What to Negotiate in an Exclusive Rental Lease Listing Agreement
An exclusive rental lease listing agreement is relatively straightforward vs an exclusive right to sell listing agreement, without much to negotiate. The most important items to negotiate or at least keep in mind are exclusive agency vs exclusive right to sell, fee vs no fee, the protected buyers clause, the expense reimbursement clause and of course the commission rate.
What Is Exclusive Agency?
An exclusive agency listing agreement simply means that the listing agent will be the only broker marketing the property for sale, hence the term “exclusive.”
However, an exclusive agency listing agreement has one very important distinction in that the owner if free to find his or her own tenant, and by doing so will not have to pay any commission whatsoever.
However, this should be rather rare as most exclusive agency listing agreements only allow the broker to market the property online.
Furthermore, most MLS associations and even many public websites only allow one individual to market the property, meaning the owner cannot have a competing listing online simultaneously.
What is an exclusive right to sell listing agreement?
In contrast, an exclusive right to sell listing agreement means the listing broker will be paid regardless of how the tenant is found. This means that even if the owner procures a tenant through private channels, the broker will still be paid the stated commission.
This is actually the most common type of listing agreement in residential sales; however, real estate brokers and MLS associations are not as strict about the agreement type when it comes to rental listings.
Difference Between Fee vs No Fee Rental Listings
Tenants typically pay the broker’s fee in NYC
In New York City, it’s well known that tenants are typically responsible for paying the broker’s fee, especially for lower priced, easier to rent apartments. For example, an apartment going for $2,500 a month will go very quickly considering that there is virtually no inventory in Manhattan priced below $2,000 a month.
Keep in mind that although NYC is especially unique in its perpetually low vacancy rates, it can be customary for tenants to pay the broker’s fee in any real estate market with high demand and low vacancy.
In the end, it’s all a matter of supply vs demand when it comes to deciding whether to list an apartment as a no fee rental or as a normal rental listing where the tenant pays the fee.
A standard rental listing where the tenant pays the fee will not mention anything about a fee on public websites; however, it’s understood that the tenant will have to pay some sort of a broker fee.
Except when an apartment is tough to rent
The exception of course is if an apartment is unique, priced high or otherwise hard to rent. For example, a luxury rental listing going for $10,000 a month might see the owner offering to pay the fee and thus listing it as a “no fee” apartment on various public websites.
Is the commission paid by the owner split between brokers?
It depends. If a listing is difficult to market and the owner’s fee is sufficient, then the listing broker might offer to co-broke the fee, just like in a typical sales listing. The fee would be split 50/50 per REBNY RLS rules. For example, a 15% (of the first year’s rent) fee would be split 50/50, meaning each broker would receive 7.5% at lease signing.
What is a Collect Your Own Fee listing?
Alternatively, a listing broker may choose to keep the entire fee for themselves if it is easier to rent out or if the owner’s fee is small to begin with. In this case, the listing would still be marketed as “no fee” on public websites, but in the REBNY RLS the commission structure would be labeled as CYOF, or Collect Your Own Fee, to other brokers.
A Collect Your Own Fee (CYOF) listing essentially means that the listing broker is not offering any sort of commission on the listing, and the tenant’s broker is responsible for securing a broker fee directly from the tenant.
A good example is a rental listing priced for $6,000 a month where the owner wants to attract more attention by listing it as a “no fee” rental. The owner agrees to pay one month in commission (8.33%) vs the 15% in commission that the two other brokers she interviewed wanted. The listing broker agrees and lists it as a “no fee” rental on public websites, and CYOF privately on the REBNY RLS (i.e. the MLS equivalent in NYC).
The Protected Buyers Clause
The protected buyers clause exists to protect listing brokers from a situation where an owner or tenant waits until the listing agreement has expired to sign a lease. This of course only applies to a tenant that was shown or introduced to the property by the listing agent.
This obviously wouldn’t be fair considering that the listing agent did the work in finding the tenant and perhaps even showing the tenant the property, only to be cut off from the deal due to the listing agreement expiring.
As a result, listing agreements will typically have a clause which will protect listing agents from this scenario.
Typically, an listing agent is given a set number of business days after the expiration of the agreement to email a list of potential tenants whom they have shown the property, or expressed interest in the property.
There will be a maximum cap to the number of names that the listing agent can submit; otherwise, an unreasonably long list of protected buyers will hinder any efforts by a future, different listing agent to rent the property.
The Expense Reimbursement Clause
Expense reimbursement clauses exist because listing agents incur substantial real and opportunity costs during the marketing process.
It’s expensive to advertise a property online
It’s not free to list properties for rent on public search websites. For example, agents have to pay $4.5 per day, per rental listing to list on StreetEasy. That can quickly add up if an agent has multiple listings and is posting the listing for rent on hundreds of websites.
