It’s back: Lawmakers propose ban on broker fees

State senators Jabari Brisport and Julia Salazar co-sponsored the bill

REBNY's James Whelan with Sen. Julia Salazar and Sen. Jabari Brisport (Getty, Brisport via Jabari for State Senate, Whelan by Anuja Shakya for The Real Deal)
REBNY's James Whelan with Sen. Julia Salazar and Sen. Jabari Brisport (Getty, Brisport via Jabari for State Senate, Whelan by Anuja Shakya for The Real Deal)

The push to ban New York City tenants from having to pay their landlords’ broker fees has been taken up by lawmakers.

New York State Senators Jabari Brisport and Julia Salazar introduced a bill last month that would ban landlords from forcing tenants to pay their broker fees. The bill was introduced about six weeks before the Legislative Session ends and there is not a matching bill in the Assembly, which is a requirement for the proposal to become law.

The Department of State attempted to bar the practice last year by issuing guidance directing real estate professionals and landlords to stop collecting broker fees from tenants.

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Broker fees in the city are typically about 15 percent of the annual rent, which when combined with the first month of rent and a security deposit can mean tenants must come up with a five-figure sum just to move in. For instance the broker fee for a Manhattan apartment asking the borough’s median rent of nearly $3,100 would be about $5,580.

The real estate industry, which argued that such a ban was a “death knell” for agents and brokerages, filed for a temporary injunction and sought to overturn the guidance.

The core question of the case was whether or not lawmakers — and the Housing Stability and Tenant Protection Act of 2019 — intended to ban the tenant-pays practice.

Albany Supreme Court Judge Susan Kushner sided with the industry in April, saying that state regulator’s guidance was an “error of law.”

In her ruling, Kushner said that her decision was based on the fact the 2019 rent law made no reference to “broker’s commissions” and did not specifically mention real estate agents.

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“Where the term is intentionally included in one section of the Act and omitted in another, it is further evidence that the Legislature must have intended to omit it,” Kushner wrote.

Though DOS could have appealed the decision, lawmakers are taking up the cause in part, they say, to avoid further costly litigation for the state.

In a memo that accompanies the bill, Senators Brisport and Salazar say the proposal aims to clarify the intent of the HSTPA, despite the fact that they believed state regulators’ guidance was a correct interpretation of the rent law.

“This legislation is necessary in order to save the State of New York the litigation costs that will be necessary to remedy an erroneous interpretation of the Statewide Housing Security and Tenant Protection Act of 2019 by a single court in April 2021,” the bill reads. “Litigating this issue will cause New York State to incur litigation expenses that could otherwise be avoided by simply amending the (already clear) provisions of the [HSTPA].”

The bill is in the Senate’s judiciary committee. The offices of Sen. Brisport and Sen. Salazar did not immediately respond to requests for comment. In an interview with The Gothamist last year, Salazar called broker fees “one of the biggest barriers for tenants and families who need to move.”

James Whelan, president of the Real Estate Board of New York, which led the industry’s legal fight to overturn state regulators’ guidance, called the bill “deeply misguided.”

“Agents provide an invaluable service to owners and renters,” said Whelan in a statement. “It would be unconscionable to prevent agents, many of whom are middle-class New Yorkers, from earning the commissions they rely on to support themselves and their families.”

The industry’s position is that monthly asking rents will increase if landlords have to pay broker fees, and rental agents will lose their livelihoods. Since the pandemic began, there have been record levels of rental vacancies in the city, which forced landlords to lower rents and offer substantial concessions, including landlords paying broker fees, to woo tenants.

The legislative session is scheduled to end on June 10.