If a Broker Makes a Promise, Get It in Writing
Say you pay an exorbitant broker’s fee based on assurances that the lease will be renewed, figuring that you’ll amortize the 15% fee over the many happy years you’ll be living in your great new apartment.
No so fast. Unless the lease specifies that it’s renewable after the initial term expires–provided, of course, that you pay your rent on time and don’t cause any trouble–the landlord can decide not to renew without notifying you until the last moment. That happened to one of our editors.
Andrew paid a $3,000 broker’s fee on an apartment after the broker, let’s call him Neo, assured him that the lease was renewable. (The landlord, however, only offered a one-year lease, which should have raised some suspicions immediately.) When it came time to renew, the building’s manager sent the appropriate paperwork specifying a 5% rent increase. Days later the same manager called to say it was a mistake; despite the fact that Andrew was a model tenant (the manager’s words), the owner had decided to renovate the apartment and rent it for hundreds of dollars more. When Andrew tried to contact the broker, his messages and emails went unreturned–leading him to believe that the broker had knowingly misled him about the renewal, hoping to collect another broker’s fee from someone else a year later.
To avoid this happening to you, here’s what you should negotiate with the broker before signing the lease:
1.) Ask for a multi-year lease, so the broker’s fee is amortized over a longer period.
2.) Ask that the lease specify in writing that it is renewable if all normal obligations are met.
3.) Ask the broker to sign an agreement that if the lease isn’t renewed for reasons unrelated to the tenant’s behavior, the broker will find a comparable apartment without charging another fee.