Realtors still charge high fees from New York tenants, despite state ban

News of the state’s sweeping ban on brokerage fees continues to send shockwaves through the New York real estate market, prompting stunned praise from renters and cries of doom from many. longtime guardians of the industry. But despite the sudden paradigm shift, some city brokers are doing business as if nothing has changed.

Several New Yorkers told Gothamist they’ve been misled by real estate brokers since the State Department released its clarification of last summer’s rent reform package, which effectively bars agents from charging commissions after January 31 (whether fees paid to brokers after the bill was signed into law in June can be recovered remains an open question). Some tenants say brokers flatly refused to recognize the changes. Others allege that they were asked to sign waivers that falsely stated that they were the ones who hired the brokers to represent them.

Jennifer, a 41-year-old librarian living in Bed-Stuy, said she went to view an apartment in Ridgewood Thursday night with a brokerage fee of $1,550. She came prepared with a copy of the State Department directive, planning to argue that the owner should be responsible for this payment.

“The broker kept telling me it’s not the law, just a guideline,” said Jennifer, who asked that we not use her last name for fear of getting listed. black tenants. “I felt like she was trying to confuse me into paying the fee, basically.”

The broker has been dealing with the building for at least two years and initially acknowledged that she was looking at the apartment for the landlord, according to Jennifer. “But when I asked her if she had been hired by the landlord, she said, ‘We now represent tenants.’ I was like, ‘Okay, you’re not.'”

Under the rent reform package passed by the state legislature in 2019, brokers can legally charge apartment hunters a commission if they’ve been hired to represent them. But the state has now clarified that brokers acting as “landlord’s agent” – the most common arrangement in New York – cannot charge tenants for their services. Some owner-hired brokers seem to be exploiting the confusion about this difference.

Christina, a 33-year-old project manager, had planned to sign a lease for a studio in Crown Heights on Saturday. But after learning of the state’s action this week, she informed the broker that her costs would now have to be covered by the owner.

“This law applies to owners’ agents,” he replied, according to emails shared with Gothamist. “I’m a tenant agent.” Application documents for the apartment show that the agent had registered as “a licensed real estate broker acting on behalf of the owner and owner’s agent”.

Ultimately, his offer to split the cost of the fee with the landlord was rebuffed. She does not know if she will sign the lease again this weekend.

A text message shared with Gothamist by another tenant shows a broker explaining: “Agents/brokers will now have potential tenants sign forms before showing apartments. Brokers are entitled to commission from the tenant under contract (the form confirms that you hire us). We will not show any of our apartments unless the form is signed.” When the tenant pointed out that he had found the apartment himself online, the appointment was cancelled.

The confusion underscores the different roles brokers have long played in New York’s rental ecosystem — often working as a facilitator for landlords, while collecting their checks directly from tenants. Experts suspect that under the new system, many landlords could forego hiring brokers and list their apartments directly online.

“Thanks to technology and the ubiquity of platforms such as Zillow and StreetEasy, the friction in finding an apartment to rent has decreased significantly over the past decade,” said Stijn Van Nieuwerburgh, professor of real estate and in finance at Columbia University’s Graduate School of Business. “It can be an efficient reallocation of labor for New York’s economy, but of course not fun for the real estate industry.”

Kristan F. Talley