Certificate of Occupancy issue for Philadelphia property

[Varun A.]

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!

[Christopher Phillips]

@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.