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NYS Supreme Court Strikes Down Department of State Ban On Broker Fees

by | Apr 14, 2021 | Industry Updates

On Friday, April 9, Albany County Supreme Court Justice Shannon Kushner issued a decision holding that the newly enacted RPL 238-a, contained in the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”) does not extend to the collection of brokerage fees from tenants by brokers. In the aftermath of the HSTPA, the New York State Department of State issued guidance to the effect that the new RPL 238-a not only restricted owners from collecting fees, such as application fees and credit check charges in excess of $20, but also prohibited brokers from collecting a fee from a tenant.

In a nine-page order, Justice Kushner held that it was clear from the Legislative History, including the statement of the bill’s sponsor, Senator Brian Kavanagh, that “the prohibition was intended to apply to application fees, background check fees, credit check fees, and any other fee imposed as a pre-condition to negotiations” for a lease. She further held that had the Legislature intended to eliminate brokers’ fees, the law would have expressly stated as such, and stated, “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.”

Finally, the decision bans the Department of State from enforcing any rule that prevents a real estate licensee from receiving payment from a prospective tenant for “bringing about the meeting of the minds” between a landlord and tenant.

Please contact us with any questions about this ruling.

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