What To Do If Your NYC Real Estate Broker is Suing You

(Photo: Sterling Ely)Moving to New York is one of the most stressful moves you will ever make.  It's a completely backwards real estate market, the city is so big that you don't really matter as an individual, and there's so much crap on Craigslist, that it's not uncommon to throw your hands up and grab an overpriced drink at a bar in Hell's Kitchen in lieu of contacting one more broker on Craigslist.  E.B. White says well of this city:

"New York is the concentrate of art and commerce and sport and religion and entertainment and finance, bringing to a single compact arena the gladiator, the evangelist, the promoter, the actor, the trader and the merchant."

I've never lived in a city where so many people work so hard to spend all their money on rent!

Persevere.  The hardest time in New York City is that first year.  It takes about that long to get familiar with all the trains, figure out the proper flow of walking traffic (stay to the right and don't look up!), and realize that the last place you want to be in this city is around Times Square or the Meat Packing District (New York is MUCH cooler than this!).

E.B. White warns of the city's ability to chew you up and spit you out wet and masticated.  When I first read this line, I couldn't help but picture me and my wife eating at a corner diner wondering why the hell all the city's brokers were such a pain in the ass. Why can't we just find an apartment?

"...sometimes in New York you run across the disillusioned—a young couple who are obviously visitors, newlyweds perhaps, for whom the bright dream has vanished. The place has been too much for them; they sit languishing in a cheap restaurant over a speechless meal."

When I first moved here, I had a nagging suspicion that Mr. White was describing me.  Fortunately, I realized later that he was describing all newbies.  Thankfully, I was quick to tie-in to a network of friends, and one of them was instrumental in prepping me for all of this.  This first summer is the worst, the first winter is the worst, the first train rides are the most embarrassing, but this all get's better!

Here is New York, the essay by E.B. White, is the best thing any new New Yorker can read, if he really wants to understand the city or why he hasn't adapted yet.  I haven't read any piece that better captures what NYC is to the transient.  It was republished in book form, or you can find it here as a PDF in full text original form as it was published for Holiday magazine.

Most New York City Brokers Are Inexperienced Hustlers.

One thing that does not take a year to realize, though, is that brokers in New York City are a hodgepodge of poor business practices!  98% of them are scarcity-minded hustlers, inexperienced in the actual field of real estate, and trained to waste your time so that another broker can't waste it.  How do I know? I was one.  I was so fascinated by the circus that is the NYC real estate market that I found out what it took to become a broker (which is actually not a broker), and I became one.  (I'll give you a hint: you need a GED, some nominal hours of having "checked into" a classroom, and you have to pass two easy tests).

Why NYC brokers are so awful is a completely different article.  They're awful, mind you, but this article is of a particular annoyance.  They will sue you.  They will sue you frivolously, and they will wrap you up, trap you, and waste your time to make sure that it is them that can sue you and not another broker that can claim the right to sue you.

When the Citi-Spaces rep first called me at work, two months after I had moved into our new apartment via a different broker, he ominously warned me, after presenting his ultimatum, that he had "never lost a small claims case."  I had messed up, and this guy was going to bring me to reckoning! It was like a lousy episode of Dragnet.  ...except that he lost, and these are the steps you can take to protect yourself from being sued, and what to do if you do get sued by your New York City Real Estate Agent.

So What Do You Do If You Get Sued?

Step 1: Stop talking! 

Be quiet, don't talk any more, just listen, you've probably already said too much.  Know that if this guy is threatening to sue you, he's probably going to sue you no matter what you say.  It cost all of $5 to file a small claims suit in NYC for a maximum claim of $5,000, which is no sweat off this guy's back, placing all the worry on you.  There are no lawyers involved, and no proof required to file suit.  Why wouldn't he sue? It's a $5 crap shoot to see if you'll buckle.  And from the tone in this pretentious loser's voice, it appeared to me that most people buckle.

Step 2: Organize All Prior Correspondence.

