NY Lawmakers Seek to Revive Fight Against Broker Fees

There has been renewed interest to cap or limit broker fees paid by prospective tenants after some high-profile instances of brokers asking for thousands of dollars in fees in exchange for highly coveted apartments have made the news. In one case, a renter paid a broker fee of $19,500 for a rent-stabilized apartment that rents for $1,725 month on the Upper West Side. New York’s Department of State (DOS), the agency responsible for licensing real estate agents, is investigating the broker.

Currently, there’s no specific statute or regulation that determines the amount of a broker’s fee, but according to the agency, real estate licensees are obligated to act with honesty in their dealings with the public, and can’t charge “exorbitant commissions that have no reasonable relationship to the work involved in earning the commission.”

REBNY Fights HSTPA Ban on Broker Fees

In early 2020, broker fees were banned for a brief period. At the time, DOS, which interprets laws and issues guidance based on those interpretations, said that, with the enactment of the Housing Stability and Tenant Protection Act (HSTPA) in 2019, the collection of broker fees was banned. The HSTPA had a provision that capped all application fees for prospective renters at $20 and forbade charging more than one month’s rent for a security deposit. DOS interpreted that to also mean broker fees were eliminated unless a prospective tenant solicited a broker’s services directly.

Soon after DOS’ guidance was issued, the Real Estate Board of New York (REBNY) filed a legal challenge that temporarily blocked the rule from taking effect. The group eventually won the lawsuit, and based on that, the state updated its policy with regard to broker fees in May 2021.

State and City Take Aim

With the demand for apartments rising again as the city recovers from the pandemic, State Senator Jabari Brisport has directed attention at a bill he introduced at the time REBNY filed its challenge against DOS. The legislation is co-sponsored by Senator Julia Salazar and would make it illegal for landlords to demand any payment at the beginning of a tenancy, apart from the $20 allotted for application processing. This would include broker fees.

In 2019, at the New York City level, Councilmembers Keith Powers and Carlina Rivera had introduced a bill that would limit brokers’ fees to a maximum of one month’s rent. The legislation also proposed requiring brokers to provide an itemized list of what the fee is being used for. On Twitter recently, Councilmember Powers commented, “$20K broker fee for a $1,725 per month apartment. Completely undermines the point of affordable housing and prices tenants out of the market.”