Are Rental Broker Fees Illegal in NYC?

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
NYC Seller Closing Cost Calculator: https://www.hauseit.com/closing-cost-estimator-for-seller-nyc/

So, are rental broker fees illegal in New York City? This is quite a complicated topic. However, as of this filming, March 11, 2020, there's currently no restriction or prohibition on a landlord's broker from collecting a commission from a prospective tenant. However, this is subject to change in the near future and we'll tell you why in today's video. My name is Nick at Hauseit. Visit our website http://www.hauseit.com to learn about ways to save money when buying and selling here in New York City. So, let's get started.

So first, a bit of background. How have we arrived at this point where we are potentially facing a commission ban for rentals here in New York City? Well it all started on June 14th, 2019. This was the date that New York's Governor signed into law the Housing Stability and Tenant Protection Act of 2019. This particular act increased protections for tenants throughout the state and generally it's considered to be very tenant friendly and harmful to landlords. However, in this bill itself there was no specific mention or prohibition on broker commissions and specifically broker commission's for rentals.

However, on January 21st 2020, the Department of State issued a regulatory guidance memo which clarifies some of the language in the bill which was passed in 2019. Here's what the regulatory guidance memo said about broker fees in New York City: Can a landlord's agent collect a "broker fee from the prospective tenant? No, a landlord’s agent cannot be compensated by the prospective tenant for bringing about the meeting of the minds. NY RPL § 238-a(1)(a) provides, in part, “no landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge for the processing, review or acceptance of an application, or demand any other payment, fee or charge before or at the beginning of the tenancy, except background checks and credit checks...." The fee to bring about the meeting of the minds would be a "payment, fee or charge before or at the beginning of the tenancy" other than a background or credit check as provided in this section. Accordingly, a landlord’s agent that collects a fee for bringing about the meeting of the minds between the landlord and tenant from the tenant can be subject to discipline.

In response to this memo, the Real Estate Board of New York and a number of other plaintiffs including the New York State Association of Realtors ad numerous other brokerage firms filed a lawsuit against the Department of State. Once the lawsuit was filed a temporary restraining order was put into place. This order temporarily removed the restriction against the landlord's agent collecting a broker fee from a prospective tenant. On March 6th, 2020 the New York State Attorney General's Office and the Real Estate Board of New York agreed to an adjournment on the lawsuit which was filed in February. At this time, the State's response is due on May 1st, 2020. The plaintiff's response is due on June 5th, 2020 and the matter may be heard by the court on the 12th of June 2020. This means that the temporary restraining order issued in February remains in full effect. Therefore, landlord's agents can continue to collect a commission from perspective tenants until further notice.

So, the litigation on going and it is possible that these prohibitions may me stricken permanently but the alternative is that they actually are allowed to go into effect. But regardless of what happens what is clear is that the mindset of New Yorkers when it comes to rental broker fees has changed forever. If you speak to your friends, family, or colleagues in New York City it wouldn't surprise us if you found that the majority of them were fully in support of this prohibition despite the arguments against it being clear and obvious government over reach and meddling in the private sector.

So, over the long term, we think that regardless of the consequence of the litigation that the mindset has permanently changed and we think that rental broker fees will ultimately be eradicated over time if not throughout right government prohibitions through the free market and innovation. So, if you are a landlord today and you're looking to find a tenant, what do you do? Technically speaking, you are allowed to continue in manner you have previously. You have a broker list your apartment and the tenant pays the fee. Keep in mind that in many parts of the city, high supply has resulted in landlords having to pay the broker fee regardless.

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
NYC Seller Closing Cost Calculator: https://www.hauseit.com/closing-cost-estimator-for-seller-nyc/
.
.
Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
_
#hauseit #hauseitnyc