Do Wholesalers need a Certificate of Occupancy when using assignment or double closing contracts in NJ
Wholesaler · Northfield, NJ · Member since 2012 · 22 posts · 2 votes
So Im trying to figure out if I need a CO when wholesaling in New Jersey. I spoke to an attorney today about writing up an assignment contract and he stated that we will need a Certificate of Occupancy for the title company to close. Is this just an attorney thinking like a real estate agent, and not understanding how wholesalers work or do I really need a CO to close in New Jersey?
If I do need them can I push it on to the buyers side contract?
In all my research this is the first time I've heard of a CO being a requirement. Any info would be much appreciated. Thanks
Yes in NJ the requirement for the CO typically falls on the seller. However, you will have contracts (particularly when you're buying 'as is' like with an REO) where the buyer is required to get the CO. That would be you the wholesaler applying for the CO but it would go in the seller's name. As a wholesaler assigning, you shouldn't have a problem because most municipalities won't require the buyer's info. HOWEVER, Newark will give you an problem because they want info on both parties, copy of the contracts and DNA samples - lol. You will likely get stuck here and may have to close with your name down as buyer.
Hey Brandon,
I couldn’t help but notice your intriguing side quest that was beckoning me to learn more about what a CO is and how it pertains to wholesaling. :p
Please be aware that any information I provide is not legal advice and it should not be used as a substitute for competent legal advice from a licensed attorney in your state. So, without further ado, I did a little bit of research and this article I stumbled upon, I hope, will enlighten you on your situation and back my propositions arising from it.
It appears to me that in the case of an assignment of contract you would not need a CO or any other certificates in order to assign a contract; regardless of whether the property you are assigning is located in a municipality that requires such certification(s) because the duty of obtaining any certification(s) fall solely on the seller as stipulated in the law. I believe if you are a wholesaler than you are merely a buyer throughout the transaction and you are simply just assigning your exclusive right to purchase over to another buyer. Hence, acquiring certifications does not apply to you because you are just a buyer of the property NOT the seller of the property.
However, if you are double closing on a property I would say it’s a different ball game. Anyone please correct me if I’m wrong but I am very much under the notion of one being a seller of a property whenever he/she double closes on a property because double closing consists of you being a named individual in the chain of title. Therefore, you are recognized as a former, legal owner of the property, even if it’s only for an extremely short period.
So, if you are, for a brief moment, the legal owner, aka seller, of the property then you will fall under the jurisdiction of such certification laws. As a result, depending on which municipality the property is located in, you will need to acquire whatever certification(s) the municipality deems necessary for you, the seller, to obtain before you can sell the property to any buyer.
Noncompliance of certification(s) will subject you to a fine according to N.J.S.A. 52:27D-198.3. Not to mention, any other penalties which you may receive for violating any other provisions of the law in failure of the proper conveyance of real estate in New Jersey.
As far as your question pushing the certification(s) onto buyers goes; let me reiterate that the law states that the seller bears the responsibility of obtaining certification(s). So, I would assume that you can’t push it onto the buyer in the contract. You’ve got to secure the certification(s) as the seller.
Well, that’s pretty much my two cents of the matter. What’s your take on Brandon’s question BP?
Thanks for commenting Cheng. Thats some very interesting information and I'm glad you shared it. Im also curious to see how other wholesalers navigate around CO's in NJ.
Your question caught my eye b/c as a novice investor, I placed the winning bid on a property that didn't have a CO and boy did I have the hardest time getting financing. Why didn't anyone warn me about COs???
I found a bit of info on Trulia that may help you...
"A Certificate of Occupancy is a requirement in many municipalities. It must be issued in order for the property to be occupied, but title may pass without a CO. To pass title without a resale CO, in a town where one is required, waivers and agreements not to occupy are generally required. Lenders who are funding for a property in NJ may decline to fund until the CO is issued. Most closings are settled by attorneys in NJ, and will not settle without the CO at the closing table. It is the sellers responsibility to obtain the CO. Fire inspections are mandatory by state law for occupancy change, including rentals. In some towns, (most), the fire inspector is a different person than the building inspector, meaning that two inspection appts are required. And, no they don’t coordinate their schedules, they usually work different days. It’s called efficiency.
"There are, of course, exceptions......... There are properties for sale that are offered “as is, CO responsibility of the buyer.” The buyer must make sure the lender will fund on a conditional CO or no CO. The town will agree to title transfer in these cases, but the buyer must sign off that they will not occupy the property until a CO is issued.
Check out the link for more info
http://www.trulia.com/voices/Home_Selling/What_is_a_CO_Is_it_some_sort_of_buiding_code_com-9361
Yes in NJ the requirement for the CO typically falls on the seller. However, you will have contracts (particularly when you're buying 'as is' like with an REO) where the buyer is required to get the CO. That would be you the wholesaler applying for the CO but it would go in the seller's name. As a wholesaler assigning, you shouldn't have a problem because most municipalities won't require the buyer's info. HOWEVER, Newark will give you an problem because they want info on both parties, copy of the contracts and DNA samples - lol. You will likely get stuck here and may have to close with your name down as buyer.