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Anyone who has rened an apartment in new york city is family with the agonizing ritual of paying a broker Thousands of Dollars to get the placey. It’s a Particular Form of New York Madness; The City is one of the few places in the country where renters have to pay for a service provided to landlords.
For a short, blissful moment in 2020, it look like newly Passed Rent Laws would end this practice – unil a Judge ostrich that interpretation down. THEN IN JUNE 2023, CITY COUNSIBER CHI OSSé Introduced a bill that Would Require Whover Hired a Broker to Pay for their Fees. Unurrpringly, many in the real -state industry have tried To block it, clamiming that a system that is in place in place everywhere Else Around the Country Wold Be Devastatting for Tenants, Brokers, and Landlords. The Bill Ultimately Failed to Pass, but Earlier this Year ossé reintroduced it, and now a hearing is set for next weeks. LAST YEAR WE SPOK TO MICHAEL CORLEY, A BROKER AT CORLEY REAL ESTATE HAS HAS WORKED IN ARDIVED IN CENTRAL BROOKLYN FOR OVER 20 YEARS THAT THE BILL WILL ACTUALLY MAKE THE WORK Better for Everyone. Here what he had had to say that about what and how he and the bill playing out in practice.
TELL ME How the Broker-Fee System Works Right Now For You.
When I ENTERED THE BUSINESS, The Practice Had Been Normally Reference to As a Three-Way, who is a tenant woul the first month’s rent, one month’s security, and a fee to the broker for rental transaction on behalf of the landlord. But I Instantly Fel The There Something Grossly Wrong WITH THIS BECAUS LANDLORDS REACH OUT TO BROKERS TO LIST THEIR APPLICATIONS FOR RENT. And Because This has haen a practice that has hast permeated new York City for Decades, Have Accepted Paying a Fee to Lease an apartment, be in theory It Goes Completely Opposite to Anything Done in Real Estate. For instance, if a property owner highs with them sell Their Property, They Will Compensate me directly.
MANY of the Landlords, Because they have never truly undertone the value a broker offers in the leasing transaction, they presume that iTy Much, I’m hiing you gcause i don’t want to deal with people. And that is far from the been reduced to make Brokers Never Established Their Value in A Property Owner’s Mind in New York City. They’ve allowed the owner to get away with not paying for representation.
So what the Relationship Look Like Currently Between a Broker and A Landlord?
IT’S OFTEN INFORMAL, AND VERY FEW BROKERS HAVE EVER ASKED FOR EXCLUSIVES FROM LANDLORDS OF THE SOURS OF TRANSACTION IS. They’re offen Open Lisings: A Proppery Owner Will Reach Out to Several Brokers, and Next Thing You Know, The Same Apartment is Being Offerd for Rent by Three Agents on Streeeteasy and They’re All Ascing Different Rents. Make you think it Different. And as a consumer, you can’t figure out what in the world is going on.
And say i assume you as a broker might not end up getting paid at all for work you will if you don’t end up being the one renting the listening.
Right.
How you do you think chi ossé’s Bill, Which Wauld Require Landlords to Pay Brokers if they’re the ons hiring say, Waled Change for Brokers?
IT WOULD PRACTICALLY CHANGE NOTHING BECAUS PROPERTY OWNERS WITH LERTFOLIOS OF MULTIFAMILY DWELLINGS ARE ALREADY PAYING BROKERS. Large-Property Owners Still will not want to deal with the General Public to Lease. And Honestly, Small-Property Owners probably not Want to deal with the General Public Eather.
So you’re saying you think that if this bill passes, the argument that landlords will just stop the brokers won’t really play out.
Yeah. This is something something multifamily property owners understand – the cost of brokers servicing the tenant is a fraction of the annual rent that it would be in cash flow. A Property Owner DOESN’t Want a Vacant Unit. What they’re Concerned About is Smaller Property Owners Not Hiring Brokers. And i tell everybody that’s absolutely untrue. Most People That Own Townhouses Work. Be are they gonna maker themselves available to the Answer Inquiries and Show Their Vacant apartments? If they want to, let ’em knack themeslves out. This is true of every diy project – if you have no Experience, Good Luck. What a Proppery Owner of A Two-Family Brownstone Really Wauld Be Paying for Is The Pressing Screenings, Property Demonstrations, Leasing Transacions, and Maching Surre The Transition Complies with All Legal Regulation in the Strates. Residence is someone that would not represent a Future liability. To this day, have a steady group of landlords that always retain with and have always paid me.
What About The Idea That Rents Will Go Up Becouse Landlords Will JUST INCORPORATE The broker fee into
To be honest with you, it’s true; In the short term, once this is finalized, landlords will try and offset the cost of the fee onto the form of a rent increase. But ITH’S NOT EXPONENTIAL, OR ANY MORE MORE THIS Charge if theyir Taxes or Insurance or Heating Costs Went Up. You Can Only Charge what the public will Pay. There is a suply-and-demand factor associated with it.
