In our most recent Icons of Relocation podcast episode, CEO Simon Johnston spoke to Brenda Levis from NYC Navigators, one of our global relocation partners. They discussed some of the most frequently asked questions about relocating to New York and its major differences to its sister city, London.
What are real estate broker fees and how much are they?
People relocating to New York (or anyone renting in NYC) will most likely have to pay real estate broker fees. These fees are specific to New York City, where it is standard practice that tenants pay the fees for the real estate broker used by the landlord to source a new tenant. In most other places, these fees are paid by the landlord. The fee is usually around 15% of the annual rent, which tenants must pay once upfront. As it is a fee, not a deposit, the money is not returned at the end of the tenancy. Previously, it had been relatively common for corporations to pay the broker fee for their relocating assignees. However, more and more companies are stepping away from this, largely due to the cost.
Tenants will need to pay this fee for any rental property they take on that was advertised via a real estate broker. Renting a property directly from a building with its own management company would not require broker’s fees, but these properties tend to come with a premium rent.
What are guarantor companies?
Another major difference with relocating to New York is the need for a guarantor company. In 2019, real estate laws changed the rules around deposits for rental properties. Prior to the change, landlords were able to ask for huge security deposits upfront. This was especially so for prospective tenants who had no credit history, as in the case of those relocating from abroad — a higher security deposit was regarded as a ‘cushion’ for landlords if the tenant becomes unable to pay rent.
However, in an attempt to protect tenants with poor or no credit from large deposits, the law now stipulates that landlords can only ask for a maximum of one month’s rent for the deposit. Yet, landlords found another way around this, and guarantor companies began popping up as another way of protecting their rental income against risky tenants while abiding by the new laws. Guarantor companies guarantee the lease, meaning they will cover the rent if the tenant fails to pay. Tenants usually have to pay the guarantor company around half a month to one month’s rent for the service, and landlords have the freedom to dictate which guarantor company the tenant must use.
While not everyone must use a guarantor company, those relocating to the US as an immigrant with no US credit history will very likely have to use one to re-assure landlords of their financial situation. This is especially so if there are numerous applicants for one apartment, as not having a credit history will be a real downside and mean a landlord is more likely to select a different tenant with a good credit history.
Why are corporate leases unpopular?
In many countries around the world, a corporate lease is a sign of stability and is highly favoured among landlords. A large company is regarded as trustworthy and will not be in a situation where it cannot pay the rent, unlike an individual who may, for example, lose their income.
In New York, however, corporate leases are highly unpopular. This is for a couple of reasons. Firstly, it would be very expensive and difficult to have to go to court against a big corporation — much more so than an individual — and landlords are not keen on the idea of having to do this. Secondly, if the tenant leaves the employment of the company or moves elsewhere, the company may then use the apartment as temporary accommodation for others and rotate employees in the apartment. Most buildings in New York do not want such transient stays.
What are ‘condos’ and ‘co-ops’?
The US has some different terminology to the UK, arising from different practices around property management.
A ‘condo’ (short for condominium) is a privately-owned unit in an apartment building or community of buildings. Owners of condos will pay homeowner’s association application costs as well as higher move-in and move-out fees, perhaps up to $1000 for maintenance. As condos are privately-owned, owners are free to make changes to the property as they wish. Therefore, if renting or buying a condo, you will likely find that they have higher-end finishings.
Co-ops, on the other hand, are apartments in a building which is managed by a board. The purchase price of a co-op will be lower than a condo, but the maintenance fees are typically much higher. As the board manages the building and the properties, any changes to an apartment have to be approved by the board. Therefore, these properties tend to be lower quality than condos.
Co-ops are generally more problematic to rent for a few reasons. Firstly, the amount of time a property owner can sublet the apartment for will be dictated by the board. This decision cannot be overturned, so renting a property in a co-op will be affected by this time limit and you may only be able to rent it for one or two years. Make sure you know how long you will be able to rent the property for beyond the initial term.
Applications are also far more in-depth for co-ops, even more so for someone relocating from overseas. These applications must be approved by the board, with a turnaround time that might be as long as 60 days. This is not ideal for relocators who only have a relatively short amount of time in temporary housing.
Are properties furnished or unfurnished?
Lots of apartments in New York City are unfurnished. Most people have their own furniture, so furnished properties are not seen as a premium but more of an inconvenience. Only around 5% of properties on the market may be furnished, meaning options will be very limited if you are searching for a furnished apartment in NYC.
Washing machines and dryers are not common in apartments, or even in the building, and you are likely to have to use a laundromat for your washing. This is because many buildings do not have suitable plumbing to have them in each apartment or even in the building.
Which neighbourhoods are growing in popularity?
Recently, relocators have increasingly been looking at areas outside the city due to rising rents and the need for work-from-home space. If you are relocating to New York, you will most likely need to find options further out than you might think.
Places like Astoria, in Queens, are particularly growing in popularity, with one-bed apartments averaging $3000 rather than $5000 and only a 20 minute commute to mid-town East. In Astoria, many luxury doorman apartments have been built in recent years meaning it is a particularly attractive area. Long Island City (also in Queens) has also grown in popularity due to its easy commute to Manhattan.
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