I rented an apartment in 2019 from Zara Realty in Queens, I paid two months security over $4000.00, plus the first and second month rent, and on top of that they demanded direct debit from my checking account, also the broker office is just next to the management office in the lobby, what a rip off. Thank you New York.
14
The devil is in the details. In a city where the rent is already "too damn high" this will only serve to make it spike more. I've always thought that tenants should have the option of paying the fee or have it rolled into their rent. If you're going to live in an apartment for a year or less then roll it in and pay the higher rent - it will come out in the wash. If your intention is more long term do you really want that higher base rent for years??? The DOS rulings that came out last year have the facade of protecting tenants, but being in the field I can attest that they've actually hurt them. I'm seeing vacated rent stabilized units not getting what was once normal updates since they are no longer cost effective to the landlord. In a year or two these apartments will become more and more blighted. I'm also seeing prospective tenants who are repairing their credit or foreigners with no U.S. credit at all being turned down for apartments they used to be able to get by paying a few months on the back end of the lease.
Brokers aren't greedy and up in arms about commission loss - we get paid either way if we place you in an apartment. I'm upset that these new laws are going to raise rents significantly for free market apartments while turning stabilized buildings into deteriorating tenements.
3
As a landlord I have sympathized with my tenants. I keep my rents reasonable. If i get a terrific tenant i don't increase rent for 2 to 3 years to help them recoup the fees.
When a tenant has paid the broker fee the are invested in the apartment and tend to stay longer. Now I can expect faster turnovers which means year over year broker fees.
I will now have to factor the fee into the rent. Possibly a lower set fee from the broker which could be split between tenant and landlord would have been a wiser well thought out plan.
Diblasio rules by the seat of his pants since that's closer to his brain
1
How does this relate to Bill DeBlasio ? This is a law promulgated by Albany. Endorsed by Governor Cuomo. Enforced by NY Dept of State. The NYC Mayor does not have fingerprints on this.
13
I think is a good thing. I've long thought that broker fees serve as a barrier for people moving to the NY metro area and simply serve to line the pockets of the real estate industry. While this will certainly impact their livelihoods as sad as that may be, it is more importantly creating a more level playing field when it comes to apartment rentals in NYC. I think this is especially valid given that apartments rent so quickly in NY that paying up to 15% just to see an apartment that has been on the market for a matter of days is ridiculous. In no way does a broker "earn" that much even considering marketing and time.
7
@Nick R Actually Nick it does not. If my client wants a $15,000 apartment and wants to hire me to find that product for him , how does that impact your life? Can you afford a $15,000 a month apartment? I'm assuming you cannot. Why do I have to suffer. I'm not at your job dictating what your level of service is worth to your clients why are you and legislators dictating what I can and cannot make from my work? I actually only charge those types of fees for certain neighborhoods anyway. Not every neighborhood and demographic is the same. Some can afford the 15% fee some cannot. Most agents adjust according to neighborhood.
3
It's good to know that the brokers who conveniently "left the keys at the office" when I wanted to look at a home may be out of a job. I wanted to purchase in my rapidly gentrifying neighborhood. In your own way you tried to deny me that option. You wer wrong to leave the keys at the office. I kept looking and made my purchase in my rapidly changing neighborhood anyway.
5
@rere
Sorry you had that experience Rene. You were dealing with an agent that does not respect people in general. I treat my clients with the utmost respect and honesty.
1
Does this really make a difference? If the brokers were adding no value, why wouldn’t the landlords acquire tenants directly and claim all of the money themselves?
What is needed is a greater supply of housing to drive rents down. Whatever regulation is passed, sooner or later the market will win out.
1
@Peter
That is basic economics Peter. Most people do not understand that (it is the entire concept behind Medicare For All--the more people join (more properties on the market) the lower the price.
Not sure why how I'm paid impacts a renter if they can only afford 2,500 but I'm listing a $3,500 apartment that they wouldn't be able to afford in the first place. How is this legislation fair for all? We have some real idiots running government.
Unnecessary brokers and agents raise prices to consumers in multiple industries. The US health care system is so costly in part because of the brokers between drug/device manufacturers and hospitals and doctors.
9
This sounds Constitutionally illegal. Why should brokers be singled out and prohibited from earning a living by charging for the services they provide? If going into the transaction, prospective tenants are made aware that they will be liable for brokers fees and they're willing to pay it, what's wrong with that? If you are against paying brokerage fees don't use a broker.
Brokers, take the State and our whining nitwit governor to court to have this legislation stayed and then thrown out.
4
This move will add tremendous liquidity to the rental market. Tenants will not be trapped is less than ideal apartments/landlords and be more able to move if they need to.
My inclination is to think the accelerated liquidity will cause downward pressure on rents to the point that there will be no room for landlords to amortize the brokers' fees into the monthly rent.
It's about time!
Good riddance, parasites!
11
Neither the state nor the article nor commenters have touched on an angle I submit. Recently there has been a huge controversy surrounding discrimination in housing on Long Island by how the real estate agents filter and show properties. It was an undercover investigation by Newsday. The NY Dept of State and public officials really took it seriously. In the past, when rental agents were working hard for big time Landlords the fact that the independent agent could discriminate would keep the deep-pocketed Landlord far enough away from any direct complaints of bias and illegal denial of opportunity. The LL could say what he wanted and did not want and preserve some plausible deniability having a broker in between. That buffer suffers now. Remember the story of Trump and housing fifty years ago. No broker in between got Fred and Don in hot water.
11
My concern with these laws being passed in general is that they are aimed at a very small subset of landlords and specifically in NYC. Why are these being passed Statewide?
There are two sides to every story and in a smaller city in Central NY property management companies are really being adversely affected by these laws.
Why shouldn’t these laws be statewide ? Agency laws are state legislated by our elected Congress in Albany. Laws and rules are enforced by NYS Dept. of State. Agents are state licensed. All residents of New York State who rent, lease, sell or buy a home deserve equal protection under the Excelsior flag of the Empire State.
8
I've been a realtor in NY for over 9 years now and my clients, for the most part, are young couples, professionals and international students. My professional clients are professors, doctors, entertainment brokers, etc. that actually don't have time to search and setup appointments because they are busy. So it is my job to seek out accommodations that suite their personal and professional needs. My international students have different requests because they are totally green on how to navigate the rental process in NY and are looking for guidance on neighborhoods, subways, banking, gyms etc. My young couples are looking for affordable living opportunities that will allow them to invest in property once they've secured funds to purchase. All in all, every client has different needs from a broker and cannot be put in one bag which legislators seem not to understand. Not everyone works with the same pocket book or has the same needs and desires. If renters do not want to pay a broker to find an apartment that is their right there are no fee options for them. But the government's interference on my ability to feed my family and secure my financial future in my chosen field is wrong, intrusive, and negligent. They fail to realize everyone is not working from the same economical platform and laws should reflect the diversity of all it constituents so everyone wins. I hate to say it but this is lazy legislation in full display.
5
In each case you describe, you are fully entitled to make explicit, formal arrangement with the busy professionals, the naive immigrants and the economizing young couples to pay you. It is NOT prohibited. It simply must be formalized just the same way if you act as a buyer’s agent in a residential transaction rather than an agent of the listing seller.
18
@Suburban Cowboy
My company, which is a top agency in NY, puts everything in writing beforehand. We do not mislead renters or landlords just to make a buck. I do have a problem with anyone taking money out of my pocket. I don't come to your jobs and dictate to you what your work is worth and how much you should get paid. I feel like lawmakers are not equipped to create legislation that is best for all its constituents. Its always all or nothing with them.
1
Trump now has another reason to be angry at his native state. For decades rental brokers made it a priority to block non-white renters from selected properties, for instance the many outer boroughs rental buildings built by Fred Trump and supervised in his early days by young Don.
4
It’s truly remarkable how stupid and shortsighted the government can be. By taking away the ability to be compensated for their work, brokers will no longer:
Share with potential renters information about apartments that may be coming on the market soon,
Assist tenants in fixing (or correcting) credit scores
Advise tenants on market conditions such as recent prices and inventory levels
Educate tenants as to the process
Act as an intermediary between two parties that have conflicting goals
Those who know nothing of the real estate business are touting the new law as a great thing but they will soon learn why so many rightly fear government involvement in matters they know nothing about.
8
@Matt Williams
Addressing each of your points other than the first -
Share with potential renters information about apartments that may be coming on the market soon - nothing to keep LL from listing in advance on websites
Advise tenants on market conditions such as recent prices and inventory levels - publicly available information
Educate tenants as to the process - also publicly available
Act as an intermediary between two parties that have conflicting goals - Agent is incentivized to maximize rent as it increases income which is directly conflicts with the needs of the person paying them. LLs are still free to hire brokers and raise rents in which case incentives are properly aligned (like they have always been in sales)
8
@Matt Williams
Thank you Matt. Well said.
A lot of us in the industry take our jobs very serious and treat our clients as if they are our family (maintain long term relationships-long term clients).
