Certificate of Occupancy issue for Philadelphia property

Certificate of Occupancy issue for Philadelphia property

Investor · Philadelphia, PA · Member since 2016 · 5 posts · 0 votes

Hi all, my business partner and I purchased our first rental property (3 unit multifamily RM-1)  last year located in Philadelphia. Soon after, we attempted to obtain a rental license for the property only to find out that the certificate of occupancy was invalid because the use permit stated the property was a two unit and not a three unit. It seems at some point an addition to the property was made and city records do show permits were pulled. However, the use and CO were never updated making getting a rental license very difficult for us. We currently have obtained a new use permit for the property and are in the process of getting a new CO. However, this requires building plans as well as a property inspection and thus is an expensive and time consuming process. My question is, since a valid CO was never presented to us at closing, do we a legal claim to get the previous owners to cover the cost of this process. Furthermore, what is the best way to navigate this entire process with the city to get everything done quickly? We are obviously in touch with legal professionals as well as other professionals to resolve both issues but just wanted to get an outside opinion as well since we were advised that there is no clear answer to the previous owners liability. Thanks!

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Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y

@Varun A.

No. Whenever you purchase property, it's the responsibility of the buyer to do proper due diligence. One of those steps is verifying the status of the CO. Lenders always require a copy of the CO before closing. Most building departments also make them available for viewing and printing (for a fee). In some places you can view the CO online.

So, if you received a copy before closing and didn't check that is was a 2 unit versus a 3, or that permits were requested but not closed properly, then that's a due diligence problem.

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  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Varun A.

    No. Whenever you purchase property, it's the responsibility of the buyer to do proper due diligence. One of those steps is verifying the status of the CO. Lenders always require a copy of the CO before closing. Most building departments also make them available for viewing and printing (for a fee). In some places you can view the CO online.

    So, if you received a copy before closing and didn't check that is was a 2 unit versus a 3, or that permits were requested but not closed properly, then that's a due diligence problem.

  • Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    9y
    Surprised your lender didn't catch this.
  • Investor · Philadelphia, PA · Member since 2016 · 5 posts · 0 votes
    9y

    @Christopher Phillips @Max T.

    Thanks for the responses, what you are saying certainly makes sense. Just to clarify,  the seller never actually provided us any use or certificate of occupancy documents for the property. Despite this, the sale went through. Does this change anything or does it still come down to our responsibility for proper due diligence? 

  • Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    9y

    This one slipped through because the zoning RM-1 is correct for small multi family (4-units and  <). That is why the lender didn't catch it.

    Unfortunately this does come down to your due diligence. But, I would recommend moving forward with getting the correct CO for 3 units. Go downtown and talk to the people in the correct department. Tell them what you want to do and they will help you. Yes it will cost you some money and some time but it will be worth it when its done.

    Having a valid rental license is required if you ever want to use the court system to get a tenant out. It is fairly common for investors to get the tenant  and the rental license as soon as possible, but not necessarily in that order.

  • Investor · Philadelphia, PA · Member since 2016 · 5 posts · 0 votes
    9y

    Thanks for the clarification Max, we are working to get this taken care of as soon as possible. I agree it's especially important if we ever need to evict a tenant. 

  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Varun A.

    Unfortunately, it does come down to due diligence. Whenever looking at any property, permits and COs are always things to verify.

    Violations from the buildings departments will show up during title searches since they are public record.

    If someone installed an extra bedroom or enclosed a porch the only way to know if the work was done legally would be to search for permits at the buildings dept., check the final work to the permits and the certificate of completion, and to also compare the current property to what the current CO says.

  • Investor · Philadelphia, PA · Member since 2016 · 5 posts · 0 votes
    9y

    Thanks for getting back to me Christopher, will certainly keep this in mind for future properties. 

  • Kevin PaulkPro Member
    Rental Property Investor · Brooklyn, NY · Member since 2016 · 219 posts · 174 votes
    7y

    @Varun A. Just wanted to check in and see if you were able to get your problem resolved. I am facing the same roadblock.

    Cheers!

    Kevin

  • Kevin MoyerBusiness Member
    Property Manager · Philadelphia, PA · Member since 2019 · 269 posts · 301 votes
    7y

    @Varun A. what ever happened with this? Facing a similar issue and wanted to hear your outcome. Thanks.

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  • Kevin MoyerBusiness Member
    Property Manager · Philadelphia, PA · Member since 2019 · 269 posts · 301 votes
    7y

    @Kevin Paulk Are you still dealing with the same issue? Did you ever resolve?

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