Broker-fee ban lawsuit postponed for the third time

Real estate industry filed case to overturn state regulators’ broker fee ban in February

New York /
Aug.August 18, 2020 04:58 PM
REBNY’s James Whelan and New York Attorney General Letitia James (Getty Images; iStock)

REBNY’s James Whelan and New York Attorney General Letitia James (Getty Images; iStock)

State regulators and the real estate industry have postponed a showdown over tenant-paid broker fees for the third time.

State regulators pushed the deadline for its response to the industry’s lawsuit against the fee ban by two weeks, which in turn delays the parties’ Sept. 25 court date to Oct. 23, court filings show.

Both the state and industry agreed to the modified timeline, a letter filed by the New York attorney general’s office indicates.

The case will determine whether the state’s broker-fee ban will be implemented. In the meantime, tenants can still be on the hook for paying broker fees to agents hired by landlords.

The practice, which is commonplace in New York City’s rental market, was suddenly banned by the Department of State in February in guidance clarifying regulators’ interpretation of the 2019 rent law. At the time, regulators said any agent hired by a landlord collecting their fee from tenants would be subject to discipline.

That blindsided the real estate industry. As tenants celebrated, real estate agents, brokerages and landlords decried the move as one that would destroy livelihoods.

Days after the ban was announced, the industry won a temporary restraining order barring it from taking effect. The order has remained in place since.

When the case was first postponed in March, its complexity was cited as the reason by the Real Estate Board of New York, which led the filing of the Article 78 petition to overturn the state’s guidance. The case was postponed again in June because of the coronavirus pandemic, REBNY president James Whelan said at the time.

This time, the attorney general’s office did not state a rationale. It did not respond to a request for comment.

“Licensees play a critical role in all transactions and their commissions should continue to be protected,” Whelan said in a statement. “REBNY plans to pursue this position vigorously.”

Write to Erin Hudson at [email protected]


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