These legislators don't have a clue.
1
@Matt Williams never had a broker do any of those things.
6
The most recent NY Times article "Which Apartment Did They Chose?", the renter paid a $7,000 broker's fee. That number was calculated by a percentage of the total yearly rent. Outrageous!
I'd like to see the tax returns of these brokers. It is a gouge that needed to be stopped. So what if the brokers can't make a living without this heinous practice. It should be illegal. The real estate brokers should have regulated themselves and they wouldn't be in such a fix.
17
The norm that was in effect in New York City for the renters of apartments to pay the real estate commission was and is a gimmick and unfair to the renters. real estate agents who show apartments represent the landlord and not the renter, they have a fiduciary responsibility to the landlord and not the renter. When there are a sale and purchase of property and the agent represents the seller, the agent gets the commission from the seller, because the agent is representing the seller. only the agents who represent the buyers will get their commission from the buyer. why the same rule is not practiced in the rental market? because the landlords have political power and the sole seller of a property does not have that power. the reason the agents were able to demand up to 15% of the yearly rent as the commission is just because they can. The landlord owned the property and the agent represents the landlord, therefore it is the obligation of the landlord to pay. I bet they will not pay anything close to the amount that the renters are forced to pay.
8
@Harry
Actually Harry broker fees are not one price across the board. Fees are based on neighborhoods, affordability, etc. Some landlords already pay the broker fee hence the "no fee" apt phenomenon. This is what the legislation fails to acknowledge. Additionally, brokers pay for pictures, floor plans, a broker cut to the brokerage house, gas (or subway or Lyft fare) to get from appointment to appointment. No one ever asks what money we have to pay to be in business. We work on commission only and do not have salaries. So that $5,000 apartment when looking at the fees breaks down like this:
$5,000 apartment on the Upper West Side=
$9,000 commission @ 15%
$2,700 (@ 30% -depending on the cut with the firm) of the $9,000 goes directly to the brokerage firm
and another $200.00 is subtracted for admin and legal=$9000-$2,900=
$6,100 after payout to the brokerage firm
We pay our own taxes as well:
$6,100-$1,830 goes to the tax man (or 30%)
=$4270
We pay all upfront costs to do business which includes:
$5 a day to advertise on Streeteasy (one month) =$150.00
photo costs: $250
floor plans: $100
gas/subway lyft: $50
cleaning costs : $100
$4,270-$560.00 =$3,710 net income from a $9,000 commission check.
Agents don't just show apartments, we also:
make calls to brokers, follow up with potential renters, analyzing credit, email/advertise to other brokers, drawing up leases and disclosures, manage the rental process and field interested parties calls and emails.
3
So the broker's fee will just be called something else, or will be footed by the lessee and then folded into some new cost passed on to the lessor. The ignorance of economics in New York is amadaun-level.
3
What “new cost” will it be shoveled into ? I doubt it. Sure, a Landlord can attempt to raise his rental rate but that makes his property less competitive.
2
How many brokers can the NYC market support is the real question. I don't understand how a city with so little housing stock can have so many brokers; most likely, there are too many brokers.
Brokers do not provide a service to renters; if brokers were working for renters, the brokers would insist that the housing stock be realistically priced and better maintained. Instead, brokers defend landlords' shoddy offerings and don't insist upon reasonable rents. Broker's don't negotiate for tenants.
Hopefully, the breaking up of the brokers bilking desperate renters and the increased taxes on brownstones will encourage better use of land and increased housing density by knocking down ancient housing stock. It is that or move businesses to central and western New York where housing stock is plentiful.
9
There’s a name for this. It’s called disintermediation... When the middleman is removed then transaction costs are reduced.
Who reaps the benefit depends on relative market power. If the supply of rental accommodation is constrained then the landlords will win, otherwise tenants may share in the gains.
7
10 to 15% broker fee is ridiculous considering that just 10 years ago, rents were more than 50% less than they are today. And the work that the broker does has been greatly reduced by the technology available to market and rent the property. Sorry real estate agents, but I really hope your numbers decrease and that the pay you receive per rental goes down. Does that sound too angry and mean? I guess I feel burned by the experiences I have had in this real estate crazy town.
26
"Most significantly Mr. Martin said, the changes could lead thousands of real estate brokers to lose their jobs."
GOOD. If literally all they're doing is collecting money for showing me an apartment that a landlord doesn't want to show me, they shouldn't be getting MY money. If anyone's, it should be the money of the person having the service provided - the landlord.
For decades I've been mystified by how stupid our (and no one else's) system for brokers fees is.
33
It's infuriating to me that the New York Times continues with these “fair and balanced” quotes from people like Jay Martin, without context. There's a difference between a qualified professional with a bias and a biased, self-interested actor masquerading as an industry expert. That Jay Martin is employed by the credible-sounding Community Housing Improvement Program, an association with a deliberately ambiguous sounding name and a confused mission statement that implies it serves rent-stabilized tenants, while advocating for landlord's directly oppositional interests. Its founder, William Moses, was a real estate mogul who owned and managed over 30 properties and made it his life's mission to destroy rent control. The average landlord makes more than the average resident of NYC, and way more than a full-time minimum wage worker, and that’s in purely passive income. What do these people think they’re owed?
There are plenty of qualified professionals--urban studies professors, real estate analysts, consultants, long-time brokers--who you could source for a quote, without inciting fear among brokers using quotes sourced from landlords masquerading as analysts.
21
I am a small time owner of a couple of rental neighborhood "affordable " properties in Chicago for many years
1) we have brokers who typically charge 1 month rent paid by the owner to get tenants in to my units . There is no exclusive listing , it is off their marketing and ads
2) I Can show my places myself and save the 1 month fee
3) I can't ask for more or less rent then the broker listed my apt for
4) Broker knows if a get a prospect off my rental sign . I got the deal and he didnt . It is who ever hussle's for the business gets it.
5) The market is turning broker as they have more marketing horsepower then me and it is easier for a renter just to call and broker and see multiple places with a broker .
6) Brokers cant get any more rent to "pay for their commision" actually i find them looking for me to lower the monthly rent , just to do the deal and they make a lil less and i make whole lot less
7) The only time i been able to raise the rent in a big way was when the real estate taxes went up big all over Chicago and ALL landlords had to cover this increase . I made less but charged more and renters paid more and the City got the $$
4
You explained it perfectly. Balanced professional arena where skills and hustle win the day.
3
I managed a small apartment building in Brooklyn for 15 years and was a renter in NYC generally for 25. So I've paid brokers, I've used brokers, and I've rented apartments to tenants myself (for most of those 15 years). Some thoughts:
Brokers say that landlords will just pass on the expense through higher rent. This has a sliver of truth but is mostly nonsense. What landlords will do is what all business owners do, which is minimize costs. They will figure out the most efficient way to find and screen tenants, which is absolutely NOT going to be just paying the fees of existing rental brokers for doing what they have always done. Brokers understand this, which is why panic is setting in as they see their business–which as previously arranged was basically a protected payola scheme–evaporate.
The old arrangement composed what economists like to call a principle-agent problem. Because the landlord was getting the service for free its actual cost from a market standpoint wasn't really known. Tenants payed because they had no choice, creating an entire industry the color of dirty dishwater. I say good riddance.
Small landlords will turn to a growing landscape of web-based information services, augmented with some inexpensive labor or some of their own time, and they will find that they get a better tenant for their troubles. Large broker companies will spin off services to large landlords directly, at drastically reduces rates. And the market will adjust.
49
Great regulations the landlords already started increasing their prices they will have to compensate the landlord's broker.
On the other hand, if you need a broker to find a rental either you or the landlord will compensate the broker. So the landlord will have to increase the prices even more. This is just pushing the rental prices even higher.
4
@TAPPAN ZEE BRIDGE Just checked with some of the heavy-hitting brokers they immediately increased their listings with a minimum of 1-month broker's fee.
Isn't that great!? Who is the winner here!?
Seems like a move in the right direction as those middlemen taking too much of a cut, as it is clear when one compares with cities elsewhere. Other cities and states have similar situations and also risks. However, one approach, if the aim is to make housing more affordable and reduce homelessness, would be to give incentives/breaks to those that only have a home, the one where they live in. Second, third, fourth properties should be taxed with increasing rates. This should discourage the use of money to buy rental properties because this makes the market more competitive and workers cannot afford to outbid. The alternative, as it has been shown, is increased homeless populations. Such a move would recognize we live in a country where many people making minimum wage or close to it, without insurance, and reduce the disparity between the richest and the poorest.
1
Can someone explain why NYC has these exorbitant broker fees? Virtually every other rental market in the country operates without them just fine.
Every place I've been, the landlords hire property managers and they typically are paid 5-10% (and I think 10 is on the high side) of monthly rent. Why wouldn't that model work in NYC?
10
@Craig Karsch
Those places are not NY
Brokerage jobs are the last refuge of the otherwise unskilled.
