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Do brokers deserved to be cheated? — Brooklynian

Do brokers deserved to be cheated?

Cheating the Broker


By TERI KARUSH ROGERS
Published: July 23, 2006

FOR some renters, the temptation is just too great.
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Illustration by Robert Grossman

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With a broker’s help, they have found a perfectly suitable apartment. Then, depending on their moral compass, tolerance for risk and financial standing, they may be tempted to double back and try to close the deal alone — thereby saving 15 percent of a year’s rent, the fee typically charged by rental brokers in Manhattan.

With the median rent for a one-bedroom in a doorman building now at $2,450 a month, according to Citi Habitats, that $4,410 fee could buy a fine flat-screen television set.

An informal survey of Manhattan rental agencies confirms that while backdoor maneuvers remain rare, they are growing in what is the tightest rental market in more than a decade. Vacancy rates stand at a microcosmic 0.56 percent, and the number of apartments for which the owner pays the broker’s fee has dwindled. Surging rents are commensurately swelling the dollars-and-cents translation of 15 percent and the incentive to avoid paying a fee.

Even employees who are relocating — formerly the cream of rental brokerage business for their blithe expense-account attitude toward rental fees, because they would be reimbursed by employers — are balking. That’s because many corporations have quit reimbursing brokerages directly and are instead paying flat-rate “moving allowances” to the employees themselves, who may then do as they wish with the spoils.

Marge Pearson, the executive vice president of DJK Residential, where half of the rental clients are corporate relocators, said that backdoor behavior is up about 25 percent as a result of the shift in reimbursement policies.

David P. Lesch, who practices real estate law throughout the five boroughs as a partner in Lesch & Lesch in the Bronx, understands why. “It’s a tough world for tenants, and it’s a tough world for brokers in this city,” he said. “They’re fighting for leverage, and everyone is trying to protect their money, and the two have been clashing as of late.”

So if you are a renter with the stomach of a street fighter and the situational ethics of a reality-show contestant, what, exactly, are the risks of cheating on your broker?

They run the gamut from tribal to litigious.

“A broker can make a person’s life very miserable if they want to,” said David Francis Calderazzo, the director of leasing for William B. May Real Estate. “All you have to do is spread the word that these people are no good in the building, that they’re deadbeats. No one likes the cold shoulder.”

“A couple of years back,” said Mr. Calderazzo, a former actor, bartender and bouncer, “I showed an apartment to someone who was from one of my corporate accounts but had to pay his own fee. It was a $3,800 one-bedroom on the Upper West Side for him and his dog.”

The client dropped out of sight after looking at the apartment. But two months later, during a routine 411 check on vanished clients, Mr. Calderazzo discovered he had been double-crossed.

“I confronted him, and he basically hung up on me,” Mr. Calderazzo recalled. “Then, he calls me up two or three weeks later. He said he had to get his locks changed three times because someone put Krazy Glue in them. That the super and the doorman paid him no mind.

“It wasn’t me. I didn’t do anything. I believe in karma. But I know people in the building. He figured out maybe it’s because he didn’t pay me my fee. He mailed me a check for 15 percent ASAP.”

Most brokers said they begin with friendly reminders to recalcitrant clients. “I would e-mail or fax them an invoice and see what their initial response is,” said Senad Ahmetovic, an associate broker at Halstead Property who has confronted similar situations about four times a year during his eight years in the business. “They’ll try to wriggle out of it. They’ll either be fine with it or try to negotiate the fee down. If it’s one of our corporate accounts, or if it’s a rental where we have not dealt with another broker and we don’t have to split the commission, then we would negotiate the fee and cut up to 20 percent off.”

It may be a somewhat dispiriting discovery for line toe-ers everywhere, but anecdotal evidence suggests that nice cheaters finish first. They often earn a discount for their bad-faith behavior — anywhere from a few percentage points to perhaps paying a month’s rent instead of 15 percent of a year’s rent — so long as they mind their manners.

“We try to leave the client with as much good will as possible,” said Philip K. Kiracofe, the chief operating officer of Dwelling Quest, echoing the farsighted view of other agencies and agents. “A rental client today is just an opening for a relationship that could be lifelong. If we get the feeling that the person is likely to be our client moving forward, we’re going to be more amicable in terms of working out a fee arrangement. If the person is utterly enraged, then we’re going to defend our services to the maximum we can.”

And what is the maximum? Probably a stream of scary letters from the company’s lawyer and the implication that, win or lose, any litigation could result in a scarlet letter on the renter’s credit report, imperiling his or her ability to rent anywhere ever again.
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People with any type of lawsuit history are the hardest type of applicants to deal with, said Claudia Saez-Fromm, the executive vice president of Mark David & Company, a boutique real estate brokerage in Manhattan.

