Keep an Eye on the C of O

Key document. When a sponsor transfers control of a new development to a co-op or condo board, one thing that should be ready to go is the Certificate of Occupancy (C of O). Issued by the Department of Buildings (DOB), it states a property’s legal use — residential, commercial or mixed — and that it complies with building codes. Without one, new boards can run into trouble.

Ripple effect. Sponsors typically have a temporary certificate — which means a building is safe for occupancy but still has outstanding construction or open permits — when transfers take place. “After that, they’re obligated to finish the work and get the C of O,” says Dean Roberts, a partner at the law firm Norris McLaughlin. But when sponsors drag their feet, there are consequences: Sales take a hit, since banks are often reluctant to lend money to potential buyers at buildings without a C of O. In the worst-case scenario, a sponsor defaults and disappears. “Then it falls on the board to get everything done,” Roberts adds. “They’re the ones left holding the bag.”

Paper trail. A board’s best defense is to ask the sponsor for a list of items that need to be addressed and his time frame for completing the work. “I suggest doing that as soon as there’s owner representation on the board,” says Robert Braverman, a principal at the law firm Braverman Greenspun. Boards should get a formal report from the sponsor’s expediter and can engage their own expediter to cross-check the lists. “Then you have to keep an eye out,” he adds. “If you see that list shrinking every month or so, you’re probably in good shape.”

Nudge, nudge. Even when sponsors are diligent, boards need to bear in mind that getting a C of O takes time. In addition to the backlog caused by COVID-19, “the DOB requirements keep changing, and the goal posts keep moving,” Roberts says. “That’s why boards should be informed and try to work cooperatively with the sponsor to get the C of O issues resolved well before the sponsor closes out. And in this case, there’s a certain amount of nagging that’s appropriate — and required.”