Review everything that you have said and/or signed with this broker!  The last thing I asked this guy after his pathetic threat was that he kindly fax me the Client Registration form that I signed with his agent.  I already knew that he was using my emails back and forth with the agent from the month prior when we tried to solve this like gentlemen, against me, so I dug those up in Gmail and printed them too.

Preface:  There are a couple of things that have to be said here now.  Not all brokers in the city are bad. 1% of them have your genuine interests in mind and are fascinated by the market like I was, they want to help find you a place, and the other 1% of "good" brokers have fantastic networks in place (which is what you need to excel as an agent) so they don't need to hustle and scam, or chase small claims cases.

Knowing that, these brokers actually perform a service for you, and for landlords.  They are market makers.  They bring buyers and sellers together.  They know the markets better than you because they spend day in and day out in those markets.  They see what developer is bending on price, what developer is easier to get a dog into, and what developers will be the most stringent on credit ratings, thus providing no shot for you to land that rental or co-op.  A good broker is worth so much more than you actually pay or respect them!  They save you time, and they make deals smoother.   If a broker has done what a broker should for you, said broker deserves that commission.  

The purpose of Step 2 is to review all of that material and decide if the broker has held up his end of the client agreement.  The general rule of thumb is that if a broker brought you to a developer or landlord, and showed the property, you signed in at that property, with that agent, the agent (broker) is owed his commission.  He brought a buyer and seller together, he created value by facilitating the deal, he deserves compensation. 

Step 3: Counter Sue.

(Optional)  When you've determined that this broker is incorrect and has a limp leg to stand on, counter sue.  This is not required, but on further inspection into my case, it became apparent to me that Citi-Spaces, and other big NYC rental brokerages, were making a business out of suing customers that had crossed their paths and moved on. Suing just to sue.  It was one last shake on the money tree to see if any coins would drop out of the prospect who walked away for one reason or another.

This realization annoyed me to no end.  You can't counter sue for the sake of counter suing in small claims court.  But you can counter sue for lost wages. 

When the Citi-Spaces rep first announced that he would sue me, I was quiet and collected, but shaken up inside.  I had never been sued before, and $5,000 was certainly not money I was ready to just give away because some bully came up and asked for it.  I left my office right away to go talk to the leasing office to see if he had any leg to stand on.

Then I contacted the broker I had actually worked with.  Then I spent lots of time online looking up NYC's legal code, and best practices, etc.  I spent a lot of time focusing on that stupid suit, and not a lot of time focusing on what I was supposed to be focusing on like my job, my school work, my personal investment portfolio I was running at the time, or the part time business I ran after hours with a partner. 

I quantified the money-value of that time lost and counter sued for lost wages.  It was also a strong response to the Claimant that I wasn't going to roll over.  It only cost $5 to counter sue, why not play his game too?  Bring the original NOTICE OF CLAIM and SUMMONS TO APPEAR to the clerk, and ask her how to counter sue.  There are instructional pamphlets all over the office, and when you tell her it is Citi-Spaces suing you, she will likely chuckle, knowing how many claims they file, and help you in your counter claim.  Be polite, and don't act like it's a Law And Order episode.  It's just a small claims suit.

Again, this step is optional, but it came in handy on the day of the hearing because I was able to leverage my claim by offering to drop it if they opted to go to arbitration and not wait another three months for the judge to hear it.

Step 4: Prepare Your Case Presentation.

Regain your composure, and put your case together.  My case was sound in logic. This broker had tried to show me a building but didn't have an appointment for us so we were turned away at the lobby.  I later realized when I became an agent, that he didn't have an appointment for me because Saturday appointments in the most popular buildings are hard to get with less than two-day's notice. I also later realized, after becoming an agent, that he was just using stall tactics to keep me with him as long as possible so that I couldn't call another agent who might possibly already have an appointment there (because if we got one of those appointments we certainly didn't give them up if the "client" cancelled.  We kept them and tried to get another "client" in there!)

