New York State regulators unexpectedly released updated guidelines in the wake of last year’s sweeping rent reform laws passed by lawmakers. The adjustments include a total ban on broker fees associated with rental apartments for consumers.

In February 2019, a set of New York City lawmakers, led by Councilman Keith Powers, attempted to pass legislation that would limit brokers’ fees to one month’s rent. In pricey neighborhoods, a brokers’ fee for a renter could be as much as 15 percent of the annual rent, due at the time of the lease signing.

The ban goes further than Powers’ proposal.

“No, a landlord’s agent cannot be compensated by the prospective tenant for bringing about the meeting of the minds,” guidance from the New York State Department of State reads, clarifying that no broker fees can be charged.

The Real Estate Board of New York, New York City’s trade organization for real estate agents, immediately announced its opposition to the changes.

Individual agents and brokers also blasted the decision, saying it would eventually pass the costs onto consumers in the form of higher rent.

“Over the last few years, the industry has been leaning toward the landlord paying the broker fee so this is not a monumental shift,” Martin Eiden an agent with Compass Real Estate, told Inman. “However the fees will be passed on to renters in the form of higher rents. As such, renters may be priced out of options as landlord look to have renters making a yearly income 40-50 times the rent.”

Steven Goldschmidt, senior vice president and director of sales of Warburg Realty specifically criticized regulators for the lack of notice, regarding the decision.

“This was dropped on everyone without an opportunity to comment or take action — usually regulations, especially major shifts in policies, have some period of public comment,” Goldschmidt said. “It might be good politics but a very bad policy. Owners have rights too.”

Goldschmidt said this will be another example of unintended consequences, where politicians believe the adjustment will benefit tenants, but, instead, will drive rents up and leave tenants to fend for themselves without representation.

“The ‘major’ landlords will usually find ways to adjust, hire staff to handle their rentals in-house, and absorb some or all of the cost,” Goldschmidt said. “That impact will truly be felt by small property owners (or owners of individual condo units) who need agents to find qualified renters and who can’t afford to absorb the extra expense without increasing rents.”

“It will surely be felt by the everyday agent, especially in the outer boroughs, whose income will now be severely impacted if not wiped out by a state agency, not by the high-end brokers and brokerages.”

But many New York City renters took to social media to share, “horror” stories over the thousands of dollars it cost them to move into New York City apartments.

Mara Gay, a member of the New York Times editorial board, said she and her roommates paid more than $10,000 to move into their first apartment. Lindsey Boylan, a candidate for Congress, said she could only find apartments on Craigslist and was never on leases, due to the high fees.

The overall legislation, passed in June, makes the state’s rent regulation laws permanent, without an act of the legislature to repeal or terminate them. Previously they have been scheduled to expire every four to eight years. The law also made sweeping changes to the ways landlords can increase rent.

Email Patrick Kearns

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Inman Connect is LIVE next week! Join us and thousands of your peers from wherever you are.Register Today×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription