NY Judge Rules Renters Will Need to Pay Pricey Broker Fees

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We were told, overnight, ‘Well, you’ve run your business this way for decades, but you have to make a change right now,’” said Sarah Saltzberg, co-founder of the Bohemia Realty Group brokerage. Photo Credit: bohemiarealtygroup.com

By Benyamin Davidsons

After months of turmoil, a Supreme Court judge has ruled that renters will indeed need to pay broker fees.

As reported by Crain’s NY, on Friday, Judge Susan Kushner of state Supreme Court in Albany ruled that previous guidance from Department of State which had prohibited brokers from collecting fees were “issued in error” and were “an unlawful intrusion upon the power of the Legislature.”

Following the state’s 2019 rent reforms, the State Department had issued a guidance, which read that landlords would have to pay the fees for brokers they hire to lease apartments, and banned the fees from being passed on to tenants. The pricey fee for a landlord’s broker, which can be one month’s rent or up to 15 percent of the year’s total rent, has long been billed to the renter. The new guidance wreaked havoc in the real estate industry, which was shocked that renters would not pay the commission. The industry swiftly moved to fight the guidance.

A lawsuit was brought forth in response by the Real Estate Board of New York, in collaboration with the New York State Association of Realtors. The suit argued that there was no precedent in legislative history which would allow the state’s interpretation of the rent law. Broker fees were not even mentioned when the law was debated in June, claimed REBNY.

Just days later, in February 2020, Judge Michael Mackey of state Supreme Court in Albany, had given the industry temporary reprieve by putting a temporary restraining order on the guidance. “We were told, overnight, ‘Well, you’ve run your business this way for decades, but you have to make a change right now,’” said Sarah Saltzberg, co-founder of the Bohemia Realty Group brokerage. “The judge’s order was absolutely the right thing to do.”

Now, Judge Kushner’s verdict fully solidifies that New York’s broker fees are back, as she deemed the controversial guidance “null and void”. The judge noted that the ban on tenants paying additional fees was only intended to apply to “application fees, background check fees, credit check fees, and any other fees,” with no mention being made in the statute about broker fees.

The REBNY lauded the judge’s decision. “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,” REBNY President James Whelan said in a statement.