Expert: Lack of Permit May Not Always Become an Obstacle to Home Purchase

The absence of a certificate of occupancy does not have to become an insurmountable obstacle in home purchase if it is clear before the transaction exactly what documentation needs to be arranged, explains Angela Virak, a real estate broker at 1Partner Kinnisvara.

Various reasons can lie behind the absence of a certificate of occupancy, and it does not always mean the building has construction problems. In some cases, the owner has already gathered the necessary documents, commissioned audits, and the application is awaiting only a final decision, while in other cases the proceedings may still be in their initial stages and first it must be determined whether the actual condition of the building corresponds to the construction project and the data in the building registry. "For the buyer, these are very different starting points and merely a note that a certificate of occupancy is being prepared or issued does not yet provide sufficient overview. Before deciding, it is worth clarifying whether the application has already been submitted, whether the municipality's remarks have been resolved and necessary work completed, and how far along the process is," explains Angela Virak, a professional real estate broker at 1Partner Kinnisvara with more than 20 years of experience.

As a first step, it is worth determining what kind of procedure is actually necessary for a particular building. In addition to the certificate of occupancy, a simpler certificate of use is also used, and which of these is needed depends, among other things, on the building type, construction date, size, and work carried out. This year, the use of the certificate of use was expanded to include single and two-unit residential buildings, which previously required a certificate of occupancy. "For each sales listing, it is necessary to clarify what requirements apply to the particular building and whether organizing documentation is sufficient by consolidating existing materials or if construction work also needs to be done," says Virak. She adds that for older buildings it is particularly important to investigate the later construction history, as extensions and attics or basements converted for residential use may require special attention.

A home buyer may notice property without a certificate of occupancy precisely because of a more favorable price than usual, since the owner wants to leave the buyer to bear the administrative work and associated costs. Virak emphasizes that such an offer makes sense only if the scope and cost of necessary actions have been clarified before the purchase. Additionally, incomplete documentation can also affect the bank loan available for home purchase, which is why it is worth discussing the property's situation with the bank before taking on binding obligations. "One should not assume that every such situation is resolved with minimal expense and a few applications, but it is equally premature to assume that extensive construction work always awaits. The price difference should be compared with all anticipated costs, including possible construction work and time spent on administration, and room should be left for unexpected expenses," says Virak, and adds that to make an informed decision, it may be necessary to involve a specialist in the construction field in the process.

If documentation is organized during the sale, it must be agreed who will handle the administration, who will bear the costs, and what result must be achieved by the time the sales contract is signed or ownership is transferred. If further actions remain with the buyer, they must have an overview of existing documents, the progress of the proceedings so far, and issues that need to be resolved before deciding. Additionally, all obligations and deadlines should be fixed in writing so that both parties know exactly what they are responsible for. "The absence of a certificate of occupancy does not have to be a reason to give up a suitable home, but before deciding, the buyer must have a substantive overview of what has already been done and what still lies ahead. If a particular home appeals to you but its documentation raises doubts, it is always worth contacting a broker, because a thorough discussion and reviewing documents together provides much more for decision-making than a single brief note in a sales listing," recommends Virak.