13
I would add. Have you ever met someone in high school or college say ?: I want to get an education , a college degree and then become a Real Estate Agent ? Ans: Rarely. From my observation, folks who enter the real estate sales and rental business have been flushed out of the career they had due to restructuring or incompetence or age. Or in the case of the suburbs many are housewives who have a network of contacts and a nice SUV to drive to listings and showings as a side gig. Just look at the photo in the local newspaper of the office agent roster.
4
@Suburban Cowboy
Really! Do you know how to put a feasibility study together for developers? Can you do an excel analysis helping to draw out ROI on potential investments? Do you know building construction? Do you know how to navigate through the Department of Building? Have you ever done site layouts. Unit planning? Designing?
I could go on and on. Many universities have excellent RE programs Georgetown, The George Washington University, NYU, Fordham, MIT, Harvard, and Cornell. Real Estate is the basis for all economies.
1
This hurts small landlords and real estate agents. It is also a restriction of free trade and socialist in its intent. Beware they are coming for you next! This will solve problem for the 93,000 homeless- what a joke!
7
I would say the 15 percent is for chumps who just moseyed in from outta town. The going rate is more like one month’s rent which is approximately 8 percent.
3
This article is misleading and even inaccurate, as the authors do not understand that there are a landlord's agent and a tenant's agent, collectively termed "brokers" in this article.
Indeed, the DoS guidance only discuss a "landlord's agent". It is a landlord's agent who is prohibited by this guidance from receiving a broker fee from tenants. Besides, there are many tenant's agents, who work for only tenants and are paid by either landlords (in the form of concession) or tenants.
3
Listen people: "clah-swoomp"
Did you hear it? Well, sports fans, let me explain what just happened, dear people. That was the chest thudding reverberations of the ball being hit, ever so tenderly, yet, very precisely back toward the crosshairs spot, between the eyes, as it were, on the unsuspecting, newly shocked, 'Landlords of New York'.
It is a catchall moment, if your inclined to see a spectacular, once in a lifetime moment.
I'd be on the sidewalks of New York City, with soft bagel in hand and strong coffee; early in the setting of the sun, to experience this awe inspiring, "David-Attenbourough-explanation of a scene."
2
Landlords outsourced their jobs to brokers, used their power as property owners in a city with short supply to outsource the cost of that service to tenants, and in turn, did not care how much the brokers gauged their tenants. If they had responsibly compensated the brokers themselves utilizing their industry knowledge and leverage to negotiate, this problem never would have existed. They chose the easy route and let the industry decline into a state of dysfunction to make their jobs easier. It's no different than beverage companies switching to aluminum cans and passing the costs of recycling to municipalities.
Unfortunately, this legislation is not the solution to the problem. The costs of a broker will continue to exist at the current rates for which they have precedent, only now the costs will be hidden to tenants. Landlords will bake them into market-rate rents, increasing the very concept of market rate, and they will be billed monthly, in perpetuity, even to tenants who stay in their apartments long term or who choose to live in less desirable areas that used to cover broker fees.
6
This turns the table. Perhaps not 180 degrees because being an agent for the Landlord and/or being an agent for the prospective renter is still permitted. But far past 90 degrees because the game is exposed and adjusted by the ruling.
3
This is much ado about nothing - the brokers will get their fee and the renters will pay it, the money will go from the renter to landlord to broker.
2
Only from the Landlords who don’t want to keep all or part of that fee. It puts the broker on the fringe of the equation, so it does change the dynamic and the payout.
4
New York can be like every other state, where the landlord pays real estate brokerage fees. Yes of course the fees are passed on to renters in one way or another, but landlords have a lot more leverage to keep fees down than renters ever had.
Small landlords who don't want to pay 15 percent can use Craigslist and show the properties themselves. Large landlords can have their own offices handle showings. That leverage means landlords can negotiate more reasonable fees, as they do in other cities.
1 month's rent is common in Philadelphia, which works out to 8 percent. And a large number of apartments are marketed by the landlords themselves without a need for agents. That's the free market at work.
It will certainly put a dent in the agents' income but it won't mean the end of the industry -- maybe the number of agents will shrink by a couple of thousand, but probably New York can survive that.
14
Good , they should go out of business , that applies to brokerage firms and brokers that have scammed enormous amounts of money from hard working New Yorkers . When I first arrived in New York there were no brokers ; buildings had signs by the door : Apartments available inquire within . By the 80's they were in business , with the 15% fee .
9
demand rose. brokers filled the need for higher demand to see apartments from an increasing population.
this doesn't effect me, but thousand of honest hard working new yorkers just lost their jobs.
2
@newyorker Very doubtful , and they were not honest charging what they did ; a racket .
7
@newyorker The problem is that the system incentivizes dishonest behavior and rewards previously honest people to be dishonest.
2
As a licensed real estate broker in New York City, this law couldn’t have come fast enough. I never understood why I would show an apartment for days or weeks on end to various potential renters, but in the end the burden of all of that was thrown upon the tenant that wanted the apartment with a ridiculous fee that covered the time I spent with all of those other people. The idea was crazy to me, but it “was just how it is” so nothing changed.
If I’m hired to sell an apartment, the owner pays me. What this article and the industry won’t admit is that the broker’s fee is there to discriminate people that have money in the bank to cover a fee and those that don’t. The disparate impact amongst the poorer tenants would be telling if the NYU School of Real Estate ever looked into it, but I’d bet the equity in your tax-abated condo in Williamsburg that they won’t. If I sell a property, the owner collects and is finished...over and out. If I rent the unit, they are legally tied to the tenant in a city where it is hard to get a tenant out if things turn bad. So, brokerages are there to put up a pile of paperwork, credit reporting, and then a huge fee via certified check before the lease is even sent over to the landlord for consideration. The process is the financial bigotry. Agents will always be the middlemen and non-stabilized units will surely go up in price because landlords are not in the business of showing property. They are in the business of renting it...
20
bkr:I have multiple applications I'm sorry.
tenant: can I offer a higher price?
bkr: sure
tenant: can I offer to pay your fee so the extra amount isn't locked into my renewal lease?
bkr: sorry. new york law requires you pay the higher lease price and pay it again next year.
1
So the landlord would have to hide that sunk cost into the rent since a renter paying ANY broker fee is illegal so even the landlord could not state the renter is paying it through a rent increase. But since there is a rent cap for rent increase. My guess is it is going to end up forcing brokers to lower their fees to be in line with what the landlord could theoretical pass on to the tenant.
3
‘“They are just on this high,” Mr. Benaim said, “of just punishing real estate and those in the business.”’
How does he know that? Why print this? You don’t need it.
5
Always amazed how brokers can say just about anything and believe its true. True to form: "Brokers warned that the new rules would simply increase what tenants pay in monthly rent, since many landlords will likely pass on the cost of a broker’s fee to their residents in higher rent."
2
@SJG Sounds highly plausible to me. Do you really think in a city with massive demand for apartments (relative to supply) owners are going to absorb the costs of reimbursing brokers?
If anything, I suspect many brokers may not be bothered by this rules change. In a previous life I worked in the apartment brokerage business, and I can tell you it makes many brokers' lives easier to be able to market a unit as "no fee."
Mind you, this new regulation might still be of some help to less affluent renters, in that it should reduce the total up-front "move in money" required to secure a rental in NYC. But sure, the compensation to the broker will simply be amortized over the course of the lease term, in the form of a higher monthly rent.
1
I Mac commercial real estate agent. And I think that this is great for the city. Cuts down a huge barrier to moving into the apartment. Will help curb the exodus.
1
About time! I have rented in Providence and Los Angeles, and NYC was the only place to brutalize the renter. The market here will adjust, because the landlords will not stand for the INSANE fees the brokers have been charging. I essentially paid $4500 for someone to run my credit last September!
14
I just feel terrible for all of those landlords out there raking in tens or hundreds of thousands of dollars per month and their brokers collecting 2 months' rent for having an open house and posting some photos online.
6
This is such a relief. It’s always been a crooked practice to charge tenants for a service being provided to the landlord. I never understood why I had to pay over $3200 to a broker for 10 minutes of their time and the privilege of renting an apartment. It's like charging a customer $100 to try on and buy a $10 t-shirt.
14
As a broker i predict the results of this new ruling:
1. higher rents
2. more discrimination based on profiling (small time landlords are really racists and know nothing or care about fair housing.
3. more owners of stabilized buildings having much less incentive to fix their properties.
4. less choice for tenants as the new limit of one month rent paid by the owner to his/her agent will not be enough for co-broking and the sharing of listings by agents will go by the wayside.
5. the further crash of the small multi-family market where stabilized properties that are losing so much will never find a buyer .
10
@R
Exactly. Most of the anti -broker comments here fail to bring up those points.
5
How about lower brokerage fees more in line with what brokers actually DO?
10
@R
Thanks for the fear mongering, but no thanks.
This ruling will add massive liquidity to the market by allowing tenants to move more freely when apartments/landlords are not satisfactory.
