In an update made last week to the state’s recent rent reform laws, the Department of State said real estate brokers hired by landlords could no longer charge tenants a fee. The ruling sparked a widespread backlash from the real estate industry, particularly rental brokers. In response, a group of industry representatives filed an Article 78 petition in Albany, which resulted in a temporary restraining order on Monday, The Real Deal reported. The Real Estate Board of New York (REBNY) and a number of high-profile brokerages have filed a lawsuit claiming the new guidance was an “unlawful, erroneous, and arbitrary” interpretation of the rent reform law passed in June and wreaked “havoc and confusion” on the industry. The restraining order means agents acting on behalf of landlords can collect a commission from tenants until further notice without fear of discipline by the DOS.
The New York Supreme Court in Albany issued the temporary restraining order Monday after a group that includes REBNY, the New York State Association of Realtors (NYSAR) and big-name agencies including Corcoran, Brown Harris Stevens and Douglas Elliman among many others filed the suit.
The lawsuit accuses the DOS of violating procedural norms by not consulting industry insiders and the public before making the change and argues against the agency’s interpretation of the law, as agents were not specifically mentioned. The suit claims that when it issued the Feb. 4 guidance, the DOS “usurped” the state legislature and “engaged in unlawful rulemaking.”
Last week’s DOS guidance made securing an apartment much less prohibitive for renters–who would be spared fees of 12 to 18 percent of the annual rent–but riled the real estate industry, who claimed that rental brokers would sustain irreparable damage to their livelihood in the form of income loss and job loss.
According to the New York Times, Hal D. Gavzie, Douglas Elliman’s executive manager of leasing, commented in the suit–along with other brokerage representatives–saying that “Douglas Elliman is currently working on hundreds of current rental transactions in which potential tenants are now threatening not to close the transactions and are refusing to pay commissions.”
In a statement, REBNY President James Whelan and NYSAR President Jennifer Stevenson said the restraining order “means that thousands of hardworking, honest real estate agents across New York State can do business in the same way they did” before the state issued the rule. “We look forward to ultimately resolving this matter in Court in the weeks ahead,” the statement reads.
The order is expected to stay put until March 13, when the state department is due to respond in court.
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