Industry Backlash Prompts NY to Pause Brokers’ Rental Fee Ban

February 11, 2020

After a real estate groups’ lawsuit, a New York judge has granted a temporary restraining order to prevent new rules taking effect that banned brokers from receiving fees on rentals in the state. The short-term reprieve was in response to the Real Estate Board of New York, the New York Association of REALTORS®, and other brokerages suing the Department of State over its broker ban fee ruling that they called “unlawful”and having an “immediate and devastating” impact on brokers.

At least for now, brokers can continue to collect commission from tenants for rentals in the state, as they traditionally have done. The temporary restraining order will likely stay in place until at least March 13, when the Department of State will need to respond in court to allegations.

The restraining order does not necessarily indicate a ruling in favor of broker fees in rentals. The judge put the restraining order in place so that all sides could argue their case in court before a decision is made.

Last Tuesday, the Department of State in New York set off a firestorm after it issued guidance that blocked brokers from collecting rental commissions from renters in cases where a landlord hired an agent to market the listing. These fees usually added thousands in dollars to renters. The fees could no longer be collected from landlords unless a tenant hires a broker to find a unit. The Department of State called the guidance a clarification of sweeping tenant protection rules that had taken effect in 2019.

The judge’s temporary restraining order “means thousands of hardworking, honest real estate agents across New York state can do business in the same they did”before the ruling last week, the presidents of the Real Estate Board and New York State Association of REALTORS® said in a joint statement in response.

The Real Estate Board of New York, New York Association of REALTORS®, and other New York brokerage firms filed a lawsuit against the Department of State’s new ban on broker fees. The lawsuit claimed the guidance was “unlawful, erroneous, and arbitrary.”

Rental Commissions Are Back—For Now,” The Real Deal (Feb. 10, 2020) and “Sorry, Renters: You Still Have to Pay Brokers’ Fees for Now,” The New York Times (Feb. 10, 2020)