Broker Fee Ban on Hold in New York

By Miguel Moreno

A New York judge has blocked a ban on broker fees—for now.

Landlords can once again make renters pay the broker fee, which can be as much as 12 to 15 percent of a year’s rent. However, tenant lawyer Sam Goldberg said he doesn’t think the temporary  Feb. 10 court order indicates a future win for the plaintiffs.

“I think they wanted to bring it back to the status quo, to the way things were previously,” said Goldberg of Goldberg & Lindenberg, P.C. “A lot of what they said was that there was a lot of confusion in the industry, people don’t know how to act, people don’t know if they can’t collect money, if they can collect money.”

Landlords hire brokers to market and advertise their property. Rather than paying for it themselves, they often collect the fee from their tenants.

However, New York issued a clarification memo in February for tenant and housing laws enacted last year. The section that has alarmed real estate firms and groups says that unless it’s a background or credit check, “a landlord’s agent cannot be compensated by the prospective tenant for bringing about the meeting of the minds.”

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Buildings with residential apartments stand in the newly developed and exclusive Hudson Yards neighborhood in New York on Sept. 13, 2019. (Spencer Platt/Getty Images)

Goldberg said the state is trying to make it easier for tenants to get by.

“New York is trying to be as friendly to tenants as possible. This definitely gives the tenant a lot more protection. It’s helping the tenants save a lot of money,” he said.

But the Real Estate Board of New York (REBNY) didn’t take the news sitting down. They’re spearheading the case against the state.

Joined by many real estate firms and groups, they claim that the ban was “contrary to established law, devoid of logic, arbitrary and capricious, an abuse of discretion, and constitutes improper rulemaking,” according to their petition.

They argue that the law doesn’t explicitly mention brokers or agents of landlords. Additionally, the petition says that even after the tenant protection laws were enacted, the Department of State says on its website that ‘”in most transactions’ the tenants will be responsible for paying the brokerage commission.”

REBNY argues that this ban on broker fees will hurt brokers and ultimately pressure landlords to raise rent, which will hurt tenants in the long-run.

Landlords can continue to collect broker fees from tenants legally until the next court date in March.