Opportunity costs are real
An agent can spend an enormous amount of time and energy showing and marketing a property, not to mention countless hours spent taking phone calls at odd hours and negotiating offers.
Expense reimbursements can be taken upfront
At Mont Sky, we’ve decided that typical marketing reimbursement amounts of $1,000 to $2,000 and more are too much of an impediment for our customers.
As a result, we’ve lowered the amount dramatically to only several hundred dollars to partially cover some of the costs associated with your listing.
In exchange however, we do ask for the expense reimbursement to be paid upfront. We would never pursue a client over an amount so small, so if we never hear from you again on day 2 after the signing of your listing agreement, you are free to keep and use the professional photographs and the custom floor plan we made for you.
If your property is leased however and we are paid our commission, you can simply shoot us an email and we’d be happy to roll the marketing expense reimbursement into the commission. As a result, our reduced marketing expense reimbursement is more of a credit card hold, as everything is technically free if it rents.
How to Get Exclusive Rental Listings in NYC
Agents can secure exclusive rental listings in NYC either through individual co-op, condo or single family townhome and house owners, or through rental buildings that don’t have their own leasing offices.
Individual unit owners
Securing an exclusive rental listing with an individual unit owner works the same way as securing a sale listing with an individual owner. The landlord could be an former client, or even a current client is who concurrently listing his or her unit for sale.
Multi-family unit owners
Securing an exclusive for a large, multi-family building is every NYC agent’s dream. As you can imagine, relationships come into play and these types of listings can be quite difficult to procure. Often times, agents will offer discreet incentives or other carrots to large landlords to incentivize them to award them the exclusive. It’s not unheard of for a listing agent to take a developer or landlord out to a very expensive group dinner before being awarded an exclusive on an entire building.
EXCLUSIVE AGENCY RENTAL LISTING AGREEMENT
[Owner Name]
[Owner’s Mailing Address]
[City, State and Zip Code]
Re: Exclusive Agency to Lease
[Full Address of Rental Property]
Dear [Owner Name]:
This will confirm that you have engaged Mont Sky Real Estate LLC (“Broker”) as your exclusive agent with the exclusive agency to lease (including sublease) the above Premises.
1. You represent (select one):
___ You are the owner of the Premises and authorized to rent the Premises without the consent of any other person.
___ You are the tenant of the Premises, have received approval from the Owner of the building to sublease or assign your lease and will cooperate with Broker and any prospective tenant in obtaining the con sent of the Owner.
___ The Premises is a condominium unit, you are the owner, and you will cooperate with Broker and any prospective tenant in obtaining the Waiver of Right of First Refusal of the Condominium.
___ The Premises is a cooperative unit, you are the holder of the proprietary lease for the Premises, and you will cooperate with Broker and any prospective tenant in obtaining the consent of the Cooperative.
Any rental or sale is subject to approval of the Landlord, Condominium, or Cooperative, as applicable, as well as your approval. You authorize Broker to contact the foregoing, or their managing agents, to verify the status of the Premises and all necessary approvals.
2. You authorize Broker to offer the Premises at a monthly rent of $TBD for a minimum term of 1 year. This price can be updated at any time with seller’s approval.
3. The Term of this Exclusive Agency shall be 90 days from the date you sign this Agreement. Thereafter the Term may be extended by mutual agreement of the parties, in writing or it shall become an open listing.
4. You authorize Broker to advertise, photograph and show the Premises. Broker may host open houses for potential tenants and brokers. You authorize Broker to direct all marketing and agree that no other advertising or marketing, including listings on the Internet, shall be permitted unless Broker specifically authorizes them. Broker will advertise the Premises, including listing it on its web site, at its discretion.
5. You hereby authorize Broker, unless otherwise specified by you in this Agreement, to solicit the cooperation of other licensed real estate brokers who are members of The Real Estate Board of New York who will act as agents for the prospective tenants.
6. An Exclusive Agency to Lease means that during the Term of this Agreement only you and the Broker can rent the Premises. During the Term of this Agreement you agree to refer to Broker all inquiries, proposals and offers received by you from other brokers, and you agree to conduct all such negotiations solely and exclusively through Broker. Nothing in this Agreement shall preclude you from leasing the Premises on your own. You agree that when and if a lease of the property is fully executed, we will seek and be paid our commission and compensation for services rendered only from the tenant, at a rate of ____% of the first year’s rent.
7. Within three (3) business days after the expiration or termination of this Agreement, Broker will give you a list of no more than 6 people who were introduced to the Premises by Broker during the Term. If a lease or contract of sale for the Premises is entered into with anyone on that list within 90 days of the Term, you will owe us a commission as provided in this Agreement.
8. You acknowledge that Broker has informed you of your obligations under the Federal Lead Paint Disclosure Law and that you are aware of your responsibility to ensure compliance therewith.
