New York state on Tuesday effectively banned the practice of real estate agents charging tenants broker fees, which often amounted to an extra month or more on top of the cost of an annual lease.
The New York Department of State issued new addendums to last year’s landmark changes to its tenant laws that will immediately be an unexpected boon to those hoping to secure an apartment in the state, particularly in New York City. Real estate agents have long served as the gatekeepers of the city’s cutthroat rental market, offering up listings and apartment viewings in exchange for a fee that could be as much as an upfront 15% payment on the total cost of a yearlong rental.
For a $2,000-a-month apartment, that would amount to a $3,600 lump sum. New York City is one of the only cities in the country that has such a system (Boston does as well).
That payment will now be passed on to landlords that contract with real estate agents, and any broker that attempts to charge tenants a fee can be penalized. Renters are still able to hire their own brokers, and such agreements would not be affected by the rules.
The changes have further unsettled the city’s real estate agents, who were already aggrieved after the state passed a bevy of new rental protection laws last June. The sweeping, pro-renter changes closed loopholes that allowed building owners to raise some rents and ended rules that let them deregulate apartments. The reforms also limited the size of security deposits, changed eviction rules and capped the cost of application fees at $20 per applicant.
The Real Estate Board of New York, a trade group that represents brokers, said it opposed the new guidance and urged the Department of State to reverse its stance.
“If enacted, it would negatively impact consumers, residential brokers in our community, and tenants,” the group said on Twitter.
The board said it was exploring legal action to oppose the guidance. Reggie Thomas, the group’s vice president of government affairs, told The Real Deal the changes were a “body blow to thousands of hard working New Yorkers.”
The New York Times noted agents have warned that costs will ultimately still be passed on to tenants through higher rents. But state laws mandate how much rents can be raised each year for about 1 million apartments that are rent-regulated.