This liquidity will create significant downward pressure on rents to the point that landlords will need to scramble to keep costs down, precluding the option of passing on a corrupt fees to tenants. Landlords will also be forced to maintain attractive properties and maintain respectable reputations. There is a glut of new real estate on the market. 300 people are exiting the city EVERY day:
https://www.forbes.com/sites/jackkelly/2019/09/05/new-yorkers-are-leaving-the-city-in-droves-heres-why-theyre-moving-and-where-theyre-going/#11fa0a2941ac
This is an equation for a broker extinction... FINALLY!
2
Brokers - despite their pleas for the 'poor and socioeconomically disadvantaged' (please, don't make me LOL too hard) - are a parasite feeding off of real estate. Poll 100 people who've had to use brokers, and 99 of them will say they're the lowest of the low, that they make the experience FAR more stressful than it needs to be. Sure, occasionally there's a knowledgeable broker out there who might take more than five minutes with you, but that's the 1 out of 100.
I realize the broker's fee will be rolled into rent anyways, but still... In our caustic political and economic environment when everything seems to be going in the wrong direction, this quote gives me great pleasure:
"It’s going to decimate the brokerage industry."
24
@lineitems
Please. The only ones getting rich off the current NYC rental market are landlords (usually big time landlords, as many small owners are hard-pressed) and a very small number of agency owners.
Brokers often go weeks without a deal. Four or five grand isn't a lot of money in New York if it has to stretch three or four weeks. And brokers typically enjoy zero in the way of work benefits.
Your ire (and that of most of the commenters here) is misdirected.
4
@Jasper ~$6k/month seems about right for the work they do. Yet it should still come from the landlords. The only thing you're right about is that the landlords are the ones profiting the most from the current system. Name another industry where the buyer pays the salesman directly for their sales effort, regardless of how much time they spent or help they provided.
5
This regulation hurts the unscrupulous brokers.
There are listings put out by LL without broker representation. A broker will then bring prospective renters by, and pretend to them it is an exclusive, when it is an 'Open" listing. These typically low end brokers then turn around as force the renter to pay because the LL wasn't really using the broker. It was a sham, but the LL doesn't care because they got the renter.
Now, there will be no more "Open Listings" that are hijacked by brokers as their exclusives.
5
If the large property owners hate it, I love it.
3
@Awa
It's really going to hurt the small landlords. Would you rather they rather put money into their property or broker fees?
1
In the end, tenants in nonrent stabilized apartments will pay more. Landlords will include the broker fee and then the tenant will have the higher rent base for the balance of the lease. Perhaps limiting the percentage or a maximum fee of $1,000 on an open ended lease would have been wiser. Another well intentioned idea that was not thought through.
3
I'm a renter in NYC but a landlord in another market. I luckily avoided a fee this time around, but as an out-of-town landlord, I have a property manager that manages the leasing of my property. I pay them a modest monthly fee (10% of that month's rent) and a less modest fee (1/2 of one month's rent) for each lease turnover. The property manager is also a RE broker who is hoping for the bigger business when I decide to sell the property. It also encourages me to not be a slum lord and keep good tenants around. It works much better than this insane system here. All for this change.
68
@Hallelujah This model sounds workable although I'd like to learn more about the city it works in. While prospective renters appear to benefit from this new rule, I doubt it will perform as intended. Someone needs to vet the bona fides of the renter, show the property and ensure that everything is secure. Not every applicant is pure of heart and brokers provide a valuable level of protection. If the landlord has to perform this work the cost for these services will be passed on to the renter in some manner: in non-rent controlled properties, the rent will most likely rise; in rent-controlled properties maintenance will drop unless the laws are changed. Ultimately older such housing stock will more likely be replaced by uncontrolled properties built by wealthier landlords. Perhaps that was a motivation for the change?
I used to be a small-time property owner in NYC. Brokers are needed to sift through enormous piles of applications where the vast majority of people are on terrible financial footing already (enormous credit card debt and minimal assets and/or limited income). We are not all “heartless and greedy people.” However, like any other business, we are not a charity… we are in business to make a profit. If someone’s financial situation is already appearing so precarious that we question their ability to pay rent for a full 12-month lease term, we must decline their application. We’d love to have rented out to everyone in need of an apartment but when NYC courts allow tenants to stay for months and months without payment and then move out, we’re left holding the bag. Brokers provide landlords with the service of sifting through enormous amounts of applications and, even then, we would still get some that we have felt don’t look good on paper. And no… sorry to those who think we’re looking at skin color… we don’t – just papers. We only care about getting paid our money due. We were happy to rent to anyone able to pay. These rules, while seemingly “nice” to tenants on the surface, will simply shift the burden to property owners for paying broker fees. And, in turn, property owners will increase rents (on market rate) units. In the end, politicians will say they’ve helped, but like most government meddling, this will actually hurt tenants.
45
@ABC123 Correct me if I'm wrong but I believe in most markets the Landlord pays for a broker, you know, has to invest some money to insure a good tenant, or time... I am a landlord and real estate agents rarely get me the best tenants, its typically the self starter tenant that works hard to make sure they get seen by me and show their financial stability, good nature, etc., not an agent whose interest is just collecting a fee.
44
@ABC123 Exactly, brokers provide the service to the landlord, not the renter, which is exactly why the landlord should pay the fee and not the renter!
87
@Andy
"And, in turn, property owners will increase rents (on market rate) units"
This is still beneficial to renters in that they can pay the fee monthly rather than up front. And more importantly they can look at an honest price of without a hidden broker fee which usually only comes up once you've already looked at the apartment.
24
This abrupt change is gonna blow the rental game wide apart. The passive Landlords who sit back and wait for Leasing Agents to deliver tenants are not prepared for the shift. The Leasing Agents who make virtually their entire living on bringing Leasors and Leasees together via advertising, showings, background checks and contract preparation are getting shafted. How will they pay their bills on Mar 1 ? The renting public is getting a fine break. More people will be able to move more often now that the cost of moving is without a fee.
21
@Suburban Cowboy
I totally agree!
Just remember, if landlords have to pay fees, rents will go up and services will decline.
@George "...rents will go up. .." That's ok, since renters will no longer pay an up front fee.
"..services will decline." Without further explanation, this makes no sense
8
I've lived in my building for 5 years, and didn't pay a brokers fee. My landlord is amazing: he fixes everything promptly, only raises the rent to cover tax increases, and charges less than the rent controlled amount.
Believe me, I've questioned how I got so lucky, and really if this situation is too good to be true.
As my landlord explained it, he makes more money having a good tenant who pays on time, rather than trying to charge the most possible and having large amounts of turnover. Turnover costs him money (getting the apt ready etc).
52
@RA I have a similar situation with my landlords. I didn't pay any fees to move in, and things get repaired promptly.
3
The renters market in NYC is a racket plain and simple. I'm supposed to feel bad for these brokers who literally do nothing other than meet you at the apt, open the door and say, "what do you think?" Then you cut them a check for $2000...cry me a river. And if they really are needed because the landlords can't effectively manage their listings, then the landlords should pay them. With the rent prices in NYC, they certainly can afford it.
23
I fail to understand the need for brokers in this time where the information about available apartments can be shared easily on so many platforms. In my opinion, this service does not add enough value to warrant the cost that tenants pay for it.
218
@Kris N Landlords do not have the time to effectively market and show the property as well as help the tenant navigate the qualifying process and application process...the RE industry arose out of a real need to help bridge the gap between supply and demand for housing...also many tenants (not all but many) are busy with work and life that they rely on qualified brokers to help them find a space and sort out all that it takes to secure one in a free market...
4
@Kris N. Okay, so then if you are a tenant looking for an apartment and you have all the resources, don’t pay a brokers fee.
If restaurants are charging prices that are too high for hamburgers, you don’t get government to step in an regulate hamburger prices in a free market, instead consumers will just not pay for that expensive hamburgers, thus leading those business to eventually go under. If people want to pay for the expensive hamburger... let them.
However bringing it back to brokerage, less and less people want to pay brokers fees, which for the past few years, has naturally been driving certain ends of the market to be no fee. In the super high end of the market (luxury developments and high rises) 80% of the market is no fee. In low end affordable housing, tenants don’t have the money to pay fees and landlord understand this so again 80% of the market is no fee. In the middle of the market you have you average apartment for your average New Yorker who wats to save as much as possible and will only spend on a brokers fee if absolutely necessary, but will offend ship around and find great options that are no fee, which has led the middle of the market to be about 50% no fee.
The the major impact of this law will be landlord increasing rent to make up for the cost of renting the apartment themselves, or to make up the cost of outsourcing to a broker. Not to mention the thousands of agents who put food on the table for their family’s with broker fees.
3
@Kris N The brokers simply do not add value. Landlords who do not have on site leasing offices will not be able to simply charge that fee back to the tenants. That would render them non-competitive with the "big guys". They will have to start marketing and leasing themselves or find cheap on line or app based alternatives to do it for them.
