February 26, 2020

New York Broker Fees: Legal or Banned? | Featured on PropertyShark

February will certainly be memorable for New York State brokers. At the beginning of the month, the New York Department of State issued guidance on rent reform laws, effectively banning broker fees for renters. 

Specifically, this would mean that New York renters would no longer have to spend thousands of dollars up front to cover the cost of a security deposit and brokers fees (which could be up to 15 % of their yearly rent). Brokers would still be able to collect a fee for representation, just not at the expense of the renter. Instead, landlords would now be liable for paying the hefty broker fee.

The ban rocked the New York real estate industry. Brokers claimed that the new rule would provide limited relief, if any, to tenants because landlords could increase rent to cover the cost of the broker fees; they argued that although tenants wouldn’t be paying the fee up front, renters could potentially feel that cost throughout the year in their monthly rent.

While renters praised the unexpected ban, it certainly came as a shock to landlords and brokers across the state. Suddenly, landlords were faced with difficult decisions on whether to use a broker at all.

Renters had about a week to celebrate before they were forced to unzip their wallets again. The Real Estate Board of New York filed a lawsuit against the Department of State and, shortly after, Supreme Court Justice Michael Mackey issued a temporary restraining order on the week-old broker fee ban. The lawsuit was also supported by several big-name brokerages that felt the new law was enacted without considering key industry players and that it went against a real estate procedural norm.

Meanwhile, the ban on the broker’s fee for renters has divided the real estate community in New York City. On the renter’s side, the ban addresses the issue of continually rising prices of New York City real estate; as such, renters feel this ban relieves some of the financial pressures imposed upon them by extensive costs like broker fees and security deposits, which could make housing costs a little more affordable.

However, landlords and developers don’t believe the ban will have a positive outcome. In particular, the ban would make landlords responsible for adding the fee into any other existing costs they might have already, such as property taxes, maintenance and more. If the ban is made official, landlords will act accordingly and raise the monthly rent rates. And, if and when this happens, then the ban’s original purpose to alleviate the financial stress of renters will be futile.

In the meantime, the temporary restraining order is effective until at least March 13, 2020, when the Department of State is due for a response in court. Both sides will be allowed to present a fair case in court. 

So, for at least the next few weeks, brokers can legally continue to request and collect commission from renters. However, what happens after March 13 is anyone’s guess. Connect with us to stay up to date.


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