New York officially gives real estate agents the go-ahead to collect broker fees

Posted On Thu, May 27, 2021 By

Posted On Thu, May 27, 2021 By In Policy

Photo by Daryan Shamkhali on Unsplash

The state of New York this week walked back the broker fee ban that was never really a ban. Last year, the Department of State issued guidance related to the sweeping rent reform laws from 2019 that said brokers hired by landlords would not be allowed to charge prospective tenants a fee. Following several legal challenges, a judge ruled last month that a ban on broker fees was an “error of law” and struck down the law. The state on Tuesday officially updated the guidance to fall in line with the court ruling.

In 2019, Gov. Andrew Cuomo signed into law the Housing Stability and Tenant Protection Act, which expands tenant protections, prevents landlords from deregulating rent-stabilized apartments, and caps security deposits to one month’s rent. Last February, the DOS had issued guidance related to the new law that said real estate brokers hired by landlords “cannot be compensated by the prospective tenant.”

In response, several real estate brokerages filed a lawsuit claiming the rule change “would negatively impact consumers, residential brokers in our community, and tenants.” The New York Supreme Court soon issued a temporary restraining order, halting the very short-lived ban.

In a decision last month, Albany Supreme Court Judge Susan Kushner said: “The guidance was issued in error of law and represents an unlawful intrusion upon the power of the Legislature and constitutes an abuse of discretion.”

The Real Estate Board of New York applauded the court ruling. “This decision ensures that thousands of hardworking, honest real estate agents across New York State can earn commissions without fear of unwarranted discipline by the Department of State based on its erroneous interpretation of the Housing Stability and Tenant Protection Act,” James Whelan, president of REBNY, said in a statement on April 9.

“We appreciate the support of our members throughout this challenging process and we are proud to continue advocating for the rights of New York’s real estate agents.”

New York City renters have long had to come up with a large sum at once when moving to a new apartment, fees which could include a security deposit, application fee, and a broker fee, which could range between 12 to 15 percent of the total annual rent.

A report from City Comptroller and mayoral candidate Scott Stringer’s office from 2018 found moving could cost New Yorkers more than 20 percent of a household’s yearly income.

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