What is a Temporary Certificate of Occupancy in NYC?

When building a new high-rise condo in New York City, developers strive toward getting a certificate of occupancy. Issued by the NYC Department of Buildings, this document certifies that the critical infrastructure is in working order. 

The road to getting a certificate of occupancy, commonly referred to as a CO, is expensive and lengthy. Plus, developers do not receive a return on investment until buyers can purchase space in their swanky luxury high-rise. But developers can obtain a temporary certificate of occupancy (TCO) or interim certificate of occupancy (ICO) to sell completed units to buyers, even if the building is not completely finished.

Purchasing an apartment with a TCO or ICO designation may mean getting first access to a new high rise, but the purchase requires an extra level of care from buyers. Below we've organized a quick guide on how to navigate purchasing a unit in a building under construction.

Are Certificates of Occupancy required in NYC?

Getting a building erected is no easy feat. It takes years of designing, planning, and construction. And 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," as they are also called, 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. And if a developer is renovating an old building from commercial to residential they can not sell units until a residential CO is issued. 

Why is a Temporary Certificate of Occupancy (TCO)? 

Without a CO, the city can order the premises vacated, creating a problem for potential buyers eyeing the property. A lender will not finance a transaction without proof of a CO, as financiers want peace of mind that the building and its systems are up to code and tenants are secure. That is where the temporary certificate of occupancy and the Interim certificate of occupancy come in for new buildings still being built.

Historically, developers obtained a temporary certificate of occupancy, or TCO, to get the approval needed to move people into the completed floors of a building. Issued by the DOB, a TCO acknowledges that there is work the developer needs to complete the building but certain parts of the structure are safe to occupy. 

How long is a TCO or ICO valid?

The term of a TCO lasts 90 days, after which the sponsor or developer has to renew the TCO to prevent the city from evicting residents. 

Applying for and maintaining a TCO is tedious for large-scale developers, but new legislation called Intro 2033 allows homeowners to move into a building on a floor-by-floor basis through Interim Certificates of Occupancy. 

Developers do not need to renew an ICO, which helps developers obtain financing, lease, and sell space in the building, allowing buyers to start purchasing units on finished floors in a partially completed building. 

The legislation is a boon for high-rise condo developments with multiple dwelling units, but 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? 

It is common for developers to finish residential units on a floor-by-floor basis, setting up the needed infrastructure to have the units habitable. 

A TCO expires after 90 days, and in that time frame, developers have to finish the needed work or reapply for another TCO. An ICO, on the other hand, lasts indefinitely. As sponsors and developers line up final CO inspections, they use a TCO to continue construction and begin moving people into the finished parts of the building. While this is a boon for buyers trying to get early access to new construction or a remodeled building, there are pitfalls to watch out for. 

Buying a unit in a building with a TCO or ICO might mean suffering through construction for a few months. Because while your floor has electrical, plumbing, and safety infrastructure, the other floors still require work. But if you see a TCO on a building that is several years old, you should exercise caution. Make sure you partner with a buyer's agent and real estate attorney experienced in selling units with these designations. 

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

A temporary certificate of occupancy can be a double-edged sword. There are instances where developers or sponsors will sell out all of their units before getting a full certificate of occupancy, and the developer transfers TCO responsibilities to the building. 

Since the building owner can renew the TCO with less hassle, they may never get a full CO. A building that is several years old with a TCO may hide a significant issue, and your broker can connect you with experts to sniff out any potential problems with the unit. 

There are numerous reasons why a building owner would avoid getting a permanent CO, ranging from not wanting to replace outdated infrastructure to hiding a structural issue with the building. While the building may seem habitable, this can lead to situations where a high rise or multi-family goes for years without getting a CO. 

If the owner forgoes any significant renovations, the building can fly under the radar for years. The problem here is the buck gets passed to you, the homeowner. 

How does a TCO alter the home buying process? 

As a buyer in New York City, chances are you may have looked at a new construction condo listing and seen the TCO designation. 

While lenders and banks will finance your transaction, there are some points to consider. For instance, if you are looking at a building and the developer or sponsor lets the certificate lapse, new buyers won't be able to find lenders or insurance providers to transact on the property. Your real estate attorney can help you determine the status of a TCO and how far along it is in the 90-day term. 

People purchasing a unit with a TCO in place are usually the first to move into the building. It is an exciting prospect, as it means you are in a whole new construction or are one of the first owners in a condominium conversion. But the trade-off is that you can't renovate the condo's interior until a final certificate of occupancy. 

The reasoning is that you have to pull a permit to do a remodeling job, and the city will not provide a CO if there are any open permits or violations. New buyers usually have to wait at least a year before they can do any remodeling of their own. 

Like any home purchase in the Big Apple, there are nuances you want to keep in mind, as the wrong decision can sink your homeownership dreams. Make sure you partner with an expert broker so they can guide you through the finer points of buying a unit without a final certificate of occupancy. 

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