17
Best news I've heard in a long while. In an age of online listings there is absolutely no reason for the NYC broker industry to exist, beyond niches like 'hard to rent' properties or 'hard to please' apartment hunters.
And before some troll funded by the real-estate industry comments otherwise: no, landlords are not too busy to show their properties. Landlords in other cities have no problem finding tenants without hiring a middle man. The only difference is that landlords in NYC have enjoyed a rigged a system in which they reap the benefits while tenants are forced to pay the costs.
169
@Sam Yep -- in the same way technology has fazed out secretaries, the grocery chains with the fresh butcher market, even the malls. Times change, and you must adapt. Why should we subsidize brokers??? Are they Trump's cousins? Further, at least the secretaries and butchers had skills.
Just how much college and advanced degrees does a rental broker need???? LOL They can find another quickie online degree to make a killing.
8
@Mary Rivkatot or start a youtube channel.
1
@Sam You make a good point. Much of NY is rigged. It is frustrating and disgusting. Landlords know the demand and sure, let the brokers 'skin' the desperate tenant. Why would a landlord not LOVE that system. It's free to them. Same reason why NYC sports teams (Knicks) are terrible. Why try to build a good team when you can fill 20k seats with a bad team. Yellow cabs:(drivers and individual medallion owners excepted) the fleet owners had a monopoly and terrible service. Gov't employees jobs and pensions and health insurance for life and boy do they know how to game the clock. Union workers who can get away with being drunk, stealing and other bad stuff and hard to fire. Famous restaurant owners whose staff made lots of $$ because their celebrity chef status keep the seats filled and tips flowing, if you could deal with the harassment. All of the above and more spells high cost and arrogance. Problem is, everyone has their scheme and figuring out the game is part of NY lore and its reality. The broker fee issue will be mitigated with higher rents and fees paid by landlord to broker. A wash. Just window dressing by the politicians.
3
Laughing at the statements from Martin and Benaim. Oh how the tables have turned. Love to see NYC real estate agents now pining for our sympathy. Do they not understand that they are the classic villains of our beloved cities? Talk about cognitive dissonance. The real estate business has been following its own rule book for far too long and it is about time they realize that they are not in charge of how a city should be 'created'.
143
Great news - brokers are truly leeches, protected by lobbying and graft. If people manage without brokers in pretty much every other city in the world, I think New Yorkers can figure it out too.
8
Cant wait for brokers to be completely eliminated or replaced by more digital tools. The pathetic quality of brokers I've dealt with in NYC metro area in the past 4 years adds to the pain and frustration of finding the perfect apartment one wants.
5
As someone who had to pay thousands of dollars to these leeches when I was younger and financially vulnerable, this news warms my heart.
9
Good news!
1
Broker == market bureaucrat. But let us pity the poor parasite!
2
Well, good riddance. I remember touring a crappy studio on 91st street on the East side with my then girlfriend (now wife), having to kowtow to some nobody middleman who had us completely over a barrel because he held the keys to the proverbial kingdom. We had to pay $3000 to this guy who barely gave us the time of day, spent about 15 minutes with us, and who had no competition or provided anything resembling $3000 worth of service. He literally just opened the door for us.
This is one industry disruption I fully support.
13
All this means is that the brokers fee will now be rolled up into the rent price. Landlords like this because they get higher rent long after they’ve paid off the broker. The same old tactic used for “no fee” apartments will now be applied to all apartments and once again the renter gets screwed.
2
I rent an apartment in my brownstone and have found it more reliable to do my own interviews and credit checks of prospective tenants. Yes, it's time consuming but I trust my own judgement and like to be able to offer the apartment free of fees. In fact, the only bad tenant I've had in 25 years was the one time I rented via a broker. While we're on the subject of RE commissions, what about that insane 6% when selling a home? In the UK, it's 1.5 - 2%. Of course, New Yorkers sometimes don't trust a good deal when they see one. When Foxton's (a huge UK RE company offering discounted fees) tried to start a business here, home owners wouldn't give them the time of day!
9
As someone who grew up in the Chicago area, when I learned of renter “brokers fees” from friends who moved to NYC & Boston I was dumbfounded. Perhaps the anger from the real estate industry is because the fees were so ingrained into the cost of living in NYC that people just begrudgingly accepted them. But anyone who moved to NYC or Boston from somewhere where brokers & the fees therein do not exist could tell NYC locals that the fees and acceptance therein is ridiculous and should be questioned.
8
I have been dumbfounded at how much money real estate "brokers" earn for the work they do. I'm not talking about the brokers who scour neighborhoods to help a client (who has approached them to find a home). Most brokers here do three things as far as I can tell: unlock a door to show an apartment, print out a pdf to have the new tenants sign, and collect thousands of dollars for doing so. The current practices have been nothing short of predatory, and they got away with it for a long time because they could. I'll bet the industry is up in arms - no more golden goose.
23
As a landlord myself, I believe this law is absolutely fair. The broker works for the landlord, not for the tenant. And the fees are exorbitant.
29
If this is a clarified interpretation of a law passed in June 2019, it seems that anyone who paid a broker's fee after the law was in effect should be entitled to a reimbursement.
15
Once again the little guy is the scapegoat. In actuality, brokers offer a service to both landlords and prospective tenants. This, especially in the small to mid-sized apartment market. Landlords do not have time to properly screen renters and/or take them around to buildings matching the renter’s choice of amenities.
Brokers, at least professional brokers like my husband, put many hours of work in a day to screen, interview, verify, and check backgrounds of potential renters. They deal with renters making appointments and never showing up. This can take out 2 hours of a broker’s working day.
It takes hours each week for my husband to review available apartments, take pictures, check for cleanliness and safety issues and much record keeping. They pay to advertise in apt rental websites like Renthop, that raises their fees often without warning.
My husband deals with landlords who can be so choosy they may only select one person after multiple renters have been presented to them. I cannot tell you how long it takes to set up a time when a landord, prospective renters, renter’s parents, current tenants of the apt being shown, can actually meet!
Finally, if prospective renters think they are getting a bargain via this new ruling (not law), they should know that landlords will simply charge higher prices for their apartments. Someone has to do the broker’s job in a city like NYC. It is simple, if the new renters won’t pay a broker fee, they will end up paying more in rent.
7
@P Green In a renters market simply raising rents will not fly because to do so would render those landlords non-competitive. If Two Trees, L&M, Moinian, Rudin, Glenwood, et al are already offering free rent, concessions and no fee rentals how are the landlords you reference going to fill their units by charging higher rent?
8
@P Green When my husband and I were faced with the prospect of moving and having to pay out 15% of the annual rent as a lump sum upfront to a broker, it made an already expensive process, completely impossible. The prospect of me, a 56 year old man, having to borrow money from my older, retired sister or my husband's elderly to cover the minimum $4,000 needed just for the broker's fee was humiliating. Having such a fee amortized as part of the monthly rent is repugnant for sure, but far more feasible for cash poor tenants. I respect your husband's hard work - I don't wish unemployment on anyone - but applaud anything that helps the middle class in an already astronomically expense real estate market. Instead of pursuing lawsuits, blaming tenants and liberal politicians, real estate professionals and landlords could get creative and proactively offer some other types of solutions; grousing about the burden this will cause and keeping things status quo in an already lopsided system is ludicrous. The never ending hoops of scrimping and saving, and boot strap pulling that tenants have to jump through just to make ends meet should be burden of landlords, brokers, and the real estate lobby for a change.
6
I signed the lease for an apartment a few weeks ago and paid the broker fee, along with a fee to the management company. Does anyone know if, given the timeframe, this could be reimbursed? Though I've signed the lease and paid the fees, I won't be moving into the apartment until next week. Thoughts?
6
@BW
If you like the apt , move in, then find out (from the State) can you claim the reimbursement. It's not going to be any different for a while, maybe more difficult. If you start any discussions re: reimbursement before you move in, they'll find the way not to let you into this apt.
2
For the average renter, brokers are obsolete. Landlords can easily advertise rentals through multiple online channels. One exceptionally popular NYC rental website charges $185 for every two weeks a unit is listed; assuming the listing is up for two months that's $740. When I moved to NYC five years ago, I effectively paid a broker $4,000 to open the apartment door for me. The apartment in question was listed online for three weeks.
9
@RP Unfortunately, many do not know that brokers put in many hours of behind the scenes work. You should ask one if you want to find out. I found it interesting the first time I heard of all the work they do.
4
@P Green I would agree that brokers likely put in many hours that are not compensated. But the person who ends up renting the apartment pays a disproportionate fee as a result. The LL, like sellers in a real estate transaction, should be responsible for the fee since the broker is essentially their agent. If a prospective tenant hires a broker to find a place that would obviously be a different matter.
7
Ask a broker how hard they work? That would be like asking Trump if he is a stable genius.
2
So let's think about this.
