New York Broker Fee Ban Halted by Judge

A state court has granted a temporary restraining order against guidance that barred brokers from collecting a fee from residents.

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Less than a week after New York State unexpectedly dropped a bomb on the rental industry in New York City by effectively outlawing the common practice of residents paying a broker’s fee when renting an apartment, a judge has put a stop to it—temporarily.

Three days after the New York Department of State (DOS) issued legal guidance clarifying the legality of broker’s fees, two of the state’s most prominent industry groups—the powerful Real Estate Board of New York and the New York State Association of Realtors—filed a lawsuit to challenge the rule in court. The broker’s fee guideline was released by the Department of State as a clarification to last year’s historic Statewide Housing Stability and Tenant Protection Act.

“The announcement of this new rule without warning has caused widespread confusion and havoc among dedicated real estate agents and the clients they serve,” said REBNY President James Whelan in a statement last week announcing the lawsuit. The complaint accused the state of overstepping its authority and failing to take the correct steps before officially adopting the rule.

In a joint statement released today, the real estate groups said the temporary order halting the ban will allow real estate agents across the state to continue doing business without fear of possible discipline by the DOS.

“We look forward to ultimately resolving this matter in Court in the weeks ahead,” the statement by REBNY President James Whelan and New York State Association of Realtors President Jennifer Stevenson read.

The news of the ban last week left New York’s rental industry, which counts 25,000 licensed real estate brokers, reeling. Leni Morrison Cummins, an attorney at Cozen O’Connor in New York who works with condo and co-op boards, said the ban would have a “staggering impact” on landlords, particularly those with a smaller inventory of properties.

“With what we’re expecting in 2020, they’re basically increasing costs on landlords so much that to remain profitable, I think rental prices are going to have to go up,” said Morrison Cummins.

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