Friday, May 20, 2022

New York landlords to pay broker fees, not renters

New York

State regulators have determined that a landlord’s agent can’t collect a broker fee from a prospective tenant

State regulators, in a move that could upend the city’s rental market, have determined that renters are no longer on the hook for broker fees.

The guidance from the Department of State clarifies that the sweeping rent reforms passed by the Legislature last year mean a landlord’s agent can’t collect a broker fee from a prospective tenant.

The updated guidance continues to interpret the laws according to their plain meaning and consistent with the way they were intended to be applied — which is to provide the strongest possible set of protections to tenants, the agency said in a statement.

Tenant advocates applauded the move.

Brokers and landlords have gotten away with taking advantage of tenants for too many years, said Michael McKee, the treasurer of Tenants PAC. “These consumer protections are long overdue.”

Robert Desir, a staff attorney with the Civil Law Reform Unit at The Legal Aid Society, said the guidance reaffirms advocates’ stance that landlords should be shouldering the costs associated with hiring brokers to represent their interests, not tenants.

This is more proof that The Housing Stability and Tenant Protection Act of 2019 is working to level the playing field, one which heavily favoured landlords and the real estate industry for decades, he said.

The package included a wish list of reforms tenant advocates had fought for, including making the rent regulation system in the five boroughs permanent and allowing municipalities outside of the city to opt into rent regulation.

One section of the sweeping package capped security deposits at one month’s rent and another said renters could not be charged more than $20 in fees when applying for an apartment.

Brokers can still collect a fee, but it’s up to the landlord to pay it. A tenant is only responsible if they hire the broker themselves to find an apartment.

In addition to ending fees, the measures passed last year included ending the practice known as a vacancy bonus, which allowed landlords to increase rents by 20% whenever a regulated unit was empty and jack up rents until the apartment is no longer covered by regulations.

Currently, about one million residential units in the city and its suburbs are regulated under the state’s rent control or stabilization programs. How much rents for those units can rise each is determined by a Rent Guidelines Board.

Roughly 2.4 million people live in rent-regulated apartments in the city.

Landlord groups, already reeling from the limitations placed on them by the new laws, were up in arms over the addendum, claiming it will result in higher rents.

If enforced, this guidance would result in higher prices for New Yorkers as building owners include commissions into rents and dramatically cut the incomes of tens of thousands of agents who provide a valued service in helping people find their new homes, said Reggie Thomas, the senior vice president for government affairs for the Real Estate Board of New York.


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