Legal Memorandum LI05

APARTMENT HUNTING

Anyone who has attempted to rent an apartment in a metropolitan area, such as Manhattan, understands the emotional and financial costs associated with an apartment search. Vacancies are often low and rental rates high. 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 for assistance.

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 an apartment rental. They are paid by commission, which is usually calculated as either a percentage of the first year’s rent for the apartment or the equivalent of one month’s rent.

If the specific apartment sought is subject to a listing agreement between the landlord and a broker, the broker with whom you will be dealing likely represents the interests of the landlord. It is important to understand that, even if the broker is representing the landlord, in most transactions the tenant is responsible for paying the broker’s commission. 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.

Consumers have the right to hire their own broker as a tenant’s broker for assistance finding an apartment and negotiating a lease with the landlord or the landlord’s agent. In this situation, the broker hired owes his or her loyalty to the tenant. It remains important for the tenant to have a written commission agreement with his or her broker setting forth when and how the broker’s 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 licensed since the broker will likely by handling money, in the form of rent, security or commission. The Department of State can verify whether a purported broker is actually licensed. The Department’s Division of Licensing Services can be reached at 212-471-5747. The Department also maintains a searchable database of licensees on its website: www.dos.ny.gov. Tenants should also avoid giving cash to a broker since, in the event of a dispute, 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, turn 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 email, 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, 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 have been accused of simply copying classified apartment listings published in newspapers and selling 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 have been accused of providing an initial list but not providing updated listings or information as promised. Others have been accused of habitually refusing to provide required refunds to consumers.

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.

Any consumer who believes that they have been victimized by a real estate broker or apartment information vendor may file a complaint with the Department of State. The required complaint form may be found and completed on the Department’s website, or may be obtained by telephoning the Department ‘s complaint review unit at 212-417-5790.