A Warning for Users of Manhattan
Apartment Rental Listing Services...
NYS Department of State Counsel's Office
Legal Memorandum LI05
Anyone who has recently attempted the frustrating task of renting an apartment in a metropolitan area, particularly Manhattan, understands the emotional and financial costs of the search. Vacancies have been low and rents have increased substantially. Attempting to personally locate an apartment and negotiate a lease can be a daunting experience. As a result, many prospective tenants reach out to real estate brokers or providers of "apartment listings." Both of these options offers benefits and risks.
Real estate brokers are licensed and regulated by the Department of State. Brokers are trained professionals who can offer potential tenants invaluable advice and guidance in locating and negotiating for an apartment. They are paid by "commission," which is usually calculated as either a percentage of the first yearís rent for the apartment or the equivalent of one monthís rent.
Dealing with a real estate broker may be unavoidable if the specific apartment sought is the subject of a listing agreement between the landlord and a broker. By signing a listing agreement with a broker, the landlord has designated the broker as his agent in advertising the apartment and negotiating a lease with a potential tenant. It is important to understand that the tenant will likely be responsible for paying the brokerís commission even though the broker is working for, and owes his loyalty to, the landlord. The tenant is free, however, to negotiate with the broker as to when and how the commission is earned and should insist on a written commission agreement with the broker. Without a written commission agreement, the commission is earned when the broker has obtained oral agreement between the landlord and tenant on the essential terms of the tenancy, even if the tenant never takes occupancy or signs a lease. The tenant may therefore seek a written commission agreement with the broker providing that the commission will not be earned or paid until the tenant takes occupancy or a lease is signed by both landlord and tenant.
An apartment hunter may approach a real estate broker to act as the tenantís agent in finding an apartment and negotiating a lease with the landlord or the landlordís agent. In this situation, the broker owes his loyalty to the tenant. It remains important for the tenant to have a written commission agreement with his broker setting forth when and how the brokerís commission is earned.
It is essential that tenants (and landlords) verify that the purported broker, whether working for the landlord or the tenant, is in fact a licensed broker, since the broker will likely be handling money, in the form of rent, security or commission, belonging to either the landlord or tenant. The Department of State can verify whether a purported broker is actually licensed. The Departmentís Division of Licensing Services can be reached at 212-417-5747. Tenants should also avoid giving cash to a broker since it may be difficult to prove that the broker actually received or retained the cash. Many tenants, seeking to avoid paying a broker commission which can amount to several thousand dollars, have turned to "apartment listing" services. This is especially true as a result of the widespread availability and use of the Internet. An apartment listing service offers lists, whether by e-mail, fax or through conventional delivery means, of purportedly available apartments in exchange for typically, a low, one-time fee.
The principal difference between a broker and an apartment listing service is that the listing service generally offers nothing more than the list; it will not provide advice or negotiate with the landlord a client, as would a broker.
While apartment listing services often provide excellent information about available apartments for a low fee, there have been abuses associated with these businesses. Some listing services simply copy classified apartment listings published in Manhattan daily or specialty newspapers and sell the lists as their own. An apartment seeker could end up paying $150 or more for apartment listings available for the cost of a newspaper.
Other services may provide an initial list but not provide updated listings or information as promised. Still others have habitually refused to provide required refunds to customers.
Because of these abuses, apartment listing services are required to obtain a license from the Department of State. Apartment seekers should verify that the service has an "Apartment Information Vendor" license before making payment for an apartment list.
Licensed real estate brokers who operate an apartment listing service require a separate apartment information vendor license. License information can be obtained form the Departmentís Division of Licensing Services at 212-417-5747.
Why pay a brokers commission unless you work with a broker who has the connections to get you a below market apartment which you can not find on your own or through any other New York City apartment broker?
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