Landlord, not tenants, will now be forced to foot the bill for New York City's notoriously high brokers fees, following new guidance issued by the NY Department of State.
Seeking to clarify outstanding questions stemming from last year's sweeping rent reform package, the new state action mandates that brokers acting on behalf of landlords cannot be compensated by prospective tenants.
"A landlord’s agent that collects a fee for bringing about the meeting of the minds between the landlord and tenant (i.e., the broker fee) from the tenant can be subject to discipline," reads the newly updated DOS guidance.
The news marks a monumental shift in New York's real estate landscape, where renters have long been saddled with all-but-inescapable broker fees that often total 12 to 15 percent of annual rent. NYC is one of the few cities where those charges are passed onto tenants — "an insane special case" that's persisted for decades, according to experts.
The guidance follows a separate state clarification in September, which determined that real estate brokers and salespeople cannot collect application fees greater than $20 under the new rent laws. Several brokers had previously been charging hundreds of dollars for application fees, arguing that they were third-party actors and thus the $20 restriction did not apply to them.
The Real Estate Board of New York, the lobbying arm for the city's real estate industry, is already vowing to fight the new guidance. “The DOS issued a body blow to thousands of hard working New Yorkers,” Reggie Thomas, REBNY’s senior vice president of government affairs, told The Real Deal. The group is exploring legal action, he said, warning that the changes would lead to an increase in rent.
Lawmakers, meanwhile, say that the burden of brokers fees was always meant to be passed onto landlords under the new rent laws.
"Broker’s fees are one of the biggest barriers for tenants and families who need to move," State Senator Julia Salazar told Gothamist on Wednesday. "It should be the property owner’s responsibility to pay a broker who finds tenants to rent the owners’ space."
The action will take effect immediately. Anyone seeking to file a complaint with the state against a licensed real estate broker or salesperson can download a form here.
