Rent

With lease takeovers on the rise in NYC, apps are swooping in to facilitate

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New Yorkers tend to be more nomadic than other Americans: a Brick survey found that over 20 percent of readers have moved four times or more within the last five years. We often find ourselves needing to move for a host of reasons, whether it’s the allure of a cheaper apartment, a job-related relocation, or having finally reached their snapping point with the city and heading for the burbs. Unfortunately, the timing of a move doesn’t always align with the terms of an apartment lease, a legally binding document that can be quite costly to break—which is where lease takeovers come in.

Unlike sublets, which assume a leaseholder will be out of the apartment only temporarily, takeovers entail a transfer of the lease assignment to a new renter. According to the NYC Rent Guidelines Board, the exiting tenant must have their landlord approve the transfer, which typically means vetting the replacement’s finances and running a background check. The board emphasizes that landlords have the right to refuse a lease transfer, as long as they have a valid reason to do so, including poor credit history, insufficient income (in other words, less than 40 times the monthly rent), and a criminal or eviction history. Per the Met Council, landlords can't, however, refuse to rent to a tenant on the grounds of baseless statements, such as that he or she seems "unreliable."

It sounds like a bit of a hassle, but Stephanie Diamond, who curates a weekly newsletter of real estate and opportunities listings called The Listings Projects, has seen a flood of ads coming in from renters requesting lease takeovers. “It’s an amazing way to bypass brokers and help out people who are breaking their lease,” she says. “It’s always done in conjunction with the landlord—they’re aware of it and there’s an agreement in place to find a new tenant.”

Plus, subletting isn’t necessarily the less painful option when you need to move in a hurry: landlords can refuse your request to suble on the grounds listed above, as well as if you, as the leaseholder, don’t actually intend to return to the apartment. With a lease takeover, your lease--and your responsibilities within the apartment--terminates. 

Furthermore, subletting poses financial risks for the leaseholder, says Jeffrey Geller, vice chairman and chief operating officer of Insurent (FYI, a Brick sponsor): “If it is a sublet, the old renter and old guarantor stay in place,” he says. “The old renter is still responsible for all, including the payment of rent to the landlord, as the sublessee gives any rent payment to the existing renter.”

In other words, if your subletter suddenly can’t make rent—or if they damage the apartment—you (and your guarantors, if you have any) are on the hook. In a takeover, by contrast, your responsibility vanishes. “If it is a lease assignment, the old renter and their obligation terminates, as well as the old guarantor’s obligation. The new renter will need to have an annual income of a minimum of 40 times the monthly rent and good credit,” Geller says.

Websites that link up renters and possible 

The start-up world appears to have noticed the takeover trend: A handful of websites and apps are vying to facilitate these handovers. Last winter, Curbed covered Flip, an app that matches tenants looking buy and sell leases. Prospective buyers (of leases, not apartments) pay to be qualified based on their credit, income, and rental history by the service, which sends a report to the current leaseholder and landlord, who can then determine an agreement. Lease Break, a user-generated site that has been around since 2013, is similar, connecting leaseholders and prospective tenants directly, though it does not conduct its own background checks.

Another site that has entered the lease takeover fray is Joinery.nyc, a platform for renters to find each other for sublets, expiring leases, and lease takeovers. Julia Ramsey, Joinery’s co-founder, explains that the service allows NYC renters to avoid broker’s fees when they’re apartment hunting, and make a little money when they move out. Outgoing renters—with their landlord’s permission—post a listing of their apartment, message with interested tenants, and find a match, at which point they can charge the new renter a fee of half a month’s rent to sign the lease.

Joinery's terms of service explains that "fees received by the departing tenant are solely for their role in furnishing information related to a Rental Unit," so technically, they are not the same as a broker's commission. “This reduces brokers fees down to a third or more of what it typically costs, so the incoming tenant is saving and the person moving out can make enough to cover moving costs," says Ramsey. 

Flip, for its part, also allows departing tenants to charge incoming ones, on the grounds that "...access is valuable. The lease price is the amount of money that you (the leaseholder) choose to charge for access to your lease."

The outgoing tenants include on their listings what the income requirements for the unit are, so that apartment-hunters know whether they’re likely to land the lease; Joinery also conducts pre-vetting that includes a background check and income statements, which are then presented to the landlord, who ultimately decides whether to move forward with the transfer.

Currently, apartment listings on Joinery are scattered throughout Manhattan and parts of Brooklyn and Queens, ranging from a single room in an Astoria two-bedroom ($950/month) to a South Slope three-bedroom ($4,150), to an Upper West Side two-bedroom ($6,900.) Interestingly, none of those three listings include a "departing renter's fee"—it seems that most tenants are declining to charge those, perhaps to make their listings more competitive. 

“We built the site as an anti-Craigslist,” Ramsey says. “Having been through the moving process multiple times and almost getting a scammed a couple times on Cragislist, we want to make something that makes people feel safe and trust the platform.”

The social media caveat

One potentially eyebrow-raising aspect of the platform, though, is that it also employs social media integration to show renters whether they have any connections with each other. Earlier this year, the launch of a UK startup called Tenant Assured, which allows landlords to assess would-be tenants by scouring their social media presences, provoked concerns about privacy and discrimination.

While Joinery will only share with landlords the materials they usually see (i.e. finances, a background check, and eviction history), not all renters may want their Facebook profiles out in the open; one arguable bright spot of services like Craigslist is that they preserve more anonymity.

But Joinery is hoping NYC renters will do the math and find their method worth it: “The one guiding principle for us was to lower housing costs for New Yorkers,” Ramsey says. “A lot of people spend more then 50 percent of their gross income on rent, and when you layer a brokerage fee on top, it's a significant chunk of change, and one we think we can alleviate through technology.”

Joinery

And the savings, as presented by Joinery, are definitely appealing—the site calculates that a renter approved for this Upper East Side three-bedroom would have an extra $10,000 in their pocket by using the platform, rather than a broker.

“To keep moving and keep paying a broker fee is so much money,” says Stephanie Diamond. “You don’t have to pay all these fees for a home if you don’t even know it’s a long-term place.”

For outgoing renters interested in finding their own replacements, and for incoming ones who want to make sure a takeover listing is legit, Diamond suggests providing plenty of info: “Share as much as possible. I ask the listers to be upfront about what their intentions and what their needs are.”

On the bright side, she adds, despite its many challenges, “There are so many options of how to live in NYC—I’ve been so impressed with how people have been creative with how they live.” 

 

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