The sudden reversal of New York’s tenant-pays-broker-fee system last week prompted fierce reaction from agents.
In the hours and days after the Department of State issued its latest interpretation of the rent law, brokers and brokerages struggled to understand how to apply the new rule to their current and future deals. Until now, owners were able to retain rental agents free of cost because the tenant would cover the fee. The new rule now says owners have to pay the fee — though agents hired to represent tenants can still charge a commission. Industry leaders have called the change a “body blow” that would cost thousands of agent jobs and push rents up.
Some brokerages initially instructed agents to operate “business as usual.” But by the end of the week, it appeared most of New York City’s biggest rental firms told agents to follow the new guidance.
Now, agents are renegotiating their agreements with prospective renters and landlords. Others say the landlords they’re working with have advised them to mark any listed rentals as “no fee” on StreetEasy and up the monthly asking rent by hundreds of dollars.
But the real estate industry saw a win on Monday — at least a temporary one. The Real Estate Board of New York, the New York Association of Realtors and several brokerages filed an Article 78 proceeding to stop the enforcement of the guidance, and a judge granted a temporary restraining order. REBNY said in a statement that agents can go back to business as usual. The organization is headed back to court on March 13.
Amid all the chaos and frustration, The Real Deal’s readers have taken to social media to vent their frustration and engage in debates about the effects of the new rule.
Here are some of the most compelling comments left on our Instagram:
marcusamadeus Big government intervening in private sector which they have no experience in. This WILL drive up rents. You know how many tenants I have found apartments for who paid a fee and never moved because the rent was a good deal? Countless. What happened in this new rent regulations from July? Landlords said f*^% it and stopped making any improvements, no one wants to buy these buildings and tenants suffer. You need financial incentive to provide good service and products.
eliezerlevi1 Being a broker on NYC even when hired by a landlord is not an easy task. You show the same unit 50x until one says “I’ll take it” your spending countless days running up and down it’s really just your time. It costs Approximately $6 a day to advertise the apartment. Then when you get paid the fee you have to split it with the brokerage you work for. Most landlords have several small buildings so it’s multiple add and more running around. I agree however with the new luxury buildings and massive managements paying fees. They simply hire an on-site for a Salary. They sit there and show all day till 5pm and that’s a wrap while most agents only stray there say at 5pm accommodating those who only have time after work.
drosen777 This isn’t the end of the world – the MARKET has already made as many as 50% – 75% of any sub market in Manhattan “no fee” by increased supply. Also – the language “a tenant can hire a broker” allows compensation. And it’s stupid to have a tenant paid system where everyone, everywhere else, in the whole world, has an owner pay system. However, to have a sweeping law change business in an afternoon BY ACCIDENT & ABRUPTLY is bad for all.
hamptonsrealestatebroker I cannot but wonder if the regulators even put this out for public opinion. Where is the due process? Public notice? Such regulation to affect thousands of brokers jobs…I think that we should have a say in the process.
carisanyrealestate @greenerpasturesny It’s a scary thing… The real estate market is under attack just like the New York Yellow cabs… Increasing taxes, excruciating regulations that will wipe out private owners and have devastating affects on the independent workers in the industry. It is what happened to medallion owners which was Bloomberg’s personal vendetta… And now he is running for president. I mean the whole thing is scary and most people are not even aware of the underlying causes of why these things are happening. It’s really terrible
ramirealestate Rental commission is paid by the owner in other states. Obviously, New York property owners don’t want to pay.
realtorgold @ramirealestate plenty of owners pay broker fees. But many small landlords can’t, NY is an entirely separate market then the rest of the world. This won’t ultimately hurt agents, it will hurt renters with built in fees. Rent will go up, and NY renters will pay more over time.
virtualstagerr And the winner is: Zillow
How?: When renters press ”Find An Agent” they become the new Broker, because now they are ’working’ on Behalf of the tenant. Nothing left to do but to bow down to the monster we created ?
jeremie_matala Whatever aspirations these litigators had to make renting easier in new york have failed miserably. Although additional securities were not ideal, they gave international clients, clients with poor credit, clients with pets a way to rent. Now you take that away, and what has happened? Rent has been increased! Instead of refundable pet deposits, there is non refundable added rent. Instead of simply minimizing cost, they have made it impossible for some people to rent now a days. I do think 15% fee to tenant can be brutal at times especially for a short term to one year rental, but requiring owners to pay this across the board will raise rents in Manhattan and fee market 15/20%. #youdidntthinkthisallthewaythrough
repowerbroker In Florida the landlord always pays the commission. I don’t understand why NYC is making such a big issue. In here there is the normal.
shoploulilobue In soft markets, when there are a proliferation of “no fee” rentals, the landlords still pay one month fee to the brokers. They are getting paid. I mean…it already exists. What we see here is a big dramatic response because the brokers don’t want to settle for one month, they want to continue gouging tenants for 15% of the first year. It’s always been robbery and greed- and no, this has nothing to do with raising rents. That’s ridiculous and a manipulation tactic. These same landlords offer the fee in soft markets without raising the rent — so pretend every day is a soft market. ?
darrylwilliamsnyc I’m sure that that have good intentions on paper but in reality this will play out poorly. No incentives for landlords to renovate. Old buildings in poor conditions will remain that way. Some landlords pay fees now which is fine but if all are forced and they look at the cost benefit I thing rental agents will begin to have less business when these landlords can hire someone in house and pay them a salary to rent their units but I can also be wrong entirely
dgoldoff This is messed-up for the #brokers The brokerage community at large, MLS services, people who live off these fees, and will in the end force landlords to raise rents to compensate taking the fees in-house and most important put people out of work. Basically the complete opposite the legislative geniuses who passed this law had in mind…They really think they are doing renters justice and have a righteous cause but yet they increase taxes, utility costs, and remove incentives for growth. They can’t even manage themselves, help the homeless, and keep our subways and streets clean. All this breeds is more separation from the low income, middle class, and create entitled bureaucratic socialistic people who don’t take risks, fault you for making money but want to tell you how to live your lives with retarded laws that are one sided. I know no one will cry for landlords. That’s not my point. Its the change In law without getting the feedback or vote from the people they are now hurting trying to make a living. Vote for change!
_jpmiami DM me if you need help with your clients moving to South Florida
Read more of our coverage on New York’s broker fee upheaval
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