Two things are a fact in New York. One, the brokerage fees for rentals are too high and burdensome, especially if you want to find a new home. Second, being a rental-brokerage agent may not be glamorous even though it may be highly paying.
Usually, tenants pay a commission of as much as 15 percent of their annual rent to a broker. But is there any value to paying a broker such a hefty amount? Rental brokers spend a considerable fraction of their time in search of new clients who may generate the fee for them. You will often find tenants complain that they spent thousands of dollars to pay a broker without even getting to sign a lease afterward.
A New Broker-Fee Law
The hefty broker’s fees that haunt the residents of New York may soon be a thing of the past. It is after clarification by the Department of State on the pro-tenant reforms of 2019 that ban the practice of new tenants having to foot the broker’s commission when searching for a rental.
According to the new law, the landlord should instead meet the costs. Also, a landlord can only charge an application fee of $20 for both market-rate and rent-stabilized apartments. The liability to pay the fee will only become the tenant’s if they decide to hire a broker to help expedite the process.
However, the new ruling may not yet be viable, at least until June 2020. A judge has temporarily blocked the new rule from taking effect. It is after several real estate industry players filed a lawsuit charging the DOS with unlawful rule-making and usurping the state legislature.
What Is the Effect of the New Law?
The ban on brokerage fees by the DOS is a move to level the playing field that has always been favorable to landlords. Shifting the burden of the commission to landlords helps to lift off a tremendous weight from low-income families that can hardly afford their rent, let alone moving fees.
While new renters may find it to be positive, the effect may not be kind to the thousands of real estate brokers in New York that depend on the fees to make a living. It could have dire consequences. Landlords, too, are increasing rental costs since they have to pick up the expense from the renters.
According to the Property Club on 7000 listings on its profile, there was a rent surge by 6.4 percent for houses in Brooklyn and 5.9 percent for those in Manhattan.
So What Is the Way Forward for New Tenants in New York?
With the halting of the implementation of the new law on broker fees, there is a lot of confusion as to whether renters can get back the broker fees they had already paid. According to Erin McCarthy, the spokeswoman to the DOS, the law is not meant to apply retroactively. It may, however, apply to all future transactions.
Further, as a renter, you may have to continue paying a commission to brokers until the law comes into play.
So far, you can avoid paying a broker’s commission only in two ways. One, you may opt to find a no-fee apartment, of which there are several, or you may wait until they make a ruling as you hope for it to be positive, with the ban in motion.