The Broker Is In

Michele Kleier is intimate with the building. Really.

The president of Kleier Residential and co-star of the HGTV reality show Selling New York is trying to sell Apartment 7A at 1125 Park Avenue. She describes the unit in this prewar co-op as “gracious” and “elegant,” and the luxury property itself as having great amenities and lovely neighbors. She should know. She’s lived in the building for 32 years.

So-called resident brokers like Kleier can be a blessing. Because the building they represent is also their home, they know it well and understand the quirks of the board, and thus are more likely to deliver buyers everyone will love. They have been selling apartments for a long time, frequently with few problems. And your building may have one: the broker who lives in a building and has, over the years, become the “go-to” salesperson for residents.

But what happens when this broker abuses her trust? How, then, does a board deal with the broker who is also a fellow resident?

Residency Is Good

From a board’s point of view, a resident broker with a rich and intimate knowledge of the building can help vet potential customers, improving the odds of approval.

For instance, Kleier, who handles 80 percent of her building’s listings, has never had a rejection in all the time she’s handled sales there. She has sold 47 apartments in this 72-unit Carnegie Hill cooperative. She is known as the unofficial broker of the house.

In addition, a building with a top broker living there has the benefit of a professional with a personal commitment to its welfare. If the broker is also a shareholder, she is not likely to sell a unit to a difficult person. “I have a stake as far as who is going to be moving into the building,” says Kleier. “I want to keep the building at a certain level. We want nice people. We want good neighbors.”

For the buyer or seller, a resident broker is more likely to ensure that the deal passes muster. The individual representing them can more easily follow up on delays in completing and delivering the package. In cases where a sale can be derailed at the whim of a board, a broker with strings to pull can offer sellers and buyers a measure of relief.

“I know people on the board. So, if I see that the management agency is going too slow, I get them to help me,” says Amy Krischer, an independent broker who only sells listings in her condo, the Bromley, a 300-unit luxury building on the Upper West Side. “And they will help me because, remember, I’m also an owner in this building.” On streeteasy.com, Krischer is listed as the condominium’s top broker.

Although restricted by anti-discrimination laws from discussing issues like schools, churches, and local demographics, resident brokers also can convey a deep understanding of the building and the neighborhood. They know whether the dry cleaner down the street is reliable or if the local pizzeria is any good. When a unit is in disrepair, they probably know enough to show a prospective buyer a renovated unit in the same line.

That Was Awkward

That said, what happens when a resident broker steps out of line? Although not a widespread problem, it can create an awkward situation. The board must deal with the uncomfortable task of disciplining or – as a last resort – forbidding the individual from doing business in the building.

No board wants to restrict its residents’ ability to work with brokers they choose (some would – and have – argued that it is a restraint of trade). In fact, you should probably bend over backward to work things out. Attorney Robert D. Tierman, a partner at Litwin & Tierman, advises boards to give the offending broker every opportunity “to clean up his act before being banned.”

The reason is simple: forbidding a broker from working in your property will invariably lead to a lawsuit. “You must realize that there is a strong likelihood that [a restriction on a broker] may be challenged in court,” warns attorney Dean Roberts, a partner at Norris McLaughlin & Marcus. “A broker who just does a little business in a building probably won’t sue, but a broker who does substantial business in a complex might.”

So be prepared with the facts. Roberts says that his client, a New York City co-op, prevailed against a challenge to a ban it had imposed on a broker by having a clear rationale for its actions. When examined in court, the directors explained that “it was to protect shareholders, because the broker was selling apartments at too low a price, misrepresenting the property, and speaking badly about the building – really about the board. In short, they said the broker was not operating in the best interests of the co-op.”

Forbidding a broker from working in your building is an extreme step to take – but one that many boards don’t even realize is open to them. Attorney Stuart Saft, a partner at Holland & Knight, says: “The board absolutely has the power to ban [any type of] brokers from [doing business] in the building. They can ban for abuse, and any other reason, except for self-dealing, bad faith, or discrimination. The board of a co-op has complete control of the co-op.”

So, what are the areas of discomfort that may force a board to take some sort of action against a broker? These include repeated instances of incompetency or dishonesty; constant breaking of building rules; sending too many e-mails to residents trying to get them to list; and staging open houses after being told to stop. In short, anything that affects the residents’ “quiet enjoyment” of their apartments and the smooth running of the property.

Conflicts, New Blood & Lawsuits

Boards can also become uncomfortable if their rejection of an apartment sale means the broker involved (who is also a neighbor) loses his income. “If you reject his sale, it hits very close to home,” says Dan Wurtzel, president of property management at FirstService Residential. “You’re telling someone who’s a shareholder, ‘I’m sorry, you’re not going to get paid on this deal.’ That can create some uneasiness within a building community.”

That sense of unease intensifies when a resident broker actively lists in the building while also serving on the board – even if this individual recuses himself from the vote. In 2005, Corcoran Group broker Bruce Robertson sat on the board of his Washington Heights co-op. When an applicant for an apartment he listed appeared before the directors, he recused himself from the process. However, he ultimately decided not to run for office again and instead works on various committees for the building.

Moreover, if the building doesn’t appear open to other brokers, “then it becomes a fait accompli, and it’s not right,” says Ellen Kornfeld, a management executive at the Lovett Company. The arrangement “doesn’t allow for much competition,” which means sale prices may flatten out.

Residents could also get the mistaken impression that the sale won’t be approved if they don’t use the broker who lives in the building – the one that everyone uses. “Somebody who is selling their apartment may feel that if they don’t give the listing to [the go-to broker, a potential buyer] might get rejected,” explains Robertson.

Boards should also be wary of overreaching. In 2012, the Link, a luxury Midtown West condo, tried to ban a broker who had sold multiple listings in the building, accusing her of running short-term rentals (otherwise known as “illegal hotels”). The broker, Katherine McFarland, had previously lived in the building. In response, according to The Real Deal, she filed a $20.4 million lawsuit. After the board lifted the ban, she withdrew the suit. (An attorney for the Link says the board declined to comment.)

The unbearable resident broker may be a rare sight, but if he appears – and the relationship turns sour – boards should realize that they don’t have to let it be; they have the power to make it better.