Citi-Spaces faces financial trouble, bounced commission checks, owner says
June 19, 2009 04:10PM By Candace Taylor
Citi-Spaces has closed its East Village office at 174 Second Avenue, as well as its HQ at 55 West 39th Street.More details have emerged about embattled residential real estate firm Citi-Spaces since The Real Deal reported closure of its East Village office yesterday.
Company founder Israel Horowitz revealed today that the company has faced serious cash-flow problems, including bouncing checks to agents, and has closed not one but two offices in recent months.
Horowitz confirmed yesterday that Citi-Spaces had closed its biggest office, in the East Village, but revealed today that it also closed its corporate offices at 55 West 39th Street several months ago. The company has been widely rumored to be ceasing operations, which Horowitz has denied.
The headquarters housed Horowitz's office and his assistant and three other staff members, who were moved to other locations when the office closed in February, he said.
Horowitz also acknowledged that the company encountered a serious shortage of liquidity in January, which caused it to bounce agents' commission checks.
"The market crashed on us," he said. "We ran out of cash."
He attributed the problem to the fact that brokers' fees had begun being paid by landlords or owner of the apartment rather than the renters, a common incentive in the troubled economy. But while renters pay brokers fees upfront, it often takes landlords several months to pay the broker.
"We were trying to pay the agents on time -- we just didn't have money," he said. "It happened so fast. Instead of getting commissions at lease signings, we had to wait a month or two. And we still had to pay all of our bills.'"
One former Citi-Spaces agent, who preferred to remain anonymous, said there was one week where everyone in the company had their checks bounced, and that Citi-Spaces bounced a refund check to the source's client. The source said employees suspect that the firm improperly commingled agents' commissions and customers' deposits with company funds, using the money to pay other bills.
"We brought the commission in, but the money was floated to pay off other things that [Horowitz] didn't have the money for," the source said.
Horowitz acknowledged that commissions and company funds were not kept in separate accounts, but said the company quickly recognized the problem and reorganized the way payments are made in order to rectify it. Agents are now paid only in certified checks, he said.
"We realized we had to change the way we do business," he said. 'There was a problem and we addressed it."
The Better Business Bureau reported two complaints filed against Citi-Spaces in the past 36 months, one for "refund or exchange issues" and one for "service issues," according to the bureau's Web site. Both complaints have been resolved.
Horowitz denied bouncing checks to customers, saying the problem was limited to agents, and said everyone who is owed money by the company has now been paid.
But that may not be the case.
Greg Bibens, a former Citi-Spaces agent who is now a sales associate at Barak Realty, said he is still owed a small amount of money by his former employer, though he said it's not a large enough amount to justify filing a complaint or going to court.
Bibens said Citi-Spaces is likely facing financial difficulties because "it expanded too fast, too soon."
Many real estate firms in New York "were riding on the over-inflated market," he said. "When it comes down to the reality of everything, those that have the skills will last. Those that don't won't make it."
The Real Deal reserves the right to delete any comment it finds to be rude, obscene, racist, sexist, bigoted, irrelevant or repetitive, as well as inappropriate comments about anyone's personal appearance. The Real Deal does not endorse any comments posted on its Web site nor does it verify the veracity of comments or the identity of posters.
Comments
Anonymous
commingling funds, bouncing checks to agents,not fessing up to the corporate office being closed for many months...shheeesh!! Need we say more about this firm and its fearless leader? Completely out of business before the end of the year..maybe even sooner if his "angel investor" entirely pulls the plug! Folks, we are going thru a cleansing in the real estate brokerage business which is really not a bad thing!
Comment #1 Posted By: Anonymous 06/19/09
Anonymous
I was an agent with Citi-Spaces. Citi-Spaces owes me quite a lot of money. Like everybody else I left because I got tired of bouncing checks and always asking for my money.
Comment #2 Posted By: Anonymous 06/19/09
Anonymous
Folks, we are going thru a cleansing in the real estate brokerage business which is really not a bad thing!
Comment #3 Posted By: Anonymous 06/19/09
Anonymous
Disintegration......
Comment #4 Posted By: Anonymous 06/19/09
Anonymous
There should be a penalty for using a holy name, and being a crook.
Comment #5 Posted By: Anonymous 06/19/09
Anonymous
i work at citi-spaces for 9 months and I did have 1 problem with a check back in January, but ever since i have been paid via certified founds and always on time
Comment #6 Posted By: Anonymous 06/19/09
Vickie Love
Comingling funds is the most common and useful abuse of the brokerage "system".....What next; your gonna complain we don't 1099 cash?
Comment #7 Posted By: Vickie Love 06/19/09
Anonymous
comingling funds is illegal and subject to a broker's license being suspended. Someone contact the DOS.
Comment #8 Posted By: Anonymous 06/19/09
Anonymous
Isreal and his girlfriend Esmeralda screwed over many people i know....bad business
Comment #9 Posted By: Anonymous 06/19/09
Anonymous
This retail space was, and should always be, a bodega. It is the East Village, after all!
Comment #10 Posted By: Anonymous 06/19/09
Anonymous
Talking about waste disposal, Hey does anyone know if the Rapid Realty office in crown heights is still open? Their phone lines seems to be not in service.
Comment #11 Posted By: Anonymous 06/20/09
Anonymous
unfortunate
Comment #12 Posted By: Anonymous 06/20/09
Anonymous
horrible busines management.... i'm sure greed took it's course... This company was playing this game before the reccession took place. so don't want to hear it. i feel bad for their agents. I hope they take legal action!
Comment #13 Posted By: Anonymous 06/20/09
Anonymous
Those sons of bitches owe me a lot. My last commission check for $3,200 bounced -screwed up my other banking transactions!! I fully intend to take legal action against them... which will includes charges of sexual harassment.
Comment #14 Posted By: Anonymous 06/20/09
Anonymous
Benjamin James is going through the same thing. They have already closed 2 out of 3 offices... They are hanging on by a thread. See u guys in the grave with the rest of the scumbag brokerages out there
Comment #15 Posted By: Anonymous 06/22/09
Anonymous
Benjamin James is down to the 21 street office. But they have an exclusive on that building. They ain't going nowhere...
Comment #16 Posted By: Anonymous 06/22/09
Anonymous
Exclusive? On what? Thats a no fee building!
Comment #17 Posted By: Anonymous 06/22/09
Anonymous
The real deal is deleting most of the comments here, How much are they getting paid?
Comment #18 Posted By: Anonymous 06/22/09
satisfied client
Well , i must say, my experience with Citi-Spaces was quite pleasant. I first moved with them during the summer of 2007. At the time they they earned a client for life. I had just moved to New York and like most people who just finished school, i was low on cash. At the time Citi-Spaces allowed me to pay the commission in installments. They helped me get the apartment that I loved . I just moved with them again and found a beautiful brownstone for no fee. I would recommend them
Comment #19 Posted By: satisfied client 06/22/09
Anonymous
Horowitz denied bouncing checks to customers, saying the problem was limited to agents, and said everyone who is owed money by the company has now been paid. THIS STATEMENT IS 100 PERCENT UNTRUE AND MR. HOROWITZ KNOWS IT !!!
Comment #20 Posted By: Anonymous 06/22/09
Anonymous
bring back 2nd Avenue Deli!!
Comment #21 Posted By: Anonymous 06/23/09