The issue before the Supreme Court of Albany, New York arose out of the Statewide Housing Security and Tenant Protection Act, effective June 14, 2019.
On February 4, 2020, the New York Department of State (DOS), the agency that regulates real estate agents in response to inquiries from real estate brokers, issued a “Guidance Memo” with respect to the following: “Can a Landlord’s Agent Collect a ‘Broker Fee’ From the Perspective Tenant?” The “Memo” stated: “A landlord’s agent that collects a fee for bringing about a meeting of the minds between the landlord and tenant (i.e., the broker fee) from the tenant can be subject to discipline.” The court documents point out that the DOS does not dispute that it is the customary practice in the larger real estate markets in the State for tenants upon execution of the lease agreement to pay the broker’s commission.
On February 10, 2020, the Real Estate Board of New York (REBNY), the New York State Association of Realtors (NYSAR), and a number of brokerage firms brought an Article 78 petition in the Albany Supreme Court challenging the DOS “Guidance Memo.” In response to the filing of the Petition, the Court granted a preliminary injunction staying enforcement of the “Memo.” In the interim, the Court allowed brokers to collect a fee from tenants when representing the landlord.
On April 9, 2021, a little over a year from the date of filing of the Article 78 Petition and the Court’s preliminary stay, the Court ruled in favor of the brokers. It stated, in part: “The Respondents’ (DOS) contention as set forth in their ‘Guidance,’ that the statute specifically precludes Landlords from requiring potential tenants to pay the commission of the broker who negotiated the lease agreement is not supported by the Court’s interpretation of the statute. It follows, therefore, that 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.”
The Court further stated: “The Respondents (DOS) are permanently enjoined from imposing any disciplinary action upon any real estate professional for collecting or attempting to collect a commission from a prospective tenant.”
The date of the Court’s decision was April 9, 2021.