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Surprise for New York renters: No more broker fees

The lower Manhattan skyline, including One World Trade Center and the Brooklyn Bridge, as shown in 2016.
The lower Manhattan skyline, including One World Trade Center and the Brooklyn Bridge, as shown in 2016.Mark Lennihan

NEW YORK — In New York’s City intensely competitive rental market, tenants usually deal with middlemen known as brokers, who have near-absolute control over apartment listings, viewing appointments and leases.

In return, brokers collect fees that can be as much as 15% of the annual lease, typically paid in one lump sum by tenants before they can move in.

But late Tuesday, New York state effectively eliminated them.

In an unexpected addendum to last year’s rent laws, state housing regulators said renters can no longer be charged broker fees, potentially upending the market and delivering the latest blow to an industry already reeling from new regulations and sweeping tenant protections.

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New York is one of the few cities in the country with a broker industry that has such financial leverage over how people rent apartments.

The elimination of broker fees, in addition to the laws passed last year, push New York further as a national leader in creating rules favorable toward renters.

Brokers can still collect a fee, the state said in the revised rules, but it must be paid by the landlord unless a prospective tenant hired them to help find an apartment.

The new rule, buried in a legal guidance on last year’s rent laws, caught lawmakers, many landlords and brokers off guard. The Real Estate Board of New York, the influential trade group, immediately threatened to challenge the rule in court and urged its members to protest.

Brokers warned that the new rules would simply increase what tenants pay in monthly rent, since many landlords will likely pass on the cost of a broker’s fee to their residents in higher rent.

Still, state laws limit how much rents can be raised in New York City’s roughly 1 million rent-regulated apartments.

But tenant advocates cheered the new rule, saying it helps tilt an uneven real estate playing field.

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“These are important tenant protections, and it’s about time we had them,” said Michael McKee, treasurer of the Tenants PAC. “Real estate brokers have been able to get away with a lot for a long time, so it’s about time they got reined in.”