9. This Agreement represents and embodies the entire agreement between the parties and supersedes any previous oral or written agreements, discussions or understandings. This Agreement may only be amended or modified by a written document signed by the parties. This Agreement is binding upon both parties’ successors and assigns.
10. In the event the property does not rent during the term of this agreement or any extension hereof or during the protection period set forth above, you shall nonetheless be obligated to reimburse Broker for expenses in the amount of $400. If you pre-pay this in advance this provision will be waived.
Please sign below as confirmation of your agreement, retain a copy, and return a signed copy to Broker.
Sincerely,
Mont Sky Real Estate LLC
AGREED AND ACCEPTED TO:
Executed by Broker:
Broker: Chris Zhou
Firm: Mont Sky Real Estate LLC
Date:
Executed by Owner(s):
Owner(s):
Date:
EXCLUSIVE AGENCY NO FEE RENTAL LISTING AGREEMENT
[Owner Name]
[Owner’s Mailing Address]
[City, State and Zip Code]
Re: Exclusive Agency to Lease
[Full Address of Rental Property]
Dear [Owner Name]:
This will confirm that you have engaged Mont Sky Real Estate LLC (“Broker”) as your exclusive agent with the exclusive agency to lease (including sublease) the above Premises.
1. You represent (select one):
___ You are the owner of the Premises and authorized to rent the Premises without the consent of any other person.
___ You are the tenant of the Premises, have received approval from the Owner of the building to sublease or assign your lease and will cooperate with Broker and any prospective tenant in obtaining the con sent of the Owner.
___ The Premises is a condominium unit, you are the owner, and you will cooperate with Broker and any prospective tenant in obtaining the Waiver of Right of First Refusal of the Condominium.
___ The Premises is a cooperative unit, you are the holder of the proprietary lease for the Premises, and you will cooperate with Broker and any prospective tenant in obtaining the consent of the Cooperative.
Any rental or sale is subject to approval of the Landlord, Condominium, or Cooperative, as applicable, as well as your approval. You authorize Broker to contact the foregoing, or their managing agents, to verify the status of the Premises and all necessary approvals.
2. You authorize Broker to offer the Premises at a monthly rent of $TBD for a minimum term of 1 year. This price can be updated at any time with seller’s approval.
3. The Term of this Exclusive Agency shall be 90 days from the date you sign this Agreement. Thereafter the Term may be extended by mutual agreement of the parties, in writing or it shall become an open listing.
4. You authorize Broker to advertise, photograph and show the Premises. Broker may host open houses for potential tenants and brokers. You authorize Broker to direct all marketing and agree that no other advertising or marketing, including listings on the Internet, shall be permitted unless Broker specifically authorizes them. Broker will advertise the Premises, including listing it on its web site, at its discretion.
5. You hereby authorize Broker, unless otherwise specified by you in this Agreement, to solicit the cooperation of other licensed real estate brokers who are members of The Real Estate Board of New York who will act as agents for the prospective tenants.
6. An Exclusive Agency to Lease means that during the Term of this Agreement only you and the Broker can rent the Premises. During the Term of this Agreement you agree to refer to Broker all inquiries, proposals and offers received by you from other brokers, and you agree to conduct all such negotiations solely and exclusively through Broker. Nothing in this Agreement shall preclude you from leasing the Premises on your own. You agree that when and if a lease of the property is fully executed, we will seek and be paid our commission and compensation for services rendered only from the landlord, at a rate of ___% of the first year’s rent.
7. Within three (3) business days after the expiration or termination of this Agreement, Broker will give you a list of no more than 6 people who were introduced to the Premises by Broker during the Term. If a lease or contract of sale for the Premises is entered into with anyone on that list within 90 days of the Term, you will owe us a commission as provided in this Agreement.
8. You acknowledge that Broker has informed you of your obligations under the Federal Lead Paint Disclosure Law and that you are aware of your responsibility to ensure compliance therewith.
9. This Agreement represents and embodies the entire agreement between the parties and supersedes any previous oral or written agreements, discussions or understandings. This Agreement may only be amended or modified by a written document signed by the parties. This Agreement is binding upon both parties’ successors and assigns.
10. In the event the property does not rent during the term of this agreement or any extension hereof or during the protection period set forth above, you shall nonetheless be obligated to reimburse Broker for expenses in the amount of $400. If you pre-pay this in advance this provision will be waived.
Please sign below as confirmation of your agreement, retain a copy, and return a signed copy to Broker.
Sincerely,
Mont Sky Real Estate LLC
AGREED AND ACCEPTED TO:
Executed by Broker:
Broker: Chris Zhou
Firm: Mont Sky Real Estate LLC
Date:
Executed by Owner(s):
Owner(s):
Date:
