New York rental fees ban is "misguided and harmful" say agents

by Steve Randall10 Feb 2020

Real estate associations and firms are taking on New York’s Department of State over a new guidance which appears to ban certain rental fees.

The DOS legal guidance says that brokers working for landlords may not charge a fee to tenants; the fees can be as high as 15% of annual rent and are paid by tenants along with a security deposit before they can move in.

The guidance says that brokers’ fees should only be charged to the property owners they represent. Those brokers that are hired by tenants to find them a home will still be able to charge their clients.

The change is concerning for many brokers and agents who fear their business may not remain viable without the fees they currently charge.

“It’s a major reversal in fortune,” Maurice Grey, who runs the small family business Esra Realty, told the New York Times. “I’m a third-generation real estate broker. But ask me if my kids will be the fourth generation? I don’t think so.”

In a statement issued Friday, Real Estate Board of New York & New York State Association of Realtors said they – along with brokerage firms - intend to file a lawsuit Monday (Feb. 10) against the DOS.

“We are asking the court to recognize that the Department of State illegally overstepped its role in issuing its new Guidance on rental brokerage commissions,” said James Whelan, President of the Real Estate Board of New York. “The announcement of this new rule without warning has caused widespread confusion and havoc among dedicated real estate agents and the clients they serve. The sudden decision and the way it was made public was harmful to thousands of hardworking New Yorkers.”

Widespread disruption
The lawsuit will state that the DOS has engaged in improper rule making and announced it in such a way as to cause widespread disruption and losses for brokers and landlords.

“The New York State Association of Realtors (NYSAR) is deeply concerned with the regulation’s content and the manner in which it was developed and promulgated.  Real estate brokers provide valuable services to the consumer and the property owners and they should be fairly compensated. These regulations will severely and wrongly impact the incomes of hard-working real estate professionals,” said Jennifer Stevenson, President of the New York State Association of Realtors. “It is unconscionable that a serious disruption of the marketplace has occurred without any industry input or even proper review by the State Board of Real Estate.  We will use every resource available to us to fight against these unreasonable and punitive regulations.”

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