In New York City, the 15% residential brokerage commission feels almost like a rite of passage. For tenants paying one of the highest rents around the country, paying the brokerage commission at lease execution can feel like a punch to the gut. Of course, residential brokers work very hard to facilitate a transaction and are entitled to compensation for the service they provide, especially since prospective tenants change their minds frequently.
Recently the New York State Department of State (DOS) took action to prevent residential brokers from collecting brokerage commissions from tenants. Until a decision is rendered in this lawsuit real estate brokers will be able to continue to collect commissions from tenants.
Here are three items to note about the recent developments:
- Contrary to popular belief, there is not a new law affecting brokers. The Department of State is interpreting the Housing Stability and Tenant Protection Act of 2019.
- The Real Estate Board of New York (REBNY) is challenging the ruling in court. As of this writing, brokers are still able to collect commissions from tenants.
- In the event residential real estate brokers are not able to collect commissions from tenants, brokers will only be able to collect commissions from landlords.