Those Hefty Broker’s Fees Can Still Be Collected Following State Judge’s Ruling

Apartment hunters can continue to be asked to shell out steep broker’s fees, a judge ruled Friday, after state regulators sought to suspend them following a sweeping update of the state’s rent laws in 2019.

In a nine-page ruling, Albany County Judge Shannon Kushner said the passage of the Statewide Housing Security & Tenant Protection Act of 2019 does not allow the Department of State to prohibit brokers from collecting fees from renters. The act dramatically overhauled the state’s prior rent laws that critics said contributed to inequality in the city. Included in one provision of the act was a passage that states brokers acting on a landlord’s behalf can no longer charge certain fees “before or at the beginning of the tenancy.” Kushner ruled the state misinterpreted that portion of the act and erred in issuing guidance early last year that sought to clarify that brokers cannot collect a fee just because there is a “meeting of the minds.”

In her ruling, Kushner pointed directly to a statement by the chief sponsor of the bill, Manhattan/Brooklyn state Senator Brian Kavanaugh, that said the legislature seeks only to eliminate application fees and “fees for background checks and other costs landlords sometimes impose before even agreeing to rent an apartment.”

“In others words, the prohibition was intended to apply to application fees, background check fees, credit check fees, and any other fees imposed as a pre-condition to negotiations for entry into a lease agreement,” Kushner said. “No reference is made to ‘broker’s commission’ in the statute.”

Kushner said that if lawmakers intended to eliminate broker’s fees, the act “would have expressly stated it,” saying the guidance the Department of State issued last year to brokers was an “error,” and “abuse of discretion.”

The decision was hailed by the Real Estate Board of New York, the lobbying arm of the real estate sector that sued the state over the provision, alongside the New York State Association of Realtors, Inc. REBNY’s president, James Whelan, said the ruling “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 [sic]. We appreciate the support of our members throughout this challenging process and we are proud to continue advocating for the rights of New York’s real estate agents.”

The ruling once again allows brokers to impose upfront fees as high as 15% of the total annual rent a tenant will pay. This is typically on top of first month’s rent. According to the Real Deal, an apartment hunter can be saddled with a broker fee as high as $5,580 if the apartment they seek has rent that falls within Manhattan’s median rent $3,100.

“There needs to be some kind of curb on how much brokers can charge,” Mike McKee, a tenant organizer and treasurer of the Tenants Political Action Committee, told Gothamist/WNYC. “The clear solution here is that the legislature should step in and clarify the law.”

It also makes New York City one of the few cities in the country to continue allowing the practice.