If you are thinking of Buying a Multi Family Property in the City of Philadelphia, it’s extremely important that you make sure that the current owner has had their rental license active in the past 3 years. If not, do not move forward with closing until you have the seller show you proof of active rental license with the amount of units specified.
It has been common practice when Buying and Selling RE in Philadelphia to simply have the seller order an “L&I” (from the License and Inspections Department in Philadelphia) certificate and deliver it to the buyer showing that there are no active violations on the property. Another component of this L&I certificate shows the zoning and the most recent use of the property. It’s really common for agents, buyers, sellers, etc to receive this certificate on a duplex they are selling, see that the most recent use is 2 family, and accept it at face value.
While it might be common sense to assume that this certificate is enough to prove zoning and use – it is actually not. In fact, when trying to submit an application for a rental license, there is a portion that asks to provide proof of current use. A logical conclusion would be to submit this document from L&I to prove the use and get a rental license based on this data. But of course the eCLIPSE system does not accept this certificate. Their claim is that the most recent recorded use is listed, but it doesn’t mean it has been continued or used in the past 3 years this way. The city has actually put this in writing – per L&I’s own Code Bulletin on Property Certifications, the certification “only identifies the last approved use in the Zoning record. It does not confirm that a use was legally established… or that a use has not been legally discontinued.” So the L&I cert was never designed to be proof of use – it’s a common misconception, not a workaround.
So what does the city actually accept as proof of legal occupancy? Straight from the Rental License Supplemental Information Form, there are only 3 ways to prove it:
- A Certificate of Occupancy (CO)
- An active/prior Rental License Record – but only if it was issued or renewed within the past 3 years for the same number of units
- A Zoning Permit – but only if it was approved prior to the year 2000, the use has continuously operated since, and you also submit an Affidavit of Continuous Use with it
That’s it. There is no 4th option, and an L&I certificate showing “most recent use” is not on that list. You can see this laid out directly in the city’s own documents:
- Rental License Supplemental Information Form – Section 4(C), “Proof of Legal Occupancy,” spells out the exact same 3 options above.
- Proof of Use and Occupancy for Rental License Information Sheet – this is the flowchart L&I uses internally to determine what documentation is acceptable.
- Get a Rental License (phila.gov)
- Rental License FAQ (phila.gov) – see the “Proof of legal occupancy” section, which addresses this exact scenario of buying a multi-family and getting told the use was never legally established.
Its really important to check this because a lot of Built As Multi Family falls under single family zoning. So even if the building was built at its inception with records as a multi family with separate units, meters, etc – if the rental license hasn’t been active in over 3 years – this use could be considered as not continued and the property could be reverted to a single family home. Imagine buying a duplex and paying duplex money for a property that’s now a single family.
We’ve heard of situations in the industry where a buyer skipped this verification, only for the rental license to not get granted after closing, forcing the new owner to go through zoning to get it approved – which meant additional costs and headaches that could have been avoided entirely. This is exactly why we don’t take the L&I cert at its face value or blindly trust a seller on our deals. If they don’t have the rental license active in the last 3 years – and the property doesn’t have a CO or a pre-2000 Zoning Permit with proven continuous use either – we advise our clients to kiss the property goodbye rather than take on that risk.
We actually just ran into a scenario like this, where a seller was insisting that the property was a duplex, but didn’t want to provide the rental license and came up with every other reason in the book to prove that it was a duplex. And while their case seemed to be pretty strong in the city of Philadelphia, if you don’t have that rental license active in the past three years (or a CO, or a pre-2000 zoning permit with continuous use), then all of the other points don’t matter. After much negotiation and back-and-forth of trying to prove to the Seller side that my client won’t purchase it without their license and that they’re not selling a duplex in good faith, they decided to go out and get the rental license to get this deal closed. And of course, when they went out to get the license, they had pushback from the city and they didn’t issue them duplex use. So if my buyer was convinced by the seller and then decided to get the rental license, this issue would fall onto him.
It’s important to note as well that if you do not have an active rental license in the city of Philadelphia, you also cannot legally collect rent. So if your tenant is giving you issues and stops paying and you don’t have a rental license, then they are 100% in the right to not pay you.
Another note that I would like to add to this is that if the property was clearly built as a duplex, the city might give you pushback for obtaining the rental license, but as the seller I almost always see it being resolved.
One more quick point – this gets even more expensive if you’re buying a triplex or quadplex. If the use needs to be re-registered with the city, they could require you to install a sprinkler system to bring the building up to code, which can cost tens of thousands of dollars or more. That’s a huge number to find out about after you’ve already closed.
Bottom line: when you’re buying a multi-family in Philly, ask for proof in the form of one of the 3 things the city actually accepts – a CO, a rental license active within the last 3 years, or a pre-2000 zoning permit with an affidavit of continuous use. Anything else, including that L&I certificate everyone likes to wave around, is not proof of anything and won’t hold up when it’s time to get the license in your name.