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Who Pays Realtor Fee

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Who Pays Realtor Fee

Postby DJS2020 » Thu Jun 11, 2020 3:04 pm

I found a property in Port Washington on Long Island, listed on Zillow. The contact associated with the listing was a Realtor. I reached out and asked to see the unit. We didn't sign anything with anyone.

I had questions and the Realtor gave me the Landlord's contact info. We subsequently reached an agreement and were ready to sign the lease with the Landlord. I just got a text from the Realtor that I should bring a check for one month's rent to the signing for her commission (not that it matters but this is in addition to 2 months security and 1st months rent).

As far as I'm concerned, I haven't used a Realtor in this process. The Realtor that listed the property is a fiduciary for the landlord - why would I pay for the listing agent's commission?

What would have happened if I had my own realtor? Would I have had to pay the listing agent AND my realtor? I specifically didn't use a realtor to avoid paying.

Has anyone heard this before? I currently rent in NYC and we DID use a realtor to find this property - we paid him one month rent to OUR realtor but we didn't pay the listing agent.
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Re: Who Pays Realtor Fee

Postby TenantNet » Thu Jun 11, 2020 3:35 pm

What do you mean by fiduciary for the LL? I presume you mean the agent is an agent of the LL, there being some sort of financial connection. If so, then yes, there's no commission due in our opinion.

Chances are the LL and agent are in cahoots with each other. If they can get away with that, then you will probably experience other frauds if you take the place.

Second, look at the new 2019 rent law changes. See viewtopic.php?f=24&t=13981 and look at Judge Lebovits treatise, part 1 (page 13 of the file, page 44 of the document) where it says, 2019 law, "Tenants in RS and unregulated units may not be required to deposit more than 1 month's rent as security deposit," and "Abolishes pre-paid rent advances. No more first and last month's rent accepted or required at beginning of tenancy."

So it seems the LL/agent are charging illegal amounts. I hope you go to the Attorney General's office about this.

As for Brokers' Fees, there is some confusion. I seem to remember there being a lawsuit challenging this part of the new laws, but I don't know if that's been resolved. But see https://thecity.nyc/2020/02/new-york-re ... nated.html

or

https://therealdeal.com/2020/02/05/owne ... e-guidance

and

https://therealdeal.com/2020/02/10/judg ... ssion-ban/

and

https://www.nytimes.com/2020/03/04/nyre ... -fees.html

Obviously there is ongoing confusion.

I would google NYS Brokers' Fees to see if there are any more recent articles.
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Re: Who Pays Realtor Fee

Postby DJS2020 » Fri Jun 12, 2020 5:40 am

Thanks. Great information.

So it does seem that the tenant paying the landlords broker fee is pretty common. We called a few other places and other realtors in the area also indicated the tenant was responsible for paying the listing agents fee.

There was a law against this that was passed in June and went into effect in February. It was contested by several large realtors in court and the courts were going to hear arguments from both sides in mid March. However due to coronavirus it was pushed to early September.

Anyway we refused to pay the fee and lost the apartment. I guess properties that don’t charge a fee are listed as ‘no fee’, and listings that say nothing the prospective tenant should assume a fee (at least until September decision)
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Re: Who Pays Realtor Fee

Postby TenantNet » Fri Jun 12, 2020 5:49 am

May be common, but also might be illegal.

I assume you mean June 2019, which we refer to above. That part of the law is murky right now and I can't say where the legal challenge stands.

"No Fee" has been around forever and depends on the market. The part about the broker having to be not related financially to the LL ... that is not new.
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Re: Who Pays Realtor Fee

Postby DJS2020 » Fri Jun 12, 2020 3:37 pm

Yes, sorry - i did mean June 2019 (what you referred to above). I guess until the murkiness is clarified, the current system will continue. This is all new to me, as the system is completely different in every other place I lived (including 4 other states, CT where I own rental property, and my current apartment in NYC, which I now guess was 'no fee').

Anyway, it seems pretty ridiculous to ask a tenant to pay for a service provided to landlord but I guess my opinion doesn't count!

Thanks for the quick and thorough replies.
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Re: Who Pays Realtor Fee

Postby cheeseburger69 » Tue Jan 05, 2021 3:13 pm

Bumping this to check where we are at in terms of brokers fees as I can't get beyond months old articles suggesting that things "remain up in the air." As of *right now* are brokers or "landlord agents" allowed to charge prospective tenants a fee?
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Re: Who Pays Realtor Fee

Postby BubbaJoe123 » Tue Jan 05, 2021 3:59 pm

The rules were announced in February, REBNY got a temporary restraining order preventing them from being enforced, with a March court date. That got pushed to June (at the state's request, with REBNY's assent), and then to September (again at the state's request, with REBNY's agreement). I can't find anything about whether the September hearing actually happened, but the lack of coverage means that it probably didn't, meaning brokers can still charge a fee. With that said, the weak market has mean that tenants have a lot more leverage than usual.

https://therealdeal.com/2020/06/11/brok ... hed-again/
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Re: Who Pays Realtor Fee

Postby cheeseburger69 » Wed Jan 06, 2021 6:10 pm

Thanks. Was just viewing an apartment where the broker informed me that I would pay her fee in the form of one month of rent (which she described as a good deal!) and that they "won" the fight over the new rule.
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Re: Who Pays Realtor Fee

Postby TenantNet » Wed Mar 10, 2021 5:39 am

This is why you never believe LLs or brokers. The fight is not over by any means. In fact, just two days ago in a related suit, the tenant's complaint survived a motion to dismiss by defendants Sotheby’s International Realty’s (an intermediate decision) with the court stating:

There is no doubt that there is a valid dispute over the reach of this HSTPA provision. However, the Court finds that the guidance from the Department of State permits plaintiff to state a cause of action against the Broker Defendants relating to the broker fee. Plaintiff alleges that the Broker Defendants were acting on behalf of the landlord during the transaction and were acting as the landlord’s agent. Under the Department of State’s interpretation, the Broker Defendants were not permitted to charge a third-party, plaintiff, for work performed as an agent for the landlord.