If it is true that landlord will simply bury the broker fee in a 15% higher rent (if that were at all possible), the broker would still get the money upfront and it comes from the landlord instead of the tenant.
The broker is made whole so why should they complain?
Perhaps they complain because the landlord will not or cannot increase the rent to cover that fee and therefore the broker is the loser here.
The landlord has a something of value: the apartment. The tenant has a something of value: the desire for shelter and the ability to pay. Economically, it makes sense to bring the two parties to agreement at the lowest cost.
13
@J Fogarty We are in a renters market. There is no way landlords can up rents by that amount.
In a renters market simply raising rents will not fly because to do so would render those landlords non-competitive. If Two Trees, L&M, Moinian, Rudin, Glenwood, et al are already offering free rent, concessions and no fee rentals how are the landlords you reference going to fill their units by charging higher rent?
2
@J Fogarty Ah, if all of life were only that simple. The industry you are describing is a fallacy. If you think landlords don't charge higher rents than they are allowed, you should think again.
@J Fogarty
Thewiseking and P Green appear to be arguing opposite sides of the argument.
If Thewiseking is correct and it is a renter's market, then the landlord has limited price flexibility.
If P Green is correct and there are other ways to get rent increases, the question still stands: Can "those other ways" bring in an extra $375/month ($4500/year)? And if they can, because perhaps Thewiseking is not correct and it is not a renter's market, why don't landlords do that already?
Something is holding them back. I think Thewiseking is on to it: The market place.
3
I was until recently a small-time landlord in San Francisco, a rental market arguably as competitive and nearly as expensive as New York's. I used a broker to find tenants and paid her 6% of the lease term's rent, standard practice in SF. It is amazing to me that NY's broker fee is 15%; what could possibly justify such a high percentage, regardless of who pays it?
Also, how and when did the NY market adopt the practice of having the tenant pay the broker fee, a practice that differs from most of the rest of the country? Was this a product of rent control, which encourages landlords to offload every possible expense onto tenants as long as they can get away with it under the rent control rules?
To the commenters saying that brokers are just paper pushers and bottlenecks in the rental process, I say that a good broker is worth every penny (to the landlord, at least). Mine showed my apartment to prospective renters, allowing me to focus on my day job; offered very useful advice on marketing my unit (get rid of that wall-to-wall carpet - nobody wants it these days!); and screened applicants, presenting me with only the most financially stable ones. And I know she even provided a service to applicants by carrying an "inventory" of apartments available from other mom-and-pop landlords: "If you don't like this one, I have another one you might like".
7
@Minor 49er Fifteen percent is an extreme! They can be as low as 8% in NYC.
The rental agents I’ve encountered on showings - and even those I’ve signed leases through - are some of the sketchiest people I’ve ever dealt with.
In what other industry would you give $4k to someone who posted a few pictures online, provided vague/incorrect details about the product (namely, square footage) and processed your paperwork? Oh, and provide all of your most sensitive personal and financial data to a freelancer who needs to be paid in money orders.
Rental agents should be compensated for the time and effort they put into converting vacancies to leases, but the dynamics have been completely out of wack. I hope these changes will weed out the side hustlers (most of them) who wedge themselves into the transaction from the professionals who actually add value for both the tenant and the landlord.
31
NYC doesn't have property management companies? Reading the comments has me thinking that some landlords have never thought they could manage themselves or simply hire someone for a reasonable fee to manage for them. Charging the tenant so much upfront sure seems like an effective way to only obtain well-heeled tenants.
2
"Newcomers to New York City have long been mystified and frustrated about having to pay a broker’s fee even when they found an apartment online."
i would have been mystified and frustrated too. makes no sense. i negotiated a reduction in my real estate broker's fee when i bought a condo b/c i found it and negotiated the price myself; i simply wanted her to sit with me.
1
Another thought: if the high cost of moving comes down with the removal significant barriers such as outrageous brokers fees, it will result in a more efficient use of housing stock. People definitely stay in apartments that are no longer right for them due to the insane upfront costs of moving including broker fees of thousands of dollars. Movers at least earn their thousands of dollars by lugging heavy furniture up the stairs. Brokers 'earn' their thousands of dollars by relying out outdated housing practices providing almost nothing of value in return. Additionally, making it easier to move gives landlords an incentive to retain their tenants by providing good service. This is excellent news for renters.
27
Back in 1992 I had to move home for a year so I could save up the $10,000 I needed to move to NYC which is where I worked and attended school. That money would primarily fund the 15 percent broker fee, first month rent and security deposit for a studio apt that was about 300 square feet.
Renters paying the fee was always about keeping some out and ensuring landlords that those let in had the funds, income and credit history to be a good tenant. It was also probably racist too.
14
I've rented from landlords in Chicago that use brokers. The broker shows me the apartment and runs my credit/background. The landlord pays my first months rent to the broker and in exchange they get a reliable tenant that has been fully screened. Everyone, broker, landlord and tenant, is fine. The system can work without massive up-front fees being charged to the tenant.
18
However, the LL never had to pay for this expense before. Hence he is inclined to balk at the steep fee. Inevitably agents earn less money. Well, that is the real world. However, the agents will now only show the apartments to persons willing to SIGN A CONTRACT prior to initiating help unless the LL has an ironclad guarantee of a decent fee.
Just quick check.
Yesterday, Studio apartment in Bay Ridge, Brooklyn was $1200-1350/m, Today that same apartments starts at $1450/m.
I guess, Landlords and brokers will have to thank lawmakers for this gift, because:
1. The brokers fees paid by landlord will be transferred to the tenant anyway via increased rent. Not good for tenants.
2. Brokers now can enter to month-to-month 'service" fees with landlords and get a percentage of rent. Great for brokers, long lasting dream of predictable sustainable income becomes a reality.
3. Renewal rents will be based on new (increased fees)
I'm not sure who the lawmakers were trying to protect, but it is surely not tenants.
4
@Nasim If the landlord really thinks they can get $1450/month for that apartment, why didn't they price it that way to begin with? They will likely struggle to fill the vacancy if the rent is above comparable units in the local market.
11
@Nasim Exactly. Rents will only increase to cover Albany's smart move.
3
@Nasim Or people might be able to swing that extra $100 per month whereas they couldn't pay 15% of an annual rent before even living in the apartment.
8
The idea that landlords will pass the cost on to renters in ludicrous considering that market rate apartments are already rented out at the maximum price the rental market will bear. In other words, if they could charge more they would, but they can't so they won't.
26
This will also encourage more landlords to try and retain tenants since the cost of turnover is on them instead of the tenants.
33
When exactly was this new law implemented? I paid my broker fees less than a week ago (still hurts) and it would be amazing if I could get it back. Any suggestions on how to proceed?
9
@Karoline Good luck. I wish the same for the big bucks I paid to a broker.
2
As a long-time New Yorker who has suffered under the tyranny of broker fees for decades, I applaud this move by the State. When I lived in Chicago there were no broker fees - the landlord paid those. NY brokers have been steadily abusing their niche for far too long. The costs for their service far outweigh the benefits they provide, particularly in the age of apps. Let's put it this way - if broker fees were more reasonable, say even $500 per rental, they wouldn't have become such a hated target. Instead, the fees are exorbitant, way over the top, and so here we are at last.
62
It is precisely because of the internet that the fees have climbed so high. The broker has to work so much harder to close a deal. What livelihood is next ?
1
@Jon Ones that continue to exploit.
4
@Jon The broker now does next to nothing. I find a unit I like online, they spend 10 minutes showing me the unit, I say I want it and am ready to sign the lease, and they expect me to pay them $4,000. It's an absolute racket. If landlords are too lazy to list apartments themselves, they can pay the brokers the ridiculous fees they seem to expect.
12
It is about time. The rental brokerage business is a complete racket, built off the corruption of public officials willing to support a system that enriches a few dozen rental agencies at the expense of the most economically disadvantaged people in the city.
16
Real estate brokers have been serving a useful purpose in New York rentals for well over 100 years. They spend their time showing tenants a better selection of apartments, know about special conditions in each building, know something of how some landlords can be problematic, and ease transitions through to a conclusion. Rental brokers do not earn a fortune, though it might seem so when one hears a number like 15%. This is almost always divided between the owners broker and the prospective tenants broker for, hopefully, watching out for for their clients interest. When I used to be a rental agent (in another career incarnation) I quite often ferreted out phony background information, once discovering, through a web of credible lies and false references, that one tenant was being evicted from his apartment because he was making commercial pornographic videos there. The landlord was immensely grateful that I had done my research (and I was thrilled to see the look on the fraudsters face when he was confronted with his lies) the landlord hired me to handle all of her properties for years thereafter.
If you think being a tenant is difficult, I wish you the pleasure of living through the hell of malevolent, inconsiderate tenants which are not uncommon, or the pleasure of getting a malevolent landlord who makes your life a misery, which landlord a broker might have been able to weed out for you
14
@Critical Thinker - Not entirely the whole story, so many "No Fee" apartments are then rented by a broker making a quick buck. In some cases, they collect money from the Landlord and the tenant. No other market has this middleman and they seems to function just fine, you're right, Rental agents have served a purpose for a long time, but the purpose has been to skim off the top and grift a bunch of folks out of a bunch of money. Good riddance!
