Realtors blow past new $20 tenant fee cap

Realtors who connect potential tenants with landlords claim a new cap on application fees doesn’t apply to them, snubbing a key part of New York’s recent rent law overhaul.

The sweeping housing measure passed by state lawmakers in June prohibits landlords from charging more than $20 to cover the costs of tenant background or credit checks. But the New York Real Estate Board advises its members that brokers, who act as intermediaries, can still charge more than $20.

“We believe that real estate brokers are always entitled to collect a reasonable application fee,” reads a memo distributed to REBNY members and obtained by THE CITY.

The State Department, which oversees real estate brokers, is “reviewing” whether the $20 cap applies to them, according to an agency spokesperson.

“This is one of many areas of ambiguity in the new laws,” said REBNY general counsel Carl Hum.

His organization tells brokers they should always limit fees associated with credit or background checks to no more than $20 and provide potential tenants with an itemized invoice. But brokers can also charge application fees above the prescribed limit, REBNY argues.

“A deliberate misinterpretation”

The application fee is in addition to any fees paid to the broker by potential tenants or owners.

State Sen. Brian Kavanagh (D-Manhattan), who heads the House Housing Committee, said it will ultimately be up to the courts and regulators to “interpret the law” and ” clarify the circumstances in which it applies”.

Some of the lawmakers who have helped guide the new tenant-friendly reforms have expressed less patience with the industry’s pullback.

“The intent of the law is that the application fee should not exceed $20 to protect people from excessive charges. It’s a simple reading of that that makes the intent pretty clear,” said State Sen. Zellnor Myrie (D-Brooklyn).

The real estate industry’s reading of the reforms is a “willful misinterpretation,” Assemblywoman Linda Rosenthal (D-Manhattan) told THE CITY. “They’re not going to get away with this.”

A troubled area

Aaron Burger, 26, said he and his partner spent several weeks looking for apartments on StreetEasy before coming across an available unit at 832 Lexington Ave. in Stuyvesant Heights. The 46-unit building offers apartments at stabilized rent in exchange for tax relief from which the developer has benefited.

Burger and his partner contacted the ad’s broker, a Brooklyn company called Rentopia. On July 24, they had signed a lease to move in on August 15.

They said they paid a $5,800 down payment on their $2,750-a-month apartment — the first month’s rent, a month’s deposit and a $300 application fee. The fee was $100 for each of them, plus an additional $100 for their guarantor.

Then the quasi-tenants discovered at a community meeting that the newly enacted rent laws capped the application fee at $20. So last week they sent the broker a screenshot of a section of the new state law that caps application fees.

The broker responded that the law does not mention a rental office or agent, according to posts shared with THE CITY.

For a moment, it seemed to the couple that they might give in.

“We spoke to the manager and he said, ‘We’ll reimburse you for the extra costs,'” Burger said in an interview last week.

The couple were due to collect their refund last Wednesday – but the next day “we received a call from the manager of the rental agent and [he] said the landlord had found someone else for the apartment,” Burger said.

Rentopia agreed to refund them their $5,800 – but first they had to sign an “acknowledgment of refund” stating that the claimants “have no further claim against Rentopia corp. for any money or obligation whatsoever”, according to Burger.

“It’s retaliation. Two days after we said, ‘Hey, you overcharged us, you stole money from us’, they come out and don’t just kick us out of the lease… now they don’t don’t give us our money because we don’t sign a form,” he added.

Aaron Burger said he and his partner refused to sign a refund acknowledgment letter for 832 Lexington Ave. in Brooklyn.
Courtesy of Aaron Burger

The couple received their full refund – including the $300 brokerage fee – earlier this week after THE CITY left a message for the company.

The acknowledgment form is not about any legal claim, but rather a standard protocol for documenting proof that there has been a refund, Omri Elmalem, office manager at Rentopia, said Wednesday.

“We are just messengers. It’s not our apartment. We are not a management company; we are a brokerage house. We are only passing on the owner’s information,” Elmalem said.

The owner has chosen to give the apartment to people who “look less like [of a] troublemaker” than them, he added.

“The whole process was a bit of a nightmare, I’ll be honest,” Elmalem said, noting that he was trying to help Burger and his partner.

THE CITY unsuccessfully attempted to contact Lexington Flats LLC, the entity that owns the building on Lexington Avenue.

The app is unclear

Burger filed a complaint with the state’s Housing and Community Renewal (HCR) Division, which oversees rent-regulated and rent-stabilized apartments. But it will take some time for his tenant protection unit to gather information should an investigation take place, he expects.

There has been no consensus among state lawmakers on who tenants should contact to file a complaint if the filing fee exceeds what the law allows. Some said they should alert Attorney General Letitia James’ office. Others said to contact UNHCR or the city’s Department of Housing Preservation and Development.

Some elected officials, like Rosenthal and Assemblyman Harvey Epstein (D-Manhattan), a former housing law attorney, have suggested voters contact their offices for help.

But even if tenants file a complaint, there aren’t many remedies available under the current law, which has no penalties or fines if landlords charge tenants more than $20.

“It’s like saying you can’t speed up – but if you speed up, there are no penalties,” Epstein said.

The new laws may need revision to fill in the gaps, Epstein said.

“As we move forward, if we see a lot of problems with breaking the law, we may have to put some energy into enforcement if UNHCR doesn’t put enforcement into regulation,” said- he declared.

“We made a big move in June. It was a sledgehammer. Now we have to go in with a knife to finish the edges. What’s going to shake over the next six months are all those edges.

Are you trying to rent? Here is some information about the new laws:

• Landlords and tenants cannot charge or charge for processing or reviewing applications. But they can charge up to $20 for background and credit checks, and are required to give you a copy of the background and credit check, along with an invoice.

• If you provide your own credit or background check completed within the previous 30 days, the fee must be waived.

• A deposit or rental advance cannot exceed one month’s rent. After you leave, the owners are required to return the deposit within 14 days and provide you with an itemized list of any part of your deposit held.

• If your rent is paid within five days of its due date, landlords cannot charge you a fee. If you exceed the five-day window, landlords can charge $50 or 5% of the monthly rent, whichever is less.

• Learn about New York’s new rent laws.

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Kristan F. Talley