Sotheby’s is one of the plaintiffs in the REBNY action seeking to force the Department of State to revoke its guidance. REBNY v. Dept. of State, 901586-20 (Sup. Ct. Albany Co.). See the DOS FAQ attached to this post. It's our understanding that the REBNY case has not been decided.

DOS FAQ.pdf
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Re: Who Pays Realtor Fee

Postby TenantNet » Sat Apr 10, 2021 3:09 pm

Below is the latest on the broker fee issue. An Albany court issued a decision nullifying the state's guidance. As explained below, there are two options ... either appeal the decision to a higher court, or have the legislature rewrite the regulations. But I don't see a lot of hope in either path.

https://therealdeal.com/2021/04/09/broker-fee-ban-was-an-error-court-rules/

Broker fee ban an “error,” court rules
Judge called the state’s guidance to ban tenants from paying landlords’ broker fees “an abuse of discretion”
April 09, 2021 05:50 PM
By Erin Hudson

An Albany judge sided with the real estate industry Friday, declaring New York state regulators’ attempt to ban tenants from paying landlords’ broker fees an “error of law.”

The decision comes more than a year after the Department of State issued guidance banning the practice. That guidance offered regulators’ interpretation of the Housing Stability and Tenant Protection Act, which became law in June 2019.

In response, prominent real estate trade groups and residential brokerages filed for a temporary injunction against state regulators and sought to overturn the guidance, which they said wreaked “havoc and confusion” on agents and renters.

After lengthy delays and several postponed hearings, Albany Supreme Court Judge Susan Kushner issued her decision on Friday.

“The guidance was issued in error of law and represents an unlawful intrusion upon the power of the Legislature and constitutes an abuse of discretion,” Kushner wrote in her court order.

In addition to dismissing state regulators’ guidance, the court order bans the DOS from applying or enforcing any rule that would prevent a real estate licensee from receiving payment from a prospective tenant for “bringing about the meeting of the minds” between a landlord and tenant. It also permanently prevents state regulators from imposing any disciplinary action against licensees who do collect broker fees from tenants.

Broker fees in New York City are typically about 15 percent of the annual rent, which when combined with first’s month rent and a security deposit can mean tenants must come up with a five-figure sum just to move in. The broker fee for a Manhattan apartment asking the borough’s median rent of nearly $3,100 would be about $5,580.

While counterintuitive for those who have never rented in the city, it’s common for a renter to pay the broker fee for the landlord’s agent whether or not that agent did any work on the tenant’s behalf. Before the pandemic, the city’s rental market was so notoriously tight that if a tenant refused to pay the broker fee, landlords and their agents often had plenty of other options. (That dynamic has since changed as vacancies across the city skyrocketed and listings touting no broker fee have proliferated.)

The DOS guidance last year shook the real estate industry. Many called it a “death knell” that would jeopardize rental firms and agents’ businesses .

Meanwhile, housing advocates and many New Yorkers applauded the move.

“Fees, historically, just defined who had access to the rental market and who didn’t,” Paulette Soltani, political director at the activist group VOCAL New York, said at the time. “This is just going to allow people to equally be able to find housing and not have to pay these exorbitant fees to get access.”

Though state Sen. Julia Salazar did not voice outright support of regulators, when asked last year whether the guidance was in line with the spirit of the 2019 rent laws, she said “our intent is to eliminate barriers that currently prevent low-income and vulnerable people from obtaining housing.”

Within days of regulators’ guidance being issued, the real estate industry headed to court. The Real Estate Board of New York and the New York State Association of Realtors filed for the injunction, along with brokerages Corcoran Group, Douglas Elliman, Bond New York, Brown Harris Stevens, Sotheby’s International Realty, Bohemia Realty Group, R New York, Kian Realty NYC, Level Group, City Connections and Regina Wierbowski Real Estate.

The injunction was granted and broker fees were back, though the pandemic dealt a swift blow to market activity soon after. Many landlords began forgoing the practice of charging tenants broker fees in order to fill apartments as the city emptied out.

Now, the industry is extolling its ability to charge the broker fee without state regulators stopping them.

“This decision ensures that thousands of hardworking, honest real estate agents across New York state can earn commissions without fear of unwarranted discipline by the Department of State based on its erroneous interpretation of the Housing Stability and Tenant Protection Act,” said REBNY president James Whelan in a statement.

But the industry’s celebration may be premature: The DOS could appeal Friday’s decision. It’s also possible state lawmakers could introduce legislation that explicitly bans the practice of forcing tenants to pay broker commissions.

The judge’s decision deferred to lawmakers and was based on the fact the 2019 rent law made no reference to “broker’s commissions” and did not specifically mention real estate agents.

“Where the term is intentionally included in one section of the Act and omitted in another, it is further evidence that the Legislature must have intended to omit it,” Kushner wrote.

Also see
https://therealdeal.com/2020/02/05/owne ... -guidance/
https://therealdeal.com/2020/02/10/stop ... oker-fees/
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