Landlords skittish about accepting a potentially litigious tenant may ask for a year’s rent upfront, she said. Even cheats who signed a fee agreement acknowledging that they will owe a broker money if they lease a particular apartment are rarely dragged into court, which in New York will most likely be small-claims court, which has jurisdiction over claims under $5,000.

“We’ve never actually gone all the way to winning a judgment and collecting on it,” said Mr. Kiracofe, who estimated that of the 60 to 70 leases Dwelling Quest brokers a month, about 5 percent of the clients try to strike a backdoor deal. When caught, he said, most settle to avoid headaches or committing credit-report suicide, especially when they know they’re guilty. And most brokers settle to avoid wasting their own time.

Consider the experience of Cindy S. Anish, a Bellmarc agent. About a year ago, she helped a young woman interning as a fashion designer find a $2,000-a-month studio in the West 40’s. The woman’s father, a Washington malpractice lawyer, had agreed to co-sign the lease and pay the broker’s fee. But the daughter showed up at the building’s leasing office and signed the papers without Ms. Anish. The father refused to pay the fee.

“He knew very well I wasn’t going to sue him in Washington,” Ms. Anish said.

Instead, she sued the daughter in small-claims court in New York and won. But without any information about where the young woman banked or worked, Ms. Anish was unable to collect. “If I had realized I needed to provide assets for the city marshal to attach, I don’t think I would have done it,” she said.

A cynical soul could wonder, given the minimal practical penalties for backdoor tenants and the current pressures of the marketplace, why the phenomenon isn’t more epidemic.

“Most people are honest,” said Mr. Calderazzo of William B. May.

In addition, experienced brokers employ an array of preventive methods to avoid being left at the altar, like learning to spot potential cheaters.

“In general, they’re not forthcoming with personal information like names, full contact information, income,” said Mr. Ahmetovic of Halstead.

Some agents swear by having clients sign fee agreements. “I’ve only had two situations over 20 years,” said John Wollberg, the executive vice president and founder of the Atco Residential Group, a boutique company that handles both rentals and sales, mostly upper-end. “It’s amazing to me the number of agents out there in the world that just don’t do it and feel they’re protected somehow.”

Such agreements do create a legal obligation to pay the broker’s fee, said Mr. Lesch, the lawyer. But they can also be fuzzy — for example, what if the client rents a different apartment in the same building? And although many agents are disinclined to take matters all the way to court even with a signed agreement, others shrug them off because asking clients to sign casts the chill of mistrust over the relationship.

“I’m from the old school,” Mr. Calderazzo said. “It’s a pain in the neck walking around” with fee agreements “and kind of embarrassing.”

Barak Dunayer, the president of Barak Realty, is more ambivalent. “I kind of leave it to my agents’ discretion,” he said. “If it’s a referral or repeat client, we’re not going to ask him to sign an agreement like that, but if it’s someone from out of the blue,’’ the agent might well insist.

“If someone refuses to sign something like this,’’ he continued, “we make our own judgment call whether we want to work with them.”

One of the strongest deterrents, though, seems to be a broker’s ability to develop relationships with supers, doormen, landlords and management leasing companies. When eager clients suddenly stop calling, brokers will often check with landlords to turn up double-crossers.

In the bigger buildings, for instance, brokers sign their clients into the managing agent’s on-site leasing office before showing an apartment. Most will send a red flag to the broker — or simply refuse to proceed — if a client later attempts to rent the apartment solo. (Couples are said to try to game the system by using separate names.)

“Most management companies obviously have a vested interest in defending the broker community,’’ Mr. Kiracofe said. “Some are more strict than others.”

But the symbiosis doesn’t always work perfectly. Mr. Ahmetovic of Halstead recalled the couple whom he showed an $1,800 walk-up in the East Village two years ago. Shortly after that, they disappeared. He didn’t see them for another year, and then the landlord called him about rerenting the apartment.

When he stopped by the apartment, he immediately recognized the current tenants: they were his former clients. “They greeted me like we knew each other,” he said, adding that the landlord apparently neglected to check the tenants’ names against the list of Mr. Ahmetovic’s clients.

“I didn’t press for the fee because it probably wasn’t worth my time,’’ Mr. Ahmetovic said, “and I got the chance to rent the apartment again.’’

Comments

  • this article gave me ideas how to cheat them. have a friend go with broker and check out apt and than goto the building and get the lease sign yourself.