This was paramount for me in my case.  Claimant, in his own words, believed he "showed" me that building.  He emailed me, "I think you are a good honest person but the fact matter [sic] is that I work hard for my income and what I was expecting you as a client is to tell the other agents that I have already introduced you to the building and give me a call back to see it again."

There are several things wrong with his statement. For starters, I'm not a "client," I'm a customer, and I'm certainly not his exclusive client.  The developer is paying him in this "no-fee" deal, so the developer is his "client." Second, he's not in the business of merely pointing out buildings to me. He's a real estate professional, he should be showing them.  And the word "showing" has implications that any normal customer would expect in a showing.

Namely, and as I put it to the court, "In my opinion as a Consumer, and something I think Real Estate Professionals should know well, the act of 'showing' a property is more than a mere point toward a building or casual walk through the front door unannounced." It should entail walking into the leasing office, entail some form of grounds tour, or entail some fashion of benefits presentation.

I prepared an outline that I was going to use to state my case to judge or arbitrator.

1. Contend that Citi-Spaces did not "show" me Building.
   1. Illustrate that with a contrast of two showings from that day.
   2. Present logical consumer assumptions of the definition of "shown," or "to show" as written in their contract I signed.
2. Emphasize fact that Client Registration form was not exclusive.
   1. Meaning I was not beyond my right to find additional representation if I was not satisfied with Citi-Spaces.
3. Introduce that Citi-Spaces is using bully tactics, this lawsuit was knowingly unwarranted, and it cost me valuable time to sort through.
   1. This is least important of my defense, but I think it's important to note, in the court, since Citi-Spaces seems to present these cases with little regard for any consequence.

A crucial part of my case presentation was also a letter from the building.  I went the diplomatic route and recognized the validity of both sides.  I also went the proactive route and wrote it for them, asking them to endorse it on official letterhead.  It went something like this:

We here at [Building Name] work very carefully to protect any and all brokers as they are critical to our position in the market.  When a broker shows a client our property, both the broker and his client are registered in our computer..."

Citi-Spaces and I were never registered together in the building, because Citi-Spaces didn't show me the building!

But I digress. Number 2 above is what I want to close this step with.  If you're not satisfied with your broker, change brokers.  Find another one.  Keep searching until you meet one that fits your personality.  Almost all brokers in NYC have access to the same listings, and you can have them to.

Where I was going with that though is that Broker 1 did show us a building early in the day that we were interested in.  I put in an application for me and my wife, and it was declined.  In hindsight, I believe that had some to do with this broker's attitude toward the leasing office.  He was pushy and impatient.  He had no finesse with them.  That was the only building he showed us that we liked.  It was a "luxury" building.  When we asked him to see more of those, he proceeded to show us walk-up after walk-up which paled in comparison to what we had just seen. 

He did that because he had no other appointments.  He knew about building Two the entire time.  I know that now because I was later in his shoes and had to decide if I would do the same.  Instead of rescheduling with us, or telling us about this great second building he would love to show us, but would require an appointment, he decided to waste our time the rest of the day hoping we might apply at another lesser building.  He literally occupied our time so that we couldn't go back to Craigslist and look more, possibly seeing building two, and possibly calling them direct (a building will almost ALWAYS let a customer in broker-less to save paying the broker's fee!). There's more on this another day.

This is an everyday tactic of NYC brokers and it's appalling.  It creates NO customer value, and is a disgusting waste of the entire industry's time.  If you meet that broker, find another.  As long as you don't go into the same building that another broker has shown you, with intention to apply with a different broker, you are within your legal rights of choosing your own representation.  You can work with whomever you see fit!  And this broker didn't grasp that well.

Anyway, I've gone on too long.

Step 5: Show Up. That's 80% of the Battle.

Show up to court on time.  Be courteous.  Listen.  Smile.  Present your case in order.  Let the other guy rush and slip up.  And choose to go with Arbitration.  They are there to take the load off the judge and they are fair arbitrators.  If you have a simple dispute, when the court clerk calls your name, tell her you're "Ready." Which means you agree to have an arbitrator hear it.

