On February 4th, the Department of State issued revised guidance on June 2019’s “Housing Stability and Tenant Protection Act of 2019.” The guidance stated that agents who represent building owners cannot collect a commission from incoming tenants.
Most media sources misreported this as broker fees going away. That is not the case – the guidance only prohibited listing agents hired by the landlord from collecting a commission from the tenant. Accordingly, landlords would have to pay the agent they hire to rent their listing.
Here’s what you need to know about the NYC Rent Law Updates:
1) In a major loss for tenants, NYC rents increased overnight
An unintended consequence of the new guidance from the Department of State saw many landlords immediately raising rents to compensate their listing agents. Basically, they’re baking the broker fees into the first year of tenants’ rent which likely means that the standard year two rent increase will be based on the rent with the fee recoup included and not the market value of the actual unit.
Some agents even stopped showing their listings to tenants because of the uncertainty around the law – which limits the universe of options available for people needing to find a home right now.
2) The real estate industry is fighting this
On February 10th, a temporary restraining order was issued by the New York State Supreme Court that postpones this guidance until at least March 13th, when the Department of State has been asked to respond in court.
It’s likely that the guidance will stand and the next few weeks will just be a buffer period that gives the market a much-needed adjustment period.
3) This is both good and bad for New York City renters
The good: The new interpretation of the law could level the playing field for NYC residents. Though the “Housing Stability and Tenant Protection Act of 2019” provided powerful guidelines around application fees and upfront rent and security deposits, often it can still feel like the wild west out there with very little transparency around fee structures and who is responsible for paying said fee on any given listing. This guidance could help regulate a pain point that every New Yorker can relate to.
The bad: Since these new guidelines were implemented with virtually no notice, the local rental market has been turned upside down and causing smaller landlords to increase the rent of their units to offset the added cost of paying the broker fee — which in turn increases their annual property taxes. We’re also seeing some units being taken off the market until the dust settles and we know exactly what’s going to happen.
Triplemint prides itself on always putting the client first, and will always support what’s best for the New York City buyer, seller, and renter. We believe that we’re operating in an antiquated industry that has been grossly unregulated for far too long, and we also believe in putting the power back in the hands of the consumer. As painful as transitioning to new laws and guidelines can be, disruption is a good thing!
If you have any questions about how this might affect your apartment search, please call us at (212) 235-1123 or email firstname.lastname@example.org