BILL NUMBER: S571

SPONSOR: BRISPORT
 
TITLE OF BILL:

An act to amend the real property law, in relation to prohibiting land-
lords, lessors, sub-lessors and grantors from demanding brokers' fees
from a tenant

 
SUMMARY OF PROVISIONS:

Section one of this bill amends section 238-a of the real property law.

Section two of this bill provides that this act shall take effect imme-
diately.

 
JUSTIFICATION:

This legislation is necessary in order to remedy an erroneous interpre-
tation of the Statewide Housing Security and Tenant Protection Act of
2019 (HSTPA) by a single court in April 2021.

              

Pursuant to NY RPL § 238-a(1)(a), "no landlord, lessor, sub-lessor or
grantor may demand any payment, fee, or charge for the processing,
review or acceptance of an application, or demand any other payment, fee
or charge before or at the beginning of the tenancy, except background
checks and credit checks..." That language is clear, precise, and unam-
biguous in prohibiting landlords and others from collecting brokers'
fees from prospective tenants.

Consistent with the clear and explicit language of this provision, the
New York Department of State issued.interpretive guidance on the ques-
tion of whether a landlord's agent could collect a "broker fee" from a
prospective tenant. The Department of State answered: "No, a landlord's
agent cannot be compensated by the prospective tenant for bringing about
a meeting of the minds." This guidance correctly identified that a "fee
to bring about the meeting of the minds" would effectively be a
"payment, fee or charge before or at the beginning of the tenancy," and
would therefore be explicitly prohibited by the clear terms of NY RPL §
238-a(1)(a).

Unfortunately, and in direct conflict with the law and the interpretive
guidance of the Department of State, a single court has interpreted the
"sponsor's intent" differently, and ruled that landlords are not prohib-
ited from collecting brokers' fees from prospective tenants under the
Statewide Housing Security and Tenant Protection Act of 2019. This
legislation is necessary to correct for the erroneous judicial opinion.

Importantly, this legislation would simply require that the landlord pay
the brokers' fee for its own agents, instead of allowing a landlord to
shift the cost of paying its own agents onto the tenant. Brokers' fees
can be a major expense, typically reaching fifteen percent of a tenant's
annual rent. Across the United States, in almost all jurisdictions other
than New York, it is typical for the landlord to pay this cost of
compensating its own agents.

Imposing brokers' fees onto tenants creates a major obstacle:for
tenants, at a time when rents are skyrocketing and pandemic-era govern-
ment supports are no longer available. This is especially true for the
nearly one million low-income renter households living in New York City,
who earn at or below two hundred percent of the federal poverty line, or
$43,000 for a family of three. In 2022, the lowest-priced two-bedrooms
on the market in New York City ranged from $1,860 in Bath Beach, Brook-
lyn to $2,200 in Canarsie, Brooklyn. With a fifteen percent brokers'
fee, first month's rent, and security deposit, this translates to at
least $7,000 on hand just to move into an apartment, 16%- of a low-in-
come family's annual income. While some households may use their savings
for this major expense, it is typical that low-income tenants do not
have any savings to fall back on. Sixty-six percent of low-income
tenants had less than $1,000 in savings in 2021. Forty nine percent of
Black tenants and sixty percent of Latin American tenants of all income
levels had less than $1,000 in savings in 2021.

This legislation would simply reinstate the original intent of the
HSTPA, require landlords to pay their own agents as a matter of basic
fairness, and bring New York into line with most other jurisdictions
within the United States.

 
PRIOR LEGISLATIVE HISTORY:

2021-22: S.6427 2023-24: S2783

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.