NEW YORK CITY- The New York Department of State has issued new guidance that will end tenant-paid rental commissions for landlords who retain a real estate agent. It has caused an uproar from the local real estate industry, who'll look to pursue legal action and say the legislation will hurt tenants more than help them.

The guidance was dated on Jan. 31 and is the first interpretation of the Housing Tenant and Protection Act of 2019 passed last June, which is intended to protect tenants.

However, some stirring in the real estate industry about the news believe it will do the exact opposite as landlords will look to pass down the costs to tenants, undoubtedly. "The thought is that the tenant is not going to pay, but they're going to pay dearly," Victoria Shtainer a New York real estate broker at Compass in New York and South Florida, tells GlobeSt.com.

Shtainer is already beginning to see the effects. This upcoming Monday she was set to show a rental that had a set rent but increased because the landlord is adhering to the new guidance, she said.

Also, the new interpretation is expected to hinder tenants from having broker representation, where mainly landlords will have the representation instead, she added. However, there are still questions surrounding the new guidelines, as industry players try to decipher what they mean for the industry at large.

In the meantime, rising concerns about the possibility of losing millions of dollars in broker commissions have spurred the Real Estate Board of New York, New York Association of Realtors and several other prominent residential brokerage firms to launch a lawsuit against the New York Department of State, REBNY announced on its website and in a tweet on Twitter.

The parties will file Article 78 this upcoming Monday to stop the enforcement of the guidance, citing that the Department of State illegally overstepped its role in dictating the economics of commissions in the New York rental brokerage community, said James Whelan, REBNY's president, in a prepared statement.

"The announcement of this new rule without warning has caused widespread confusion and havoc among dedicated real estate agents and the clients they serve. The sudden decision and the way it was made public was harmful to thousands of hardworking New Yorkers," he said.

Instant Insights /

Rental Fee Ban Sparks NY State, Real Estate Industry Tug-of-War

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