Sign up for “THE CITY Scoop,” our daily newsletter where we send you stories like this first thing in the morning.
UPDATE: On Monday, Feb. 10, a state Supreme Court judge issued a temporary restraining order blocking the state limit on tenant-paid broker fees, while a lawsuit filed by members of the real estate industry proceeds.
Renters across New York should now pay less up front when moving into a new home, under new state guidelines released last week.
Prospective tenants will no longer be required to shell out brokers’ fees, which often run into the thousands of dollars.
Instead, that commission will have to be paid by the property owner that hired the broker to show the unit, the Department of State said in its guidance on tenant-friendly rent laws passed last year. The guidelines are aimed at brokers, who must register with the department.
Have questions? We have some answers:
Brokers can’t charge fees anymore? Really?
Under the new measure, the Department of State says in its memo, “a landlord’s agent cannot be compensated by the prospective tenant for bringing about a meeting of the minds.” Any real estate broker who tries to collect a fee from a tenant “can be subject to discipline,” the department warns.
The restriction does not apply to a prospective tenant who elects to pay a commission or fee to a broker to help them look for an apartment.
This is a big deal, right?
Yes. Brokers’ fees typically range anywhere from a month’s rent to 15% of annual rent, and come on top of a security deposit.
The change follows other parts of the new rent law that cap application fees at $20 and forbid charging more than one month’s rent for a security deposit. On Thursday, Mayor Bill de Blasio proposed in his State of the City address getting rid of security deposits entirely for apartments the city helps finance.
For now, all a landlord can ask for from a tenant is a one-month security deposit, along with the first month’s rent.
Ack — I just paid a brokers’ fee. Can I get my money back?
Only if you signed the lease on Jan. 31 or later, once brokers received notice from the state that they have to stop charging tenants. The new guidelines do not apply retroactively, said Mercedes Padilla, a Department of State spokesperson.
The agency declined to answer THE CITY’s questions about what consumers can do in the event they have paid a fee they believe they should not have been charged or are asked to pay a broker.
What do I do about brokers who insist I pay a fee?
Tell the broker the Department of State issued guidance in late January explaining that tenants do not have to pay the fee. Have this link handy or print out a copy to carry around during your apartment hunt.
The state makes available forms in 11 languages for filing complaints against licensed professionals, including real estate brokers.
Landlords are now on the hook for fees. Aren’t they Just going to raise the rent?
If you’re lucky enough to find an apartment covered by rent stabilization, the new laws do not allow landlords to raise rent on vacant units beyond small, strictly regulated increases to help pay for upgrades.
The picture is less rosy if you’re renting an unregulated apartment. There, landlords can charge whatever you’re willing to pay. Landlords of market-rate apartments may increase the rent of a unit to make up for shouldering the costs of broker fees.
Any chance this new rule gets reversed?
Brace for real estate brokers to push back and potentially go to court over the restriction.
After City Councilmember Keith Powers (D-Manhattan) introduced a bill last year to limit brokers’ fees, more than 1,000 people who work in the real estate industry mobbed the gates of City Hall while those who got inside railed against the measure, warning of wrecked livelihoods.
As of 2018, New York City alone had nearly 26,000 active real estate brokers, according to the Department of State.
Nothing is free in New York. So, I have to ask again: Is this for real?
Tell Us Your Story
Are you searching for an apartment? We’d like to know if brokers are still requesting fees and how they respond to pushback.
Did you pay a fee recently and are you trying to get your money back? We’d like to know how that is going.
Are you a broker? We want to know what this means to you.
Email JVelasquez@thecity.nyc or text/signal/call 516-509-1641.
Want to republish this story? See our republication guidelines.
SUPPORT THE CITY
You just finished reading another story from THE CITY.
We need your help to make THE CITY all it can be.
Please consider joining us as a member today.