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Negotiations Now the Norm

01/30/2009, By Candace Taylor

Before the financial crisis this fall, the rules of renting a Manhattan apartment were hard and fast: Renters needed thousands of dollars for a security deposit and broker's fee and underwent rigorous credit and guarantor checks before signing an ironclad lease — all in the span of 48 hours.

However, now that rents have fallen and vacancies have increased, the rules have gone from hard-and-fast to "anything goes." Now, everything from the rent to pets to apartment amenities (think dishwasher) is on the negotiating table. Brokers, meanwhile, are finding they must suddenly demonstrate a new set of skills, wheeling and dealing to satisfy both tenants' and landlords' requirements. It's a challenge that carries high stakes: Learn to negotiate, or leave the business.

"My job in many ways is completely different than it was six months ago," said Adina Azarian, the founder and president of the brokerage Adina Equities. "There's a lot more haggling."

As recently as August, the meteoric rise of the rental market meant that landlords nearly always raised rents, both for new renters and renewal leases.

"For the last few years, the market's been going up and up," said Robert Scaglion, the managing director of residential marketing at Rose Associates, which manages some 10,000 rental units in New York City. "Rents were going up anywhere from 5 to 10 percent a year."

Not only were rents high, but the market was so frenetic that new tenants had little choice but to quickly pay what the landlord was asking, or risk losing the apartment.

"Two summers ago, if you tried to negotiate, you didn't have the apartment, because the guy right behind you was willing to pay full price and had all his paperwork in order," said Daniel Baum, COO of the Real Estate Group New York. "We have drastically shifted markets from there."

With vacancies on the rise, landlords are much more likely to consider renters' requests, a fact that hasn't gone unnoticed by tenants, according to Daniel Hedaya, the director of leasing and management at Platinum Properties.

"I'm literally negotiating for every single client who comes into the office," he said. Landlords are now offering to lower the rent, waive security deposits, throw in a few months of free rent or allow otherwise undesirable pets, he said.

Current renters are also getting in on the action. In a serious departure from the past, many tenants are asking their landlords for rent decreases when their leases expire, said Scaglion.

In many cases, landlords are honoring the requests without much negotiation, since it's more cost-effective for them to lower the rent for renewing tenants than to let an apartment sit empty for a month or more.

"I'm not going to lose a tenant over $50," said Scaglion. "If I have a good tenant with a good rent-paying history, we would prefer to keep them. Vacancies are expensive."

Some tenants are even negotiating for amenities they would never have had the nerve to ask for in the past. Azarian said a tenant at 53 Irving Place in Gramercy Park, one of the buildings where she is the exclusive agent, requested that the landlord install a dishwasher when his lease was up.

"He said, 'I love the building, but I know that I can rent a comparable apartment with a dishwasher for $600 less right now,'" she recalled, adding that the landlord granted the request. "If he moved out, we'd be renting for 20 percent less than he paid."

Newly built condos with a large number of units for rent are an especially fertile ground for negotiation, said Hedaya.

Traditionally, landlords had the upper hand because they usually had only a few vacancies, and renters didn't know if any other apartments were available in the building. But it's now common knowledge that unsold units in Manhattan's many new condos are being rented out by the sponsors, or by individual owners who bought them as investments.

Because some buildings have a large number of rental units on the market — and buyers know it — owners can't afford to be aggressive negotiators. In many cases they are simply trying to unload units so they are not sitting empty.

"In a building like 20 Pine where there are 50 or 60 rentals, it's going to be a lot more negotiable," said Hedaya, referring to the Financial District condominium where a large number of apartments are being rented. "If you target buildings that have a majority of listings for rent, especially when they're similar, they're going to be competing with each other."

Still, there are some areas where landlords do have the upper hand: in breaking leases.

According to Luigi Rosabianca, the principal attorney of Rosabianca & Associates, the recent wave of layoffs has prompted a rash of renters to try to back out of year-long leases.

"The landlord really doesn't have a legal obligation to make any changes to [the lease]," Rosabianca said.

If the situation becomes acute and seems likely to land in housing court, the landlord may be willing to haggle, especially if a tenant isn't paying rent at all. Rosabianca said in those cases landlords are often willing to make a deal, but it usually involves a large cash payout from the tenant and the loss of the security deposit.

"Landlord-tenant court is a lose-lose for everyone," said Rosabianca, who has helped some tenants break their leases with a 60- or 90-day payment plan that ensures the landlord will be paid rent while finding a new tenant.

The bulk of all this haggling, of course, falls on the shoulders of brokers, who must appease both parties in order to get the deal done.

"Nobody comes in and says 'I'll take that for that price,'" said Marc Lewis, president of Century 21 NY Metro. He joked that he's now doing so much negotiating, "some of the landlords are calling me Monty Hall."

The new negotiating demands are not easy, especially because it's completely new territory for many brokers who are used to lightning-fast deals where no negotiation takes place.

"It's a different skill set," Lewis said. "It's not a no-brainer now."

Azarian said she now spends the bulk of her time negotiating with building owners she almost never spoke to in the past. "It's a totally different job," she said. "I never used to hear from these landlords."

Bruno Ricciotti, a principal at Bond New York, said his agents are getting a crash course in honing their negotiating skills, and sharing tips about which landlords will make certain kinds of deals.

"We have meetings constantly to reinforce the lessons that [brokers] need to learn in this ... market," he said. "It takes a couple of weeks for it to be digested by these agents."

But for rental agents who can't hack it, the consequences can be dire. Ricciotti said the sudden need for shrewd negotiating skills is one of the reasons many agents, especially those with little experience, have been leaving the business.

"It's harder for new agents to stick," Ricciotti said. "Some novices have flaked off. We've replaced them with veterans from other companies."

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