From a Broken Lease, a Dream NYC Home
Leasebreak, a new company, aims to be the bridge between Airbnb and traditional brokers. Could it revolutionize renting in NYC?
You couldn’t believe your luck when you found that quaint, affordable apartment in New York City’s Greenwich Village—a deal in a city where real estate deals don’t exist. But that was before an ambitious construction project sprung up across the street, waking you at an ungodly hour every morning and prompting vermin to set up house in your home; before you were offered a promotion in your company’s London headquarters; before your relationship went tits up (neither one of you can afford to stay in the apartment alone).
The mice have moved in, and you’re ready to move out. There’s only one problem: that one-time gem in The Village came with a two-year contract, and it doesn’t expire for another six months.
Enter Leasebreak, a listings website that helps tenants renegotiate onerous contracts, connecting them with renters looking to sign a short-term lease. Leasebreak founder Phil Horrigan, who worked as a real estate agent in New York City since 2004 before launching the site last year, said he noticed a gap between the Airbnb marketplace and more traditional brokerage firms offering one-year leases.
“It was always a difficult situation for tenants who wanted to break their leases, and on the flip side the short-term rental business is a difficult one in this city. I thought it would be great if we could solve two problems at once.”
Indeed, breaking a lease can be a costly affair, with landlords often requiring tenants—or their guarantors—to pay for the remaining months of the contract. And while some restless tenants sublet their apartments without notifying landlords, this can also lead to financial penalties and eviction threats.
Horrigan says transparency with landlords is crucial to a successful lease break. “Most landlords will accept lease breaks if tenants can find qualified replacements.”
But he stresses that Leasebreak isn’t encouraging people to break contracts (contracts exist for a reason, after all). One reason it has taken a year for Leasebreak to get off the ground is that landlords were initially hesitant to indulge tenants’ whims. But landlords are realizing that sometimes breaking a lease is in everyone’s best interest, says Horrigan. “They really don’t want unhappy tenants in their units, so they’ll try to work with them as long as the burden is on the tenant.”
“It’s one of those things that makes you hit yourself in the forehead and say, ‘Why didn’t I think of that?’ There’s certainly a need for this kind of site,” says Robert Klehammer, vice president of the multifamily rental division at FirstService Residential in New York.
“It amazes me that so many tenants don’t realize that they’re actually signing a contract with some serious financial ramifications for breaking it early. And if tenants can’t find someone to take over the lease, landlords are generally going to seek at least two to three months pre-paid rent in order to release a tenant from a lease, if not more.”
The Daily Beast contacted Corcoran Group, the largest residential real estate firm in the New York City, to gauge the effect of lease breaking on the market, but they could not be reached for comment.
Leasebreak doesn’t vet listings, but users are asked to give a reason for breaking their lease; 40 percent of them cite “job relocation,” while roughly 20 percent of respondents list “purchasing a home” as reason for moving (“They may be closing on an apartment in a month but their lease goes for another eight months,” says Horrigan). Still fewer cite “personal reasons,” “moving in with a partner,” and a “growing family.” Regardless of their reason for relocating, nearly half of Leasebreak’s users stay within the five boroughs.
For prospective renters, Leasebreak may seem like a way of bypassing broker fees, but Horrigan designed the site to be agent-friendly. “A lot of agents comb our site for short-term rentals because there’s plenty of demand and not too many resources in the city that offer this,” he says. “And we have a lot of agents posting listings on behalf of their clients.”
As a former agent himself, Horrigan hopes to disabuse renters of the notion that brokers are mercenary con artists.
“Sometimes the bait-and-switch is legitimate because apartments go so fast,” he says. “The landlords they’re working with may be working with 10 different broker agencies, and sometimes the broker isn’t notified when an apartment he’s showing has been taken off the market.”
Some brokers are more trustworthy than others, and Leasebreak ostensibly invites scammers as much as Craigslist or any other real estate listings website. But Horrigan says the site weeds out red flags like vague or unlisted addresses. And people searching to take over a lease can select “landlord approved” apartments to streamline the process.
“The goal of our website is to turn that process into a large marketplace,” says Horrigan, who hopes to grow the site nationally. Leasebreak is already expanding rapidly through word of mouth: August saw the most traffic since its launch, and the site is currently home to 2,000 active listings.
Not bad for a startup that doesn’t yet have a public relations department.