Before the policy came into play, prospective tenants were sometimes forced to pay brokers even if they found an apartment independently.
Real estate lobbyists are suing New York City over its recently-implemented ban on broker fees.
According to The New York Times, two of New York’s most influential industry groups have announced they’ll challenge the rule. Among them is the Real Estate Board of New York, which said on Monday it will file a lawsuit against the Department of State.
The New York Department of State, notes the Times, provided legal guidance for the ban. But the Real Estate board alleges such assistance over-stepped the agency’s authority.
“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,” said the organization’s president, James Whelan. “The announcement of this new rule without warning has caused widespread confusion and havoc among dedicated real estate agents and the clients they serve.”
As the New York Times reports, the ban was reaffirmed late last week when the Department of State said prohibitions on brokerage fees are an appropriate interpretation of recently-passed renter-protection laws.
But the Real Estate Board and its allies have criticized state-level bureaucrats for adopting guidance without consulting professional organizations which may be affected by policy change.
Jennifer Stevenson, president of the New York State Association of Realtors, said fee restrictions may impact realtors’ incomes.
“These regulations will severely and wrongly impact the incomes of hard-working real estate professionals,” she said. “It is unconscionable that a serious disruption of the marketplace has occurred without any industry input or even proper review by the state Board of Real Estate.”
However—and perhaps not surprisingly—many New York residents and renter-advocacy groups have applauded the State Department’s interpretation of the law. Brokerage fees are often expensive and sometimes levied unfairly. As the New York Times notes, tenants are sometimes required to pay brokers up to 15 percent of the annual rent, even if they found an apartment without a realtor’s assistance.
In New York—unlike most other cities in the United States—property brokers wield significant influence over prospective renters and purchasers. They directly collect fees from renters and control listings alongside lease appointments, doing the sort of work that’s traditionally done by landlords.
“The overwhelming majority of New Yorkers agree that renters should not foot the bill for services commissioned by a landlord. In no other context does this dynamic exist,” said Legal Aid Society attorney Ellen Davidson, who works with the group’s Civil Law Reform Unit. “We are confident that a court will share this opinion.”
Critics of the policy revision, though, say it’s liable to hurt less-affluent landlords, many of whom delegate certain fee-collection powers to brokers because they can’t afford per-service charges.