City Council Members Mulling Legislation Designed To Cap Real Estate Broker Fees
NEW YORK (CBSNewYork) -- A battle over real estate broker fees is brewing at City Hall.
For renters, it means paying thousands of dollars to get an apartment before they even set foot in the place. But two council members are proposing a package of bills that could change that, CBS2's Lisa Rozner reported Monday.
When renter Piya Malik was in a crunch she got a broker and moved into an apartment on the Lower East Side.
"I was lucky I had a chunk of savings," Malik said.
That savings went to her broker, who collected the standard fee -- 15 percent of a year's rent.
For example, for an apartment that costs $3,000 a month a renter is paying almost double -- $5,400 -- to a broker. Councilwoman Carlina Rivera and Councilman Keith Powers took note and introduced a package of bills, one of which would limit a broker's fee to one month's rent, or 8.3 percent of the annual rent.
"There's no law right now around broker's fees and security deposits on how much you pay so we're trying to create some regulation around it," Powers said.
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Real estate brokers like Frederick Peters who have been in the business for nearly 40 years are livid.
"The idea that the broker's fee should be capped by the city seems inappropriate to me in the same way that it would if the city told attorneys they could never more than $250 an hour," said Peters, CEO of Warburg Realty. "Usually, the owner has a broker and the tenant has a broker. So that $5,400 is already divided in half. Of that half, the agent will get a percentage and the firm will get a percentage."
"A broker can spend 15-20 hours on something and put a lot of time and energy and they have a lot of expertise and they won't get paid for their work," real estate agent Cristina Cote, of Cote Luxury Real Estate, added.
Others see an upside.
"It weeds out a lot of the agents that don't really go out there and learn the market, don't really help their clients. They're just in it for the quick buck," real estate agent Mike Jeneralczuk, of REAL NY, said.
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Startups like NestApple, created to avoid the 15 percent broker fee, are taking off. Co-founder and now licensed broker Nicole Fishman explains, "You find the apartment because you know your needs, and when I get my commission I give you two-thirds of it."
When Malik moved again, she listed her apartment on Joinery, where outgoing tenants post apartments and collect a small fee instead of a broker.
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The legislation already has about half of the city council's support. The next step is for it to be heard in a committee.
