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Broker Fees

Postby TenantNet » Tue Mar 19, 2019 11:50 pm

Do I have to pay a broker's fee if I found the apartment?
Brick Underground
Depending on the agreement between a broker and your new landlord, you may still be on the hook for a broker's fee even if you found your NYC apartment yourself.
MARCH 13, 2019 - 12:00PM
by Nikki M. Mascali

QUESTION:

My friend told me an apartment was available in her building and introduced me to her landlord so I could see it. I loved it, and immediately put in an application. Now I’m being told that I have to pay a broker's fee, though I was never even in contact with one. This just seems wrong. Is there anything I can do to avoid it?

ANSWER:

For some renters, working with a broker is beneficial because they help you vet apartments and neighborhoods, and navigate other complicated parts of NYC real estate.

But looking to save money on a broker's fee, which can run between 12 to 15 percent of the annual rent, is completely understandable. It's painful to have an additional cost on top of the thousands of dollars you'll need to shell out before you even set foot into your new NYC apartment—and it would sting even more if you found the place on your own. So what gives? Do you owe a broker's fee if you find the apartment on your own?

“The general rule is a broker earns a commission when he or she produces a lessee, or tenant, who is willing and able to enter into a lease on terms acceptable to the landlord,” says Justin Brasch, a NYC landlord-tenant and leasing attorney.

But if you find an available apartment, and the landlord has a broker, and depending on the contract the broker has with the landlord, you might find yourself on the hook even though you did all the legwork.

“They can create an agreement that says they want a broker’s fee no matter how the apartment is leased,” Brasch says. “They could write that in the brokerage agreement and be clear about what the terms are.”

But wait, there’s more: A written commission agreement between the landlord and broker “is preferable, but it’s not required,” Brasch says. That means that, under the law, licensed real estate brokers and salespeople can have an oral agreement with a landlord.

If that’s the case, you may have a bargaining chip as "they're going to have to prove that in court," Brasch says, which will obviously be much harder to do than something in writing.

“The broker earns the commission when they produce someone who is ready, willing, and able to enter into a lease on terms that’s acceptable to the landlord,” Brasch reiterates. “In this case, they didn’t.”

But speaking from experience—you do run the risk of not landing that new apartment if you decide to fight the broker's fee, especially if there's competition for the apartment. You might find out that the landlord decided to rent to someone else (and that someone else is paying the broker's fee). So you can try to negotiate a cut to the broker's fee while making a good case for yourself as a desirable tenant, but prepare a fallback plan if things don't go your way.
Get thee to a no-fee

If a broker's fee is a deal breaker for you, you can look for a no-fee apartment. There are still plenty of no-fees on the market now in NYC, especially on the higher end of the market, thanks to an oversupply of inventory. Be sure to check out Brick Underground’s list of the eight best websites for finding a no-fee rental apartment to help you avoid that expense.
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Re: Broker Fees

Postby TenantNet » Sat Apr 10, 2021 3:06 pm

https://therealdeal.com/2021/04/09/broker-fee-ban-was-an-error-court-rules/

Broker fee ban an “error,” court rules
Judge called the state’s guidance to ban tenants from paying landlords’ broker fees “an abuse of discretion”
April 09, 2021 05:50 PM
By Erin Hudson

An Albany judge sided with the real estate industry Friday, declaring New York state regulators’ attempt to ban tenants from paying landlords’ broker fees an “error of law.”

The decision comes more than a year after the Department of State issued guidance banning the practice. That guidance offered regulators’ interpretation of the Housing Stability and Tenant Protection Act, which became law in June 2019.

In response, prominent real estate trade groups and residential brokerages filed for a temporary injunction against state regulators and sought to overturn the guidance, which they said wreaked “havoc and confusion” on agents and renters.

After lengthy delays and several postponed hearings, Albany Supreme Court Judge Susan Kushner issued her decision on Friday.

“The guidance was issued in error of law and represents an unlawful intrusion upon the power of the Legislature and constitutes an abuse of discretion,” Kushner wrote in her court order.

In addition to dismissing state regulators’ guidance, the court order bans the DOS from applying or enforcing any rule that would prevent a real estate licensee from receiving payment from a prospective tenant for “bringing about the meeting of the minds” between a landlord and tenant. It also permanently prevents state regulators from imposing any disciplinary action against licensees who do collect broker fees from tenants.

Broker fees in New York City are typically about 15 percent of the annual rent, which when combined with first’s month rent and a security deposit can mean tenants must come up with a five-figure sum just to move in. The broker fee for a Manhattan apartment asking the borough’s median rent of nearly $3,100 would be about $5,580.

While counterintuitive for those who have never rented in the city, it’s common for a renter to pay the broker fee for the landlord’s agent whether or not that agent did any work on the tenant’s behalf. Before the pandemic, the city’s rental market was so notoriously tight that if a tenant refused to pay the broker fee, landlords and their agents often had plenty of other options. (That dynamic has since changed as vacancies across the city skyrocketed and listings touting no broker fee have proliferated.)

The DOS guidance last year shook the real estate industry. Many called it a “death knell” that would jeopardize rental firms and agents’ businesses .

Meanwhile, housing advocates and many New Yorkers applauded the move.

“Fees, historically, just defined who had access to the rental market and who didn’t,” Paulette Soltani, political director at the activist group VOCAL New York, said at the time. “This is just going to allow people to equally be able to find housing and not have to pay these exorbitant fees to get access.”

Though state Sen. Julia Salazar did not voice outright support of regulators, when asked last year whether the guidance was in line with the spirit of the 2019 rent laws, she said “our intent is to eliminate barriers that currently prevent low-income and vulnerable people from obtaining housing.”

Within days of regulators’ guidance being issued, the real estate industry headed to court. The Real Estate Board of New York and the New York State Association of Realtors filed for the injunction, along with brokerages Corcoran Group, Douglas Elliman, Bond New York, Brown Harris Stevens, Sotheby’s International Realty, Bohemia Realty Group, R New York, Kian Realty NYC, Level Group, City Connections and Regina Wierbowski Real Estate.

The injunction was granted and broker fees were back, though the pandemic dealt a swift blow to market activity soon after. Many landlords began forgoing the practice of charging tenants broker fees in order to fill apartments as the city emptied out.

Now, the industry is extolling its ability to charge the broker fee without state regulators stopping them.

“This decision ensures that thousands of hardworking, honest real estate agents across New York state can earn commissions without fear of unwarranted discipline by the Department of State based on its erroneous interpretation of the Housing Stability and Tenant Protection Act,” said REBNY president James Whelan in a statement.

But the industry’s celebration may be premature: The DOS could appeal Friday’s decision. It’s also possible state lawmakers could introduce legislation that explicitly bans the practice of forcing tenants to pay broker commissions.

The judge’s decision deferred to lawmakers and was based on the fact the 2019 rent law made no reference to “broker’s commissions” and did not specifically mention real estate agents.

“Where the term is intentionally included in one section of the Act and omitted in another, it is further evidence that the Legislature must have intended to omit it,” Kushner wrote.

Also see
https://therealdeal.com/2020/02/05/owne ... -guidance/
https://therealdeal.com/2020/02/10/stop ... oker-fees/
The Tenant Network(tm) for Residential Tenants
Information from TenantNet is from experienced non-attorney tenant
activists and is not considered legal advice.

Subscribe to our Twitter Feed @TenantNet
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