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February132020
Broker’s Commission Ban, Perhaps

Mitchell Marcus, CPA

2.13.20 | Client Alert

The battle lines are drawn. Pro-tenant rent reforms issued by the New York State Senate, as interpreted by the Department of State (DOS), amounted to a ban on the tenant payment of a broker’s commission. Per the DOS, the commission must now be paid by the landlord except in cases where the tenant hired the broker. Reacting swiftly, a number of brokers along with the Real Estate Board of New York filed a lawsuit and the broker fee ban is currently blocked by a judge’s order … for the moment.

The ban was the result of a DOS interpretation of 2019’s Statewide Housing Stability and Tenant Protection Act1. These regulations also placed a limit on security deposits to one month’s rent and a $20 cap on application fees. However, the new tenant-friendly rules are not retroactive, so there is no opportunity to file for refunds.

Considerations

The potential change could mean the loss of fees – ranging from 8 to 15% – on New York City rentals. By placing the burden of payment on the landlord’s doorstep there is the possibility of a compensating, pass-it-on increase in rents. Also, agents may simply walk away from working with landlords if they are not going to get a commission for listing a property. There is even an argument that the new guidance is not an enforceable mandate, although brokers are urged to follow the rules while they are still being challenged.

Berdon will continue to monitor for developments as this contest plays out.

Questions: Contact Mitchell Marcus at 212.331.7460 | mmarcus@BerdonLLP.com or your Berdon advisor.

Berdon LLP New York Accountants

1 https://www.nysenate.gov/legislation/bills/2019/s6458

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