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Judge puts temporary hold on broker fee ban

New York City rental agents have been told it’s business as usual after a court lifted a ban on tenants paying the fees for a landlord’s broker.

The move comes after a week of “confusion and havoc” that saw tenants backing out of deals when the Department of State (DOS) issued an edict last week saying the practice of paying for their landlord’s agent was illegal under the Housing Stability and Tenant Protection Act.

The impact on the real estate industy was “immediate and devastating” said the Real Estate Board of New York in a petition it filed with the Supreme Court in Albany this morning (Monday) with York State Association of Realtors (NYSAR) and several city brokerage firms.

According to the petition, “Prospective tenants started backing out of their agreenients to pay the procuring brokers their commissions, tenants who had already paid broker fees began demanding the return of already paid commissions, and brokers feared they would be the subject of complaint and discipline from the DOS unless they stopped accepting commissions, despite having procured the transaction and duly earning the commiccions.”

REBNY said the confusion was compounded by in accurate newspaper reports that claimed all brokerage fees were illegal.

Despite a long-established NYC market convention whereby tenants pay the commission of their landlord’s broker, REBNY accused the DOS of “improper lawmaking” by ignoring established law with a new rule “devoid of logic, arbitrary and capricious, and an abuse of discretion.”

Supreme Court Judge Michael Mackey instructed to DOS to halt any action to prevent landlord agents collecting fees from tenants until a court is able to determine the full scope of the issue.

JAMES WHELAN

Immediately after the decision, REBNY president James Whelan issued a joint statement with New York State Association of Realtors president Jennifer Stevenson:

“The entry today by the Court in Albany of an order temporarily halting the implementation of New York State Department of State’s (DOS) interpretation of the Statewide Housing Stability and Tenant Protection Act means that thousands of hardworking, honest real estate agents across New York State can do business in the same way they did prior to last week’s DOS memo without fear of discipline by the DOS.

“We look forward to ultimately resolving this matter in Court in the weeks ahead. Meanwhile, we appreciate all of our members’ support and vigilance during this period of upheaval and confusion.

“We thank Claude Szyfer and his team at Stroock & Stroock & Lavan LLP for their tireless efforts on this matter.”

Joe Strasburg, president of the Rent Stabilization Association that represented 25,0000 NYC landlords, hailed the decision, saying, “We are extremely pleased that the court granted the TRO, and now we are hopeful that the industry will prevail on the merits of the case when it is heard in March.”

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