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(Partner article) The world of real estate has been in turmoil since February 4. On that day, New York State, interpreting a law passed last July, decided that it would now be prohibited to charge all of the agency fees (“Broker fees”) to the tenant (up to 15% of the annual rent) as was the case until then.
The decision did not go down well with many real estate agents, whose professional organization (the Real Estate Board of NY) immediately took legal action. As a result, the application of the new rule is suspended, until March 13 for the time being. But beyond that, if New York State wins, the rule will apply. What does that change for tenants? Good or bad news? Update with Renaud de Tilly, founder of Detilly Real Estate, and specialist in supporting French people in New York.
"It’s pretty good news for tenants, sums up Renaud de Tilly. But if you understand what it means: it’s not all of the broker's fees that disappear, only the part representing the owner’s agent fees ”. Until then, the owner's agent fees had to be paid by the tenant (usually 7.5% of the annual rent, or 1 month). “Theoretically, a tenant who decides not to take on an agent will therefore no longer have to pay any fees at all, notes Renaud de Tilly. But it would be suicidal, especially for people who arrive from France, who do not know the market.
You have to keep in mind that the owner's agent only represents the interests of the owner's client, not those of the tenant … "
Beware of contract pitfalls
"We see too many stories of French people who thought they would save money by doing without an agent representing them, explains Renaud de Tilly. They always realize too late that it was a mistake: very often, they still paid the full agency fees of 15% (to the owner's agent who thanks them again) and, to be sure of do not miss the apartment of their dreams, almost blindly sign rental contracts that are unfavorable to them. This is when they decide to call us for help. "
Many French customers in particular do not immediately understand the difference between the French and American systems: “in France agents are used to find apartments because information is not available; here it is the opposite: the listings are open to everyone, information is available, however agents in New York serve to represent the interests of the tenant, both to present the application in a competitive world and then to negotiate the contract".
The agent tells the recent story of a tenant "who had signed a lease specifying that if he had not paid the rent on the 3rd of the month and after receiving a registered letter, could be kicked out immediately, while still having to pay the rent until the end of the lease! And of course, he went on vacation in August, the direct deposit did not go through, he was not there to receive the registered letter and he was ousted! ”.
Horror stories of the genre, Renaud de Tilly has seen many, like that of the owner who had authorized himself in the lease to enter at any hour of the day and the night (and did it). The new rule, if confirmed by the courts, will therefore have an advantage: that of ensuring that tenants only pay for an agent who represents their interests. “For the owners, the situation is a little more complicated, recognizes Renaud de Tilly. Overnight, they end up with charges they hadn't expected. ” But the law of July 2019 was precisely intended to protect tenants in a system that was hitherto clearly more in favor of the owners than it is for example the case in France. It is the same law which limited the deposit which can be requested by an owner from a tenant to a maximum of one month. And even if, ultimately, the amount of broker fees will be passed on by the owners on the amount of the rents, “in the short term, the tenants will benefit ” concludes Renaud de Tilly.
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Note: the “partner articles” are not articles of the editorial staff of French Morning. They are provided by or written to the order of an advertiser who determines their content.
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