19
@Critical Thinker
I guess you are one out of the million that are like this. I've been a renter for 24 years and I have never met a broker like that(you). 99% of the time they don't even know the landlord's name let alone any history on a building and any nearby information. You call them abo un t an apartment and they can't really answer your questions over the phone and urge you to view. You go to view an apartment they don't know square footage, they dont know closet sizes, and 50% of the time do not know what utilities are and aren't included. And then they expect to be paid a let's say $2800 broker fee for an apartment I called them about that I found listed on Craigslist?? Yeah sure
11
@Critical Thinker Your anecdote is a perfect example of why broker fees should be paid by the landlord and not the renter, which is exactly what this regulation is saying should be the case.
15
It's about time. I'm a moderate, but this is long overdue. Awe - a bunch of way overpaid real estate hacks are losing their jobs? Cry me a river. It was a legal gouge of renters. Just like the caucus, brokers are basically outdated with the internet -- at least in the rental market.
30
This is great news! I never thought I'd see the day. The NYC rental market is horrendous. Only those that have lived there and been through it know the truth of the matter.
My first apartment in NYC was in the West Village. I found a lovely studio online (meaning I didn't reach out to a broker to find this apartment) and low and behold the apartment was attached to a broker - most apartments in NYC are, even if you find them on your own. I went to view the apartment, the rent of which I could afford two-fold, and I was dumbfounded to learn that in order to rent it I had to pay a $4000 broker fee, first months rent, last months rent, AND a security deposit all up front. Over $10K to move into a studio apartment that I FOUND ON MY OWN. It wasn't as if this broker was working for me and searching for the perfect apartment. I spent 10 minutes with him to view the apartment. I was a young professional making decent money and this struck me as outrageous, but this is the NYC rental market. Once you've lived there for some time things like this become second nature because such is New York.
The amount of people that will be negatively impacted by this new law (brokers) is far outweighed by the number of people this will be positively impacted when searching for city housing (and I would be lying if I pretended that NYC had "affordable" housing - we all know that isn't the case).
That being said... it's New York of nowhere :)
61
So let me get this right: landlords who take in piles of cash from renting their apartments are actually going to have to put effort and time to find tenants? Shocking. Landlords had a good run of making tenants pay broker fees for the privilege of renting their apartments. It's about time brokers stopped getting paid a fee for doing absolutely nothing.
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Amen, brother.
5
I am a landlord for a non-rent regulated apartment in a small co-op building. I'm going to take some time to really think this thing over and see how it will impact me. Unfortunately though, my initial reaction is that this can be harmful to both me and my tenant. My options seem to be that I find my tenants on my own. This isn't Air BnB with a vetting/rating process and some sort of insurance. I would have to spend time from my busy day to post, show, interview, and help potential tenants through the co-op sublease application and interview. Yes, I could find a broker. Maybe their rates will go down as a result, which would make me more likely to pay one myself and eat the cost, but the more likely result is that I will pass the cost of finding a new tenant off to the tenant in increased rent, which would not be good for them. If more people do this, I think this would raise the average rent in the city/boroughs at a time when wages are not increasing comparably to increases in expenses. Again, I want to take more time to problem-solve this and I'm open to suggestions where I can help renters, but I do have expenses and a bottom line, especially at a time where building maintenance costs are increasing, and potentially property taxes in the near future.
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@ER So you will have to do the work yourself or pay someone to do it for you. Sorry, but this is not a novel concept and you shouldn't expect any sympathy from renters who have been paying through the nose for brokers who do literally nothing for them except hand over the key while collecting thousands of dollars in return. Brokers have provided no value-add for renters for far too long.
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@ER It seems like you will have to put in the work to get the profit out of your capital. As it should be.
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@ER So you're saying that you're a busy person and in order to make your life easier, you're going to hire someone to manage showings and your property. However the person that you hired to save you time and make your life easier should be paid for by the tenant.
It's your property. If you want to take the time to manage it, great, you'll earn more money. If you want to hire someone, great, you should pay for it.
4
This is a wonderful and overdue change.
In a time when most NYC tenants find housing through Streeteasy or Craigslist-type services, the broker's only functions are to take a few iPhone photos of a unit (if that), unlock a door for you to view the unit, and email you a standard application provided by the landlord (which you must fill out yourself).
In no other industry would those services be worth an excess of 15% of a year's housing cost as a required fee.
The only people who will mourn this change are the brokers whose racket is up.
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This appears like a great development, but won't landlords just charge a higher rent as a result to make up for their added cost?
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@Brett
First, I think it will put competitive pressure on the cost of the broker, where landlords will not prefer brokers with cheaper costs compared to what they bring to the table. Previously it was a market without any competition really, basically a pseudo monopoly similar to what airlines did with bag fees.
Even if this all cost difference is erased, the change still allows people to house themselves easier as the upfront fees are often a barrier. 2-4x rent is no small sum for most who are living paycheck to paycheck with limited savings, or saving wrapped up in inaccessible retirement accounts.
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@Brett If landlords could get away with charging higher rents for their units they already would be. That's how markets work.
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landlords will not prefer brokers
->
landlords will now* prefer brokers
Let’s just get rid of brokers and everyone wins because no one has to pay their excessive fees for the little work that they put in.
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@Jess I think you're wrong, Jess—at least in any narrative I've been a party to. The broker(s) I know perform essential services that the landlord can't. Sometimes the work is onerous.
Wow! That is wonderful, and unexpected news, even though I assume that I personally won't be moving back into a rental in NYC now that I'm 58 and happily ensconced in my own condo here in Hoboken (although I kind of miss those days too)--but it would have helped when I was younger!
More importantly, as advocates for the homeless population here mention, removing at least one of the many barriers that formerly homeless people face when trying to find housing (as a former caseworker, I know how many obstacles there are) is a huge step forward. It's something that makes me happy during a week when the news hasn't shown me much to be happy about. I hope it's a trend that spreads to other cities.
The broker's fees involved in finding an apartment in this area have always been obscene, and an obstacle for even employed, non-homeless people looking for a place to live. Even if the move results in somewhat higher (if that's possible!) rents, at least potential renters won't have to have an enormous amount of cash on hand up front just to be able to start looking.
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Even if the cost is passed to renters as included in the monthly rent, that's easier to cover than a big check up front. And if the brokerage firms are so concerned about their agents, maybe they should stop stealing half of their commission for doing so little.
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I just switched to a career in realestate. I have not sold or rented anything as of yet. However, while people are celebrating this victory, it is short lived especially for the poor and socioeconomically disadvantaged. Rent stabilized owners will probably let the low profit margin housing stock expire and not hire agents to show the units. Perhaps the owners will sponsor a profitable coop conversion again not benefiting the financially unstable. Its a given that market rate landlords will increase the rents to pay for fees. There will be more clients for the fewer units.
Furthermore as a new agent I’ve worked with clients that have intricate subsidies. Did they consider the impact of this bill ? No this bill will surely decrease the apartments available to clients. It was bad enough units had 2-3 applications on them now there will be a very competitive 6-8 applications. This bill is an attack on the rich. But will inevitably affect the poor. It’s unfortunate but I can see homelessness tapping 100k for Fall 2020 in NYC. Those are my two cents as a new agent looking at both sides.
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@Paris Get a new job while you still can.
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Okay, so then if you are a tenant looking for an apartment and you have all the resources, don’t pay a brokers fee.
If restaurants are charging prices that are too high for hamburgers, you don’t get government to step in an regulate hamburger prices in a free market, instead consumers will just not pay for that expensive hamburgers, thus leading those business to eventually go under. If people want to pay for the expensive hamburger... let them.
However bringing it back to brokerage, less and less people want to pay brokers fees, which for the past few years, has naturally been driving certain ends of the market to be no fee. In the super high end of the market (luxury developments and high rises) 80% of the market is no fee. In low end affordable housing, tenants don’t have the money to pay fees and landlord understand this so again 80% of the market is no fee. In the middle of the market you have you average apartment for your average New Yorker who wats to save as much as possible and will only spend on a brokers fee if absolutely necessary, but will offend ship around and find great options that are no fee, which has led the middle of the market to be about 50% no fee.
The the major impact of this law will be landlord increasing rent to make up for the cost of renting the apartment themselves, or to make up the cost of outsourcing to a broker. Not to mention the thousands of agents who put food on the table for their family’s with broker fees.
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@Jon There is no way 50% of the market is no fee. Where are you getting this data? Have you ever tried looking for an apartment? There are very few no fee apartments for the "average" New Yorker and the ones that are are usually tiny, dark spaces that no one wants to live in anyway.
