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Broker’s Fees in New York City

Back in February (seems like ages ago, doesn’t it?), the New York Department of State (DOS) ruled that prospective tenants would no longer have to pay broker’s fees (sometimes referred to as ‘finder’s fees’) to agents for assistance with securing a rental in New York city. Instead, that commission will have to be paid by the property owner that hired the broker to show the unit.

Broker’s fees in New York typically range anywhere from 12% to 15% of annual rent and have been historically charged on top of a security deposit. The guidelines from the DOS regarding the tenant-friendly rent laws passed last year are aimed at brokers, who must register with the department.

In early March, in response to a petition filed by the Real Estate Board of New York (REBNY) and the New York Association of Realtors, a New York judge granted a temporary restraining order, halting the DOS’s guidance barring tenant-paid rental commissions from going into effect. The plan was to be back in court in June; however, due to the COVID-19 pandemic, all parties agreed that a potential hearing would take place on October 23. That means—for now at least—agents can still charge broker’s fees. This has caused concern and confusion for both New York City’s 25,000 licensed real estate brokers and prospective tenants who may be thinking, “should I hold off on my property search in hopes of a rule change that could result in significant financial savings?”

In short, the question now is, “to rent or not to rent?” If an individual needs to move right away and they were hoping to avoid the huge fees, they’re sadly out of luck. And for those who don’t have to move immediately, it could be detrimental to put off the search for a new residence, as it could mean missing out on a unit that’s currently available and on the market (which could be snatched up by someone who doesn’t mind paying the fees). Additionally, there’s a chance come October, the new guidance won’t pan out, leaving broker’s fees in place as they have been historically.

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Published On: March 13, 2020

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