On June 14, 2019, Governor Andrew Cuomo signed into law the Statewide Housing Security & Tenant Protection Act of 2019 and the Housing Stability & Tenant Protection Act of 2019 (the Acts). While we take no position behind the The Acts themselves, the new provisions strengthen tenant protections and swings the balance of power back into the tenants favor.
Broker's Fees in New York
It is a common practice, that is essentially unique to New York, for tenants to shoulder the cost of a landlord's brokers fees. The Acts that became effective in June 2019, effectively ended that practice. This week, guidance form the New York Department of State (the state authority who oversees real estate brokers) confirmed as much in a bulletin sent out to various real estate professionals and stakeholders.
New York Real Property Law § 238-a(1)(a) provides in relevant part: "no landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge for the processing, review or acceptance of an application, or demand any other payment, fee or charge before or at the beginning of the tenancy, except background checks and credit checks..."
Based upon a plain reading of the law that I highlighted above, a landlord's broker fee appears to fall within the broad meaning of "any other payment, fee or charge before or at the beginning of the tenancy." As a result, a landlord's agent that collects a broker fee from the tenant is subject to discipline.
What does this mean for Tenants?
The Department of State issued this guidance almost 8 months after the new laws went into effect. But for newly-settled renters, the Department of State guidance may have brought much confusion. What happens to brokers fees where you recently moved into an apartment after June 14, 2019 and may have possible paid thousands of dollars?
In my opinion, after reading the guidance from the Department of State and the very broad language used in the real property law itself, New York residents who paid a broker fee after June 14th — when this provision of the new rent laws went into effect — are eligible for reimbursement.
The Department of State is interpreting a law, it does have have the ability to create a law. So essentially what the DOS is doing is interpreting a law that has been in effect since June.
What can Tenants do?
You would want to make a written demand on the broker and the landlord for the return of the security deposit. They are likely just learning about the law this week and may voluntarily give back the fee. Keep a record of the written demand. You should also track down proof that you paid the broker fee (this could be a copy of check, a credit card receipt, or cash receipt).
If that does not yield results, you could file a lawsuit against the landlord and the broker in court. If you have proof that you paid the broker on or after June 14, 2019, then the court case should be straightforward and it *should* be an easy win (emphasis on should, litigation is inherently unpredictable - even seemingly simple cases can turn complex). If you don't have proof that you paid the broker fee (you lost a receipt or can't find any records) your case wouldn't be doomed, but it would be more difficult.
Before taking this step a tenant should consult with an attorney. I would not advise a tenant to take this step until they are settled in an apartment to avoid the situation of a landlord retaliating. I would also not advise a tenant to deduct the brokers fee from the monthly rent (which usually will be around the same dollar amount). That can be tricky to navigate and it should not be done without the advice of counsel.
(The article does not constitute legal advice, which may only be given in the context of a lawyer-client relationship)