By Ted Brooks
The Real Estate Board of New York, along with New York State Association of Realtors and numerous residential brokerage firms, filed a lawsuit Monday in response to what it termed “misguided and harmful” guidance issued by New York State’s Department of State.
The group, together with the New York State Association of Realtors, a statewide organization with nearly 60,000 brokers, says that the New York Department of State, which issued the legal guidance, went too far and did not follow the proper procedures in solidifying the rule.
“We are asking the court to recognize that the Department of State illegally overstepped its role in issuing its new guidance on rental brokerage commissions,” James Whelan, the group’s president, told the New York Times. “The announcement of this new rule without warning has caused widespread confusion and havoc among dedicated real estate agents and the clients they serve.”
Broker fees generally range from 12% to 15% of a year’s rent, Forbes noted, “and renters were required to pay them even when the building owner had hired the broker to list and market the property. The fee comes in addition to other common charges, including a security deposit and the first month’s rent.”
Frederick Warburg Peters, the chief executive officer of Warburg Realty, “said in a statement to Forbes that the entire real estate industry supports the REBNY in their Article 78 proceeding to stay the implementation of the DOS ruling,” the business publication wrote. “To attempt such a radical change to the landlord/tenant/agent equilibrium without consulting the major stakeholders shows contempt for many of the stakeholders the DOS purports to serve,” Warburg Peters says. “We look forward to the opportunity to discuss this proposed interpretation of the new rental laws in an orderly and fair manner.”
The decision has, to no one’s surprise, proven disruptive. News of the state’s sweeping ban on broker fees “continues to send shockwaves through New York City’s real estate market, earning stunned praise from renters and cries of doom from many of the industry’s longtime gatekeepers,” reported The Gothamist. “But despite the sudden paradigm shift, some city brokers are doing business as if nothing has changed. Multiple New Yorkers told Gothamist that they’ve been misled by real estate brokers in the days since the Department of State issued its clarification of last summer’s rent reform package, which effectively prohibits agents from charging commissions after January 31st (whether fees paid to brokers after the bill was signed into law in June can be clawed back remains an open question). Some tenants say that brokers have outright refused to acknowledge the changes. Others allege they’ve been urged to sign waivers falsely indicating that they were the ones who hired the brokers to represent them.”
