO, you may face issues with insurance, resale, or refinancing the property.
Which Builders Use This Clause
The following builders have been documented using this clause type in their purchase agreements.
State-by-State Enforceability
The enforceability of these clauses varies by jurisdiction. In some states, closing without a CO may violate local building codes or zoning ordinances. Courts may find these provisions unenforceable on public policy grounds if they require buyers to occupy homes that have not been certified as safe.
What Buyers Can Do
- 1Confirm whether your contract makes closing contingent on the builder obtaining a full Certificate of Occupancy.
- 2If the contract does not require a CO, negotiate this as a condition of closing.
- 3Understand the difference between a full CO and a Temporary CO, and what outstanding items may remain under a TCO.
- 4Check with your local building department about the CO status of the property before closing.
- 5If pressed to close without a CO, consult a real estate attorney about your rights and the legal implications.