The Claimant responded, "By the court." He wanted the judge to hear it, which makes me question if he even had a track record in small claims court, like he ominously threatened in our introduction. 

The court clerk came to us after roster and pointed out that it would likely be another three months before the Judge would hear it.  She pointed out that the case currently in front of the judge waited five months, and that if we went to arbitration, we could settle it now.

Using my leverage, I offered to drop my counter-suit if they would take it to arbitration.  I had already waited six weeks for this date, and I was sick of thinking about it.  The original agent looked at me with sad eyes and asked me, "well what do you intend to offer?"

"Nothing. This suit is frivolous and I just want it heard."

"Nothing?" He responded with semi-defeated eyes.

This guy deserved nothing, and if your agent is suing on empty grounds, he deserves nothing also.   They opted to take it to arbitration.  When the arbitrator read the claims, I kept my word and told the arbitrator I was dismissing mine (which probably helped my original case anyway pitching them as the greedy ones), and I presented my case concisely in the order I was called.

Six weeks later I received mail from the court saying the suit was dismissed.  In other words, I won.

A year later, I bumped into the same agent while I was a real estate agent.  We were both trying to get customers in a condo for sale in Battery Park.  I had an appointment, he of course didn't.  I was bumped ahead of him, my customer got preferential treatment.  That little victory was probably sweeter than the first one!

So What's the Short Story?

1. Stop Talking.  My case probably wouldn't have even been a case had I not corresponded so much with the original agent.  I thought we could actually resolve something like grown ups.  I was wrong.
2. Print out all correspondence you have with that firm and review your contract. They're going to use both against you in court.  Preempt their assault and you can pull the rug from under them. "I concede that agent deserves a commission if he had shown me this building...but he didn't 'show' me this building in the sense that professional real estate agents show buildings."
3. Counter Sue.  (Optional.)  Show them you're taking this seriously, and you value your time enough to demand compensation for it.
4. Prepare your case neatly and ahead of time, as an outline perhaps.  Practice your key points with other people before your day in court.
5. Show up.  Be on time.  Dress nicely.  Smile at ALL the court personnel, they have a long and grueling job.  Listen to the judge's or arbitrator's instruction, and speak in turn.

This entire experience was nerve racking at first.  It helped me to bounce the case off of other real estate professionals that I respected, business owners that I worked with, and even off the helpful staff at the county court house.  Ironically, this suit was one of the catalysts that put me in the business.

Know that these large firms often sue without grounds.  Don't cave to their slimy demands if there indeed is no case on their end.  This will not cost you thousands of dollars to defend, and with some minor preparation, you will come out on top. 

Now get out there, defend your right to good service, and choice of service, and stick it to them!  The NYC real estate market is a tough one to navigate, but once you get the hang of a few tactics, you can handle it all.

Disclaimers:

• This account was based on very real events, I graciously withheld individual names.  I'm having a tough time finding the public record on New York's Unified Court System, but the Small Claim index number was S.C. 40032/09 12/28, CITI-SPACES LLC vs TABARY, heard December 28, 2009, with Jack Baer as the Chief Clerk.  You can look it up the long way if that's important to you.
• Anticipating an accusation of slander, my words were chosen carefully and intentionally.  The Citi-Spaces rep was indeed pretentious, and he lost his case.  He was a pretentious loser, as I call him early in the account.  

Extended Resources:

• NY State outlines their Licensing Complaint Resolution Process in Legal Memorandum LI02, through the link.  It's lengthy, you're better off calling 311.
• Additionally, If you are considering working with a broker or agent you saw advertising on Craigslist, you can check their license status, and see how long they've been practicing on the NY State Public License Search.  Search by name.  This also comes in handy if they are being rude or pushy.  Look them up and find out who their broker ("boss") is, and send that person an email.  However, I've found firms to be culturally similar, and if the agent is rude and pushy, the broker probably is also.  Find another agent, or do it yourself.
• And here's an FAQ about Licensed Real Estate Salespersons for NYS.  These are the guys you're commonly referring to as Brokers.