An Occupation Certificate is a mandatory part of the DA and CDC approval processes. It should be sought to ensure the health and safety of a building and its occupants, but beyond that, there are many other legal and financial reasons to obtain an Occupation Certificate before moving into or using a new building.
What is an Occupation Certificate?
An Occupation Certificate (OC) is required as the final step to obtaining a Development Application (DA) or Complying Development Certificate (CDC). After you’ve been issued a Construction Certificate or Development Consent, a Principal Certifying Authority (PCA), such as your local council or a licensed independent certifier, checks that various regulatory standards are met before authorising the occupation or use of a new building or building addition. This authorisation is known as the Occupation Certificate.
Section 6.9 of the Environmental Planning and Assessment Act 1979 (EP&A Act) specifies the circumstances in which an Occupation Certificate is required. The majority of DAs and CDCs will not be approved without an Occupation Certificate, however there are a handful of circumstances in which an Occupation Certificate is not required. If the proposed development is exempt, does not require consent, or is by or on behalf of the Crown, the building can be inhabited or used without an Occupation Certificate.
Ten (10) reasons why an Occupation Certificate is required?
- Health & Safety
Above everything, an Occupation Certificate should be sought as a means to ensure the health and safety of a building’s occupants. If a building is found to be unfit for its purpose, this can not only be extremely dangerous, but can open a can of worms in the future. If issues arise, those involved in the building process may be implicated, so it is in everybody’s best interest to obtain an Occupation Certificate.
- Loan & Property Valuation
Construction loans and property valuations can be withheld or hindered if an Occupation Certificate has yet to have been issued. The final drawdown on a construction loan will not be paid until an Occupation Certificate is presented, and when it comes to valuing your property post-completion, without an Occupation Certificate, the property is undervalued as a construction site, even if it is in liveable condition.
- Home Building Compensation Fund
The sooner you obtain an Occupation Certificate, the sooner you can relieve yourself from the defects liability period. For any defects that arise during the 6 years after an Occupation Certificate has been issued, the relevant contractor is responsible for its rectification. Further, if you intend to take on a new project of similar or greater value than the last without having been issued an Occupation Certificate, you may not be granted cover under the Home Building Compensation Fund (HBCF).
- Unauthorised Work
Depending on the scale of works, additions and alterations to existing properties may require approval from your local council or a certifier. If it is found that unauthorised works are being carried out, your local council has the authority to issue a hefty fine and demand its demolition at the owner’s expense. This will hinder your ability to obtain an Occupation Certificate, and hence, the legality of use of the property. Fortunately, there are other avenues that can be sought to prevent this from happening. A Special Certificate called a Building Information Certificate can be applied for that will help buy time and protect the owner from legal action for 7 years. This does not, however, guarantee the issue of an Occupation Certificate.
- Property Sale
One of the easiest ways to broaden your pool of potential buyers is to present an Occupation Certificate upon sale of your development. By guaranteeing a safe and healthy building, you will attract more interest and enable the purchaser to occupy the property immediately. Increased buyer confidence makes the property more hotly contested, which is likely to generate a greater return for the vendor. For strata units purchased off the plan and land and house packages, the Conveyancing (Sale of Land) Regulation 2017 stipulates that an Occupation Certificate is a prerequisite of sale. If there are no extenuating circumstances and the vendor does not present an Occupation Certificate to the purchaser, you may be in breach of the contract for sale of land.
For new developments like multi-dwellings, an Occupation Certificate is required before the land can be subdivided into two or more titles. Subdivision is a common investment strategy as it gives you the opportunity to generate wealth from renting and/or selling several blocks of land. To ensure your development efforts and resources are not wasted, and that your investment goals are met, it is necessary to apply for an Occupation Certificate prior to commencing the subdivision process.
- Council Penalties
It is an offence to occupy a building without an Occupation Certificate. If it is found that the homeowner or tenants are living in or utilising the property, your local council may issue fines and/or a Development Control Order to cease its use. A loss of good tenants also means a loss in rental income, and a failure to abide by a stop use order can carry further monetary penalties and a possible criminal record.
- Government Funding & Licencing
Commercial buildings or buildings that accommodate heavily regulated industries may sometimes be eligible for government grants and programs. Without an Occupation Certificate, it is likely that this funding will not be approved, even if your business meets the rest of the criteria. The absence of an Occupation Certificate within an operational business can also have legal ramifications as the business needs to be licenced to practise on that premises. As it poses a risk to health and safety, the business may too be temporarily shut down.
- Goodwill and Existing Use Rights
If you run a successful business that is operating out of an unauthorised building, you risk damaging the goodwill and overall value of the business if you decide to sell it in the future. You will also not be protected by existing use rights if your local council decides to rezone the area, which means that if your business does not fit within the range of permissible uses, you will be evicted with no possible recourse.
- Insurance Claims
When taking out construction insurance, it’s important to do so within the early stages of a development. If the projects’ construction timeline extends beyond 2 years, most insurance companies will cease building insurance cover. Additionally, if the development has not been issued an Occupation Certificate prior to an insurance claim, it will immediately be void. An insurance policy without an Occupation Certificate is effectively useless.
Beyond the many reasons to obtain an Occupation Certificate, it is against the law to occupy or use a building without first having a PCA authorise. You can apply for an Occupation Certificate online via the NSW Planning Portal:
- Register for an NSW Planning Portal account to start your application.
- Log in to complete the online application form.
Alternatively, you can contact ES Design for any further concerns you may have around the DA or CDC approval processes.