After weeks of confusion over a rule change that sought to rein in upfront costs for renters, a state agency on Friday announced that licensed real estate brokers and salespeople cannot collect application fees greater than $20.
The Department of State, which oversees real estate agents, issued guidance to real estate professionals in the form of a detailed Q&A on its website.
“The new laws are a broad collection of provisions that increase tenant protections for all New Yorkers,” said New York State Secretary of State Rossana Rosado, in a press release. “The Guidance will help the real estate industry and other interested parties understand the new law and apply it correctly for the benefit of current and prospective tenants.”
The Real Estate Board of New York, the lobbying arm for the city's real estate industry, had argued that the specific statute pertaining to application fees only cited “a landlord, lessor, sub-lessor or grantor” as being restricted to the $20 fee limit. Tenant advocates accused the industry of an overly narrow interpretation that sought to carve out a lucrative loophole.
Ellen Davidson, an attorney at the Legal Aid Society, told Gothamist last month that brokers are "clearly acting as the landlords’ agents." She added: "They step into the shoes of the landlords and have to follow the law.”
In coming out with the clarification, the state puts to rest an issue that renters have long complained about in New York City, where brokers serve as gatekeepers for its limited inventory of apartments. Since the new rent laws passed on June 15th, many renters said they were being asked to pay application fees upwards of hundreds of dollars. As of last month, Compass, one of the biggest brokerages in New York City, was charging $80 per application. Asked about the policy at the time, a spokesman for the company issued following statement: "Since Compass is not a landlord and per the advice of REBNY, Compass is allowed to charge a reasonable application fee amount, as we are a third party and still need to cover the cost for our account service providing the credit check/background check amount does not exceed $20."
In response to another question that arose, the state also made it clear that the $20 application fee limit does not apply to co-op and condo sales.
The state agency did not explicitly say whether renters who found themselves paying more than $20 after June 15th would be able to recoup the amounts they were illegally charged. But it does direct anyone seeking to file a complaint with the Department against a licensed real estate broker or salesperson to download a form.
The press release further states that an agent who "collects a fee greater than $20.00 or fails to advise the landlord that such fees are prohibited may be subject to discipline by the Department."
