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Powerful NYC real estate group sues to stop new broker fee protections for tenants
By
David Brand
Published Dec 16, 2024
Modified Dec 16, 2024
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Michael M. Santiago/Getty Images
By
David Brand
Published Dec 16, 2024
Modified Dec 16, 2024
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The powerful lobbying group representing New York City’s real estate industry is suing to block a new law intended to free tenants from paying large upfront broker fees to agents they never hired to represent them.
The Real Estate Board of New York, or REBNY, and a group of brokerages and landlords filed a lawsuit to stop the measure in Manhattan federal court on Monday, exactly six months before the law is set to take effect.
The court challenge includes a provision that would halt implementation of the law and preserve a status quo that, advocates of the law say, saddles many tenants with upfront costs to agents, usually based on percentages of their annual rents.
In New York City, unlike nearly every part of the country, tenants are typically compelled to pay fees to a brokers who list apartments on behalf of landlords. A bill approved by the City Council with a veto-proof majority last month would overhaul that dynamic by requiring whoever hires a broker — usually the property owner or manager — to pay the fee. The bill automatically became law after Mayor Eric Adams declined to sign or veto it by Friday.
REBNY’s general counsel Carl Hum said the legislation “infringes upon constitutional guarantees of free speech and contract rights” by prohibiting brokers from posting apartments on online listings platforms without being explicitly contracted by a landlord to do so.
At least one major platform, StreetEasy, currently bans those posts, which are known as “open listings.”
The lawsuit also claims the law would invalidate long-standing contracts between landlords and brokerage firms that specifically say the brokers will charge the fees to tenants.
REBNY previously succeeded in overturning a 2020 directive from New York’s Department of State, which had eliminated broker fees based on an interpretation of a new state law at the time.
A spokesperson for the city’s Law Department said the department will review the lawsuit once it is served notice.
Supporters of the measure say the law will relieve tenants of onerous upfront costs often equal to 15% of their annual rents. The fee, combined with a security deposit and first month’s rent, can prohibit a tenant from moving, or burden the tenant with debt before even signing a lease.
Councilmember Chi Ossé of Brooklyn, who sponsored the broker fee legislation, said the law is a crucial step in making the city fairer for working-class New Yorkers.
"This lawsuit is a last desperate attempt by the real estate lobby to undermine the voices of city residents and maintain an irrational practice that nearly every other big city in the country does not allow," Ossé said in a written statement to Gothamist.
Mayor Eric Adams has said he was concerned about the measure’s impact on small landlords and its potential to lead to higher costs for tenants if landlords factor the fee into monthly rents.
Tagged
new york city
housing
David Brand
David is a reporter covering housing for Gothamist and WNYC. Got a tip? Email [email protected] or Signal 908-310-3960.
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