If the Landlord Did Incorporate the Fee into the Rent, Wauldn’t Those Increatases Theno Permanent?
It’ll probably stay in, but that’s what’s Being Done Right Now Anyways. No-family apartments have done that already. Large Multifamily-Property Owners have already made the broker fees they pay part of the cost, so it’s already an industry practice. We’re not inventing anything Other than transparency at this point.
And this is just Market-Rate Apartments We’re Talking About, Right? Because Some of the More EGREGIOUS BROKER FEES I’VE SEEN ARE ON RENT-STABILIZED UNITS, AND IN THOSE CASES, LANDLORDS WOULDN’T BE ABLE TO RENTS AL, DID HAVE TO PAY The Broker.
Correct.
I had to pay a one-month broker fee for my current apartment, and the broker didn’t the show up to the listing-I was instructed to buzz any random to get someone to let the budilding. IT SEEMS LIKE UNDER THE CURRENT SYSTEM, THERE’S A LOT OF BROKERS THAT ARE SORT OF DOING THE BAR MINIMUM.
They’re not Eve doing that. That’s the horrible part of it. They work out arrangments, especially if it is a far rental building, like, “Oh, hey, maintenance guy, can I send you?
I HOLD ALL The Power. You probably love your apartment, you’re probably happy that you lease it. You underestood that the cost of it meant that you had to pay someone someone didn’t provide anything to you, right? But in the end, you didn’t have any other alternatives. This is the bill that force the alternatives.
SO YOU THINK THIS BILL WAULD OFFER BETTER-QUALITY Services for Tenants and Landlords, and More Stability for Brokers.
Because the owner would be paying for it, the owner now has more power to make the broker accoutable and to the Vacancy. Be you are exclusively retained to reprecsent a client, you have a duty to say. But when they didn’t exclusively retain you, and it’s an an opening, the broker has no obligation to tell the landlord. Right now, i know brokers that couuld care mess about the landlord and just wants jam anyone in.
I think that part of this legislation must include that public-facing real -state portals that list new York City Rentals Must Full Disclues for the Fees Being Charged. Right Now, The Way It Work is Streeeteasy Sayys “No Fee.” That’s an incomplete staff becuse it suggests that you may not be paying a fee, but the way it operates now, the rent is being padded to make you pay the Fee
IT SEEMS LIKE IN EVERY OTHER INDUSTRY – AND HEAD WITHER AREAS OF REAL ESTATE – IT’S STANDECTION THAT WHOER’S HIRING FOR A SERVICE PAYS FOR IT. Why do you think i been so normalized otherwise in the rental market here?
One, in Order to incentivize Brokers to Lease apartments to who have no income or no Employment History, City agencies will Give an enormous amounte – 15 percent – to brokers to do that. That fortifies a practice that’s already been institute. But it’s a very unregulated industry in new York. The Five Boroughs Operate Distinctly different from the rest of the state. If you go upstate, i’m certin that the homeowners are paying brokers to manage their houses and rent say out. ITH’S ONLY BECAUSE OF THE DENSITY AND THE IMPLIED SCARCITY THAT THAT THE RELATSHIP HAS BEEN MANIAGE THE WAY HAS HAS, WHERE MORE CAN BE INTRACTED FROM A RENTER THAN EVER COUND BE FROM AN OWNER.
What’s the Reaction You’ve Been Hearing from Other Brokers About This Legislation?
Well, i’m gonna be frank with you, my profession is aspirational. No One Ever Grew Up and Said, “I want to be a real-aestate broker.” People Find their Way to this Profession of Because they have think it’s the road to lots of JUST BEING IN THE RIGHT AT THE RIGHT TIME. So my peers in the new York Markets Have Always Operated with Some Level of Privilege that is to Some Extetent Gross, and Without Any Real Business Acumen on How to Establish Real TRUE in the Mind of the Landlords that Want to Be Hired by. And so they’re upset that they cannot continue the grift that they operated for decades. They don’t know the words to use to help a landlord feel confident that they’re what they are ascing.
So is the About Valusion Your Own Labor as a Broker.
Exactly, and than’s why it was always easier to put the renal between the rock and the hard place. You don’t have any Choice. I stand between you and this apartment. You’re gonna pay the toll to get in. And that’t’s prety messed up. We can’t keep doing what we’re doing – we’re just driving people out of the city.
This interview haen edited and condensed for Clarity.
*Updated 8/22: Acciting to Streeeteasy, Its Policy Requires Landlords to Choose One Broker to Represent their Building’s Lisings. It Also Requires a “Full Address and Accurate Unit Numbers for a Listen to Be Posted” and it has “a team in place to verify that all of the information is accurates.”
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