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For a brief moment in 2020, prospective renters in NYC had some relief when New York made it illegal for landlords to require a broker's fee, but now that new law is gone and brokers can continue to collect a fee.
It's hard enough finding the right apartment and one that you can afford. Broker's fees have notoriously been a stumbling block for many New Yorkers since it's usually one month rent or up to 15% of the annual rent paid in one lump sum—and this is on top of an application fee and a credit check.
But on January 31, 2020, state regulators issued new guidance on the Housing Stability and Tenant Protection Act, which became law in June 2019. The new guidance suggested that it was illegal for prospective renters to pay a broker if that broker is acting on behalf of a landlord. It went into effect immediately, causing real estate brokers to panic.
Prospective renters didn't have to pay broker fees for about four days, when the Real Estate Board of New York and the New York State Association of Realtors filed a lawsuit, saying the guidance was both "immediate and devastating." They were granted a restraining order in court, meaning the new guidance was reversed until the state could respond to the lawsuit.
On Friday, an Albany County judge ruled against the guidance saying that the Statewide Housing Security & Tenant Protection Act of 2019 does not allow the Department of State to prohibit brokers from collecting fees from renters, according to Gothamist.
"The prohibition was intended to apply to application fees, background check fees, credit check fees, and any other fees imposed as a pre-condition to negotiations for entry into a lease agreement," the judge said in her ruling. "No reference is made to 'broker's commission' in the statute."
If the new act was intended to do away with broker fees, it would have "expressly stated it," but because it didn't, the guidance the state offered last January was in "error" and an "abuse of discretion."
Not only that, but the judge banned the Department of State from enforcing any rule that would prevent a broker from being paid by a prospective tenant and bans state regulators from imposing any disciplinary action against brokers who collect fees from tenants, according to The Real Deal.
REBNY lauded the judge's ruling on Friday, saying that the rights of New York City's real estate agents were protected.
"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," said REBNY President James Whelan. "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."
On the other side, housing advocates say there still needs to be some change in order to help New Yorkers be able to afford housing when it comes to broker fees.
"There needs to be some kind of curb on how much brokers can charge. The clear solution here is that the legislature should step in and clarify the law," Mike McKee, a tenant organizer and treasurer of the Tenants Political Action Committee, told Gothamist.
“Fees, historically, just defined who had access to the rental market and who didn’t. This is just going to allow people to equally be able to find housing and not have to pay these exorbitant fees to get access," said Paulette Soltani, the political director at the activist group VOCAL New York, according to The Real Deal.
The good news is that the Department of State, the body that gave the initial guidance that broker fees were illegal in 2020, could appeal the judge's decision. Lawmakers could also introduce a new law that is explicit about banning broker fees.
So how do you avoid broker fees right now? When searching for a new apartment, look for a tool that allows you to search for "no-fee" listings. You can also search for listings that a "rent by owner," meaning there's no broker involved. And of course, with any apartment search, be prepared to negotiate. It never hurts push for lower fees.
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