The Practice of Tenants Paying Real Estate Brokers a Commission May Continue

An all-around win for the hard-working, honest brokers out there assisting tenants to be placed in suitable housing. While the recent trend in New York City seems to be to protect the tenants from incurring any extra fees, the Department of State went too far in adding a protection not found within the statute by misrepresenting to the public that tenants were relieved from paying brokerage fees. It took a group of strong-willed brokers to stand their ground.

The Supreme Court has held that the Department of State’s (“DOS”) interpretation under issued Guidance of statutory authority was wrong. The DOS attempted to improperly expand statutory authority to deny real estate brokers the ability to receive a fee from a prospective tenant and be subject to discipline if they did collect such fee, when in actuality the statute referenced clearly does not mention that a real estate broker should be denied such fee.

The commission charged by a broker is not a “payment, fee or charge” demanded by the landlord as set forth in this statute, but rather a separate agreement between a broker and tenant. It was therefore improper for the DOS to read words into the construction of RPL §238-a that did not exist.

Back in February of 2020, in a prior post we explained that many real estate brokers together with REBNY joined forces and brought suit objecting to the DOS Guidance for Real Estate Professionals Concerning the Housing Stability and Tenant Protection Act of (“HSTPA”) of 2019 and posting its interpretation and comments that brokers may be disciplined if found to have collected such a fee from a tenant.

An injunction was issued and now in the recent Decision/Order by the Hon. Susan Kushner of the Supreme Court in Albany on May 12, 2021, in the matter of REBNY, et al. v. NYS Dept. of State, Index No. 901586/2020, it was determined that the Department of State’s actions were wrong. The Department of State’s interpretation was wrong. The Guidance of the Department of State was “issued in error of law and represents an unlawful intrusion upon the power of the Legislature . . .”

Congratulations brokers!