Also, with demand where it is and the ease of posting a listing on StreetEasy, brokers aren't even helpful. I've found my last two apartments on my own but still had to pay a broker's fee. Absolutely ridiculous.
2
@Jon There is a monopoly on large buildings that aren't luxury and brokers. In a number of these large landlords, the broker gets the listing before they go on streeteasy, and the broker kick backs some of the fee to the landlord.
1
I have a roof over my head now but I will never forget the anxieties associated with finding that roof when I had no money and tried to find a place to live safely and with a modicum of peace of mind. And the realtors had no mercy. If New York is doing its job in protecting people who need a place to live, that is great news.
98
What none of the news is saying is this new ruling will really have little impact actually since it only affects brokers "Exclusive" listings. when in effect the vast majority of apartments are what is referred to as "open listings"
So this may lower the fee from the high commissions of 15% but it is not going to eliminate the majority of tenants still paying a fee.
Also when i looked for my own apartments i just did the work myself to save paying a fee. NOW the state wants to regulate a transaction that is purely voluntary 90% of the time.
3
@Mark B Thank you for pointing that out Mark. Another ambiguity of it all is that many listings are "open", meaning the brokers resort to a database from which they choose to work with certain listings, but landlords have not hired them. So if I see an apartment listed online, on apartments.com for example, and a broker responds, that broker may not necessarily represent the landlord, BUT that broker also does not represent me FORMERLY, unless I've signed a broker-tenant agreement. So, while the law is not effective in the range that it is intended to be, which is to eliminate broker fee for a majority of prospective tenants, it does offer some room for negotiation by the prospective tenant in the instance that they have not signed a broker-tenant agreement.
6
What I am wondering and nobody has yet addressed is how this will effect the leasing of co-ops and condos. Keep in mind that over 50% of new construction has sat unsold and that which has sold is now being rented out by the absent owners. Will those owners be willing to pay the brokers fee? They simply can not just raise the rents in a renters market.
2
Eliminate brokers? Sure good luck with that in New York City where most of the sales are co-ops. Have you ever dealt with a co-op board or a co-op application ?
Want to navigate that on your own?
Want to go see multiple apartments that are not what they were billed online to be but your broker knows better ? I’ve lived it.
My current rental was found by a broker.He knew about the local market and about every building. I would’ve never found it on my own. I wasted God knows how much time looking at lousy apartments that seemed good online.
He was well worth the fee (Well, in truth, the fee could’ve stood to be a little lower. Maybe one months rent instead of 15% )
4
@Chris - Try reading the article next time. You can still hire a broker if you'd like. This law has nothing to do with sales, and everything to do with low-level pseudo brokers who work for companies like citihabitats and the like, who do absolutely no work other than meeting a potential tenant at an apartment the tenant found on a listing website. They then open the door, make up some lies for questions they clearly don't know the answer to, and then get paid thousands and thousands of dollars. Add in the "drafting" of the lease, which is almost always boilerplate, and they probably put in 30-40 minutes of actual work to accomplish this. Actual, reputable brokers will not be affected by this. And you can still hire one to do the real work for you if you'd like. This is a great law, and finally puts to rest the largest real estate scam in the country. This is the only city where this existed. About time its over.
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The new regulation doesnt apply to brokers hired by prospective tenants.
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@Chris And YOUR broker would have still received his fee, tenants who hire their OWN broker will be paid by the prospective TENANT
1
This was a very long time coming and represents the beginning of the end of an egregious shakedown. They will of course continue to lie and make self serving statements but the fact of the matter is that brokers simply do not add value to most of these transactions. Landlords will not simply "hike rents" to make up for the cost of these fees which would render them competitive with the larger players who have their own on site leasing offices. They will either do it themselves or find cheap on line or app based promotion and listing services to do it for them.
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@thewiseking :
Good Comment, but I think you meant to type:
"Landlords will not simply "hike rents" to make up for the cost of these fees which would render them UN-competitive with the larger players..."
1
Even if the same fee ends up getting charged to the tenant through higher rent, most people would rather pay a few hundred extra per month than have to pay $5,000 all at once on top of a security deposit and other costs. This change makes a real difference for renters.
I have no sympathy for the real estate industry. I have no sympathy for the brokers who will lose income. None.
This is a great example of what happens when the legislature responds to the demands of the people at large rather than to the narrow interests of one or two industries.
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@QTCatch10 what you also forget is the added rent will stay in place for the life of the tenancy not just the one year the owner will amortize the fee by. so if a tenant stays in an apt for 3 or more years the fee is payed 3x as well as any increase that will also be compounded on the higher rental price. In effect this is not going to make renting cheaper but will actually make free market apartments much more expensive for the consumer.
6
Would you rather pay an additional months rent upfront or a few hundred dollars extra per month? What if you live in your apartment for more then a year? Those “few hundred” turn into a “few thousand” very quickly in extra rent. I was offered a “no fee” apartment but when I offered to pay the brokers fee upfront they lowered my rent by $250. I lived in that apartment for ten years. If I hadnt paid that brokers fee upfront I would’ve paid more then $25000 extra in rent over that time.
7
When will this come into effect?
2
This is great news! The next step is eliminating them for the sale of houses - the realtors play games and earn unjustifiable fees on house sales.
6
“They are just on this high,” Mr. Benaim said, “of just punishing real estate and those in the business.”
Just Karma for years of real estate abuses.
117
Won't it just get priced into apartment rents and passed on to renters once again?
5
@Clara Yes - that's the point. Large and poorly justified up-front fees were totally contrary to renter's goals. Broker's were imposing non-competitive friction on the market which is bad for everybody involved (except the brokers) including policy makers who need to understand the true cost of renting.
Also on the backlog of rent policy: charge rent by week or in batches of weeks rather than months. February is 9.6% shorter than March but costs the same in rent.
1
I moved from Boston where the fee was 1 month's rent to NYC where the fee was 10% of the annual rent and thought "hmm". Renters in MA also got to deduct a portion of their annual rent from their state taxes, all renters regardless of income.
8
Real Estate Brokers spokesperson in the article says that the law should be changed back, because this has no effect apart from spreading out the payments.
So why does the Real Estate Broker care? Is it because they want all the cash from renters up front so they can make money off the renter's capital and be cash rich, while renters have problems ponying up massive broker fees up front?
Maybe brokers and landlords who have already accumulated more wealth (generally) should be ponying up and dealing with the up front fees.
21
To the extent that the up-front payment of the broker fee was a problem for renters, this is a good thing.
And maybe landlords -- who have been able to turn a blind eye to the brokerage costs, because the tenants are paying it -- will have more leverage to get brokers to reduce those fees.
But tenants should realize that they will STILL be paying the broker fees, just as part of their rent instead of as an up-front fee. And I would expect that the amount being paid for those fees will now be more opaque. Only the landlord will know what the fee is and how much the rent has changed to "cover" that fee.
8
@JM Maybe. But Brokers have more to lose if they overcharge a landlord. Almost inevitably, apartments from the building will go on the market again and they'll lose out on the opportunity to broker again. Whereas, overcharging a single tenant has less of a cost to their longterm career opportunities. Landlords also might have a greater ability to organize and demand better rates, than a renter who has a very small window of time before they have to move and/or may be risking homelessness if they protest a fee.
So transferring the cost to a landlord might not be a 1 to 1 shift because a good working relationship has to be maintained. Especially because technology in the form of automated credit checks, backgrounds checks, rental platforms allows landlords many alternatives to a broker.
6
As anyone who rents in NYC will quickly recognize, this won't change broker behavior one iota. The payments will simply be demanded quietly and paid under the table. Those who don't play ball won't see nice apartments.
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@Half Sour I demanded a money returned on an "application fee" of $100 when only $20 was allowed a day after I found out a couple months ago. The broker quickly sent me the money back. I don't think being constantly reported to the BBB or city makes for a long career. Also, online reviews can kill any small business, even slow down a shady broker.
4
@Half Sour If the broker's behavior doesn't change, you can report them to the department of state. Less scrupulous brokers is a good thing:
https://www.dos.ny.gov/licensing/complaint.html
2
Amazing progress. The protected NYC real estate market has been opaque and expensive for too long. This is greta news for renters.
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@Quadriped
Is this also great news for the thousands of broker who feed their kids by collecting brokers fees?
As tenants don’t want to pay fees, it is very difficult for brokers to collect them, thus leading too brokers who are making a lot of money out of that side of the business. So these brokers fees for rentals are now left up to grabs for the little guys and people just getting into the business. By no means is anyone marking millions off the back of NYC rental tenants, no. There are a handful if brokers who are making $40k, $60k maybe up to $100k if the agent has been in the business for a while and has a lot of connections.
Our lawmakers need to think further than just the direct impacts of legislation and how it effects their polling. They need to think about the trickle down effects and the long term effects. Not how it will appear in their re-election next year and if it resinates with their constituents.
1
@Jon Cry me a river. Many brokers are predatory parasites. Same goes for many landlords. Being a renter in this city can leave you broke and broken.
6