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Real Estate Brokers Blow Beyond New $20 Tenant Fee Cap

832 Lexington Ave. in Bedford-Stuyvesant, Brooklyn, Aug. 14, 2019.
832 Lexington Ave. in Bedford-Stuyvesant, Brooklyn, Aug. 14, 2019. Photo: Ben Fractenberg/THE CITY

Real estate brokers who match prospective tenants with landlords are claiming a new cap on application fees doesn’t apply to them — snubbing a key part of New York’s recent rent-law overhaul.

The sweeping housing measure state lawmakers passed in June bars landlords from charging more than $20 to cover the costs of tenant background or credit checks. But the Real Estate Board of New York is advising its members that brokers, who serve as intermediaries, may still charge more than $20.

“We believe that real estate brokers are still entitled to collect reasonable application fees,” says a memo distributed to REBNY members and obtained by THE CITY.

The Department of State, which oversees real estate brokers, is “reviewing” whether the $20 cap applies to them, according to an agency spokesperson.

“This is one of many areas of ambiguity in the new laws,” said Carl Hum, general counsel at REBNY.

His organization is telling brokers they still have to limit fees associated with credit or background checks to no more than $20, and provide prospective tenants with an itemized invoice. But brokers also may charge application fees above the prescribed limit, REBNY contends.

‘A Willful Misinterpretation’

The application costs are on top of any fees paid to the broker by prospective tenants or landlords.

State Sen. Brian Kavanagh (D-Manhattan), who heads the chamber’s housing committee, said it would ultimately be up to the courts and regulatory agencies “to interpret the statute” and “clarify the circumstances in which it applies.”

Some of the legislators who helped shepherd the new tenant-friendly reforms expressed less patience with the industry pushback.

“The intention of the law is that the application fee should not exceed $20 to protect folks from excessive fees. This is a plain reading of that that makes the intent pretty clear,” said State Sen. Zellnor Myrie (D-Brooklyn).

The real estate industry’s reading of the reforms is a “willful misinterpretation,” Assemblymember Linda Rosenthal (D-Manhattan) told THE CITY. “They’re not going to get away with it.”

A Murky Area

Aaron Burger, 26, said he and his partner spent several weeks looking at apartments on StreetEasy before stumbling onto an available unit at 832 Lexington Ave. in Stuyvesant Heights. The 46-unit building offers rent-stabilized apartments in exchange for property tax breaks the developer received.

Burger and his partner contacted the listing’s broker, at a Brooklyn company called Rentopia. By July 24, they had signed a lease to move in on August 15.

They said they paid a $5,800 deposit on their $2,750-a-month apartment — first month’s rent, one month’s security and a $300 application fee. The fee consisted of $100 for each of them, plus another $100 for their guarantor.

Then the almost-tenants found out at a community meeting that the newly enacted rent laws capped application fees at $20. So last week, they texted the broker a screengrab of section of the new state law that caps the application fee.

The broker replied that the law doesn’t mention a leasing office or agent, according to messages shared with THE CITY.

For a moment, it seemed to the couple like he might relent.

“We talked to the manager and he said, ‘We’d refund you the extra fee,’” Burger said in an interview last week.

The couple was slated to pick up their refund last Wednesday — but the following day “we got a call from the leasing agent’s manager and [he] said that the landlord found someone else for the apartment,” Burger said.

Rentopia agreed to refund them their $5,800 — but they first had to sign a “refund acknowledgement” that stated that the applicants “has no further claim against Rentopia corp. for any monies or obligations whatsoever,” according to Burger.

“It’s retaliation. Two days after we said, ‘Hey, you overcharged us, you stole money from us,’ they come out and not only kick us off the lease … now they’re not giving us our money because we won’t sign a form,” he added.

Aaron Burger said he and his parter refused to sign a refund acknowledgement letter for 832 Lexington Ave. in Brooklyn.
Aaron Burger said he and his parter refused to sign a refund acknowledgement letter for 832 Lexington Ave. in Brooklyn. Photo: Courtesy of Aaron Burger

The couple received their full refund — including the $300 broker fee — earlier this week, after THE CITY left a message with the company.

The acknowledgement form is not for any legal claims, but rather standard protocol to document proof there was a refund, said Omri Elmalem, an office manager at Rentopia, said Wednesday.

“We are just the messengers. It’s not our apartment. We are not a management company; we are a brokerage. We are just passing the information from the landlord,” Elmalem said.

The landlord chose to give the apartment to people who “look like less [of a] troublemaker” than them, he added.

“The entire process was a little bit nightmare, I’ll be honest,” Elmalem said, noting he was trying to help Burger and his partner.

THE CITY unsuccessfully attempted to contact Lexington Flats LLC, the entity that owns the Lexington Avenue building.

Enforcement is Unclear

Burger filed a complaint with the state Division of Homes and Community Renewal (HCR), which oversees rent regulated and rent stabilized apartments. But it will take some time for its Tenant Protection Unit to gather information if an investigation were to occur, he expects.

There was no consensus among state legislators on who renters should reach out to to file a complaint if application fees exceed what the laws allow. Some said they should alert Attorney General Letitia James’ office. Others said to contact HCR or the city’s Department of Housing Preservation and Development.

Some elected officials, like Rosenthal and Assemblymember Harvey Epstein (D-Manhattan), a former housing lawyer, suggested that constituents reach out to their offices for assistance.

But even if renters file a complaint, there’s not much recourse available under the current statute, which provides for no penalties or fines if landlords charge renters more than $20.

“It’s like saying you can’t speed — but if you speed, there aren’t any penalties,” said Epstein.

The new laws might need some revising to close gaps, Epstein said.

“As we move forward, if we see a lot of problems with violating the law, we might need to put some energy into enforcement if HCR doesn’t put enforcement into regulations,” he said.

“We did a big move in June. It was a sledge hammer. Now we need to come in with a knife to finish up the edges. What’s going to shake out over the next six months is all of those edges.”

Are you trying to rent? Here’s some information about the new laws:

• Landlords and lease-holders can’t demand payment or fees to process or review applications. But they can charge up to $20 for background and credit checks, and are required to give you a copy of the background and credit check, along with an invoice.

• If you provide your own credit or background check conducted within the previous 30 days, the fee must be waived.

• A rental deposit or advance can’t exceed one month’s rent. After you move out, landlords are required to return the deposit within 14 days, and provide you with an itemized list of any portion of your deposit that is withheld.

• If your rent is paid within five days of its due date, landlords can’t charge you a fee. If you exceed the five-day window, landlords can charge $50 or 5% of the monthly rent, whichever is less.

• Learn more about New York’s new rent laws.

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