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New York

Broker-fee ban courtroom showdown pushed — again

The industry’s temporary restraining order against the state remains in place

The fate of New York’s attempted broker-fee ban will have to wait.

The real estate industry and state regulators have postponed the court date over the ban on certain tenant-paid broker fees until September. The parties were previously scheduled to appear in court on June 12.

It’s the second time the defendant in the case, the office of New York Attorney General Letitia James, has asked for an extension with the blessing of the industry plaintiffs led by the Real Estate Board of New York.

The issue at stake is the validity of guidance unexpectedly issued by state regulators in late January that would effectively ban tenants from paying broker fees for agents hired by landlords.

The ban stemmed from the Department of State’s interpretation of 2019 changes to New York’s rent law. At the time, State Sen. Julia Salazar said regulators’ interpretation upheld the spirit of last year’s amendments.

The rule threw New York City’s rental market into chaos as it banned the tenant-pays practice that had been the norm for rental deals.

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New Yorkers, 5.6 million of whom are renters, applauded the ban, as the industry balked. Landlords and property managers said they would cut back on hiring agents to handle leasing, while agents claimed the rule would dramatically hit their bottom line.

Within days of the ban being publicly announced, a coalition of industry players — including residential brokerages, REBNY and the New York Association of Realtors — obtained a temporary restraining order against the DOS. The order prevents the guidance from going into effect until the parties come to an agreement in court.

The state’s response to the industry’s petition to overturn its guidance is now due at the end of July and the parties will meet in court on Sept. 11.

REBNY president James Whelan attributed the delay to the pandemic.

“These are complex matters, and due to the impact of the Coronavirus (COVID-19) crisis, all parties have agreed that additional time is necessary for preparation of court documents,” he said in a statement.

The spread of Covid-19 infections has put the city’s rental market on pause with new leasing activity plummeting and vacancy in Manhattan rising to a 14-year high.

Write to Erin Hudson at ekh@therealdeal.com

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