Broker Collects Fee Close to $20K for Small Rent Stabilized NYC Pad
By: Hadassa Kalatizadeh
The scarcity of finding a cheap apartment in New York City, is translating into big bucks in brokers fees.
As reported by the NY Post, a real estate agent recently was paid an astounding $20,000 fee for brokering a rent stabilized apartment in the Upper West Side. The one-bedroom pad was listed on Street Easy for $3,750 a month, but the realtor told prospective tenants that it was actually rent stabilized and would come out to just $1,725 per month. The rental is well below Manhattan’s median rent, which reached a record $4,150 per month in July. This apartment’s price would be limited by the city’s Rent Guidelines Board, and could only increase 3.25 percent next year, as part of the approved guideline for one year leases.
The real estate agent, Ari Wilford with City Wide Apartments in Manhattan, who advertised the deal, attached a broker’s fee of $20,000 for finding the steal. “He said, ‘Looking at the rent-stabilized price and looking at the broker fee, it will make sense in the long term,’ which, at the end of the day, it does. But at the same time, it’s like, wow, that’s a lot of money for a broker fee,” the tenant, who wished to remain anonymous, told the Post. The renter got a $500 discount from the broker, and sealed the deal dipping deep into his savings to pay the $15,500 fee.
The apartment is a “rustic 6 story prewar elevator building” near Central Park and Frederick Douglass Playground, as described by owner Solil Management. The renter was hyped for the July 1st move in date, but despite the hefty fee, the apartment wouldn’t be painted on time, and the renter had to hold his wares in storage for a week, until the landlord was able to finish the paint job.
By contrast, during the pandemic, as New Yorkers fled for greener pastures and wondered if they would ever come back, landlords were giving out concessions and waiving fees. Some apartments had been offering a free month of rent, or even two free months. Now, the tables have turned, and small, cheap apartments in the city require prospective tenants to stand on line for hours to secure a pad, and bidding wars are common occurrences.
Despite the hot rental market, a $20,000 broker fee remains a rarity. “I’ve never seen that and it’s not something I’d do. All my fees have been 15 percent,” said Marvin Michel with Douglas Elliman. The fee “probably isn’t kosher,” Broker Dolly Lenz told The Post, adding that if the tenant complained enough, he “could probably get the money back.”
The Department of State, which licenses real estate agents, commented telling the Post there is no law limiting a broker’s fees. “However, a broker’s fee must represent charges for actual services. Real estate licensees are obligated to act with honesty in their dealings with the public, and cannot perpetrate a bait-and-switch, charge exorbitant commissions that have no reasonable relationship to the work involved in earning the commission, or have undisclosed conflicts of interest,” spokeswoman Mercedes Padilla said. She added that the “department takes licensee conduct seriously and investigates complaints filed on a case-by-case basis.”
