Broker fees for NY tenants back, for now

A state judge on Monday blocked a measure that had briefly prevented landlords’ real estate agents from collecting commissions from tenants.

The measure, issued last week by the New York Department of State, stated that real estate agents hired by landlords would no longer be permitted to collect fees from tenants, a common practice on Long Island and in New York City. The announcement — a new interpretation of a state law enacted last June — was greeted with jubilation by tenants but it shocked agents, who said they would not be able to earn a living if the rule remained in effect.

Two prominent real estate industry groups and a dozen brokerages sued the agency and its head, Secretary of State Rossana Rosado, on Monday in state court in Albany County. The plaintiffs included the New York State Association of Realtors in Albany, the Manhattan-based Real Estate Board of New York, and brokerages Douglas Elliman, the Corcoran Group and Sotheby’s International Realty Inc., among others.

Later on Monday, state Supreme Court Justice L. Michael Mackey issued a temporary restraining order preventing the measure from taking effect. The next court date is set for March 13.

In a joint statement on Monday, the state group’s president, Jennifer Stevenson, and the city group’s president, James Whelan, said the judge’s ruling “means that thousands of hardworking, honest real estate agents across New York State can do business in the same way they did prior to last week’s DOS memo without fear of discipline by the DOS.”

In court papers, the plaintiffs argued the state agency had “usurped the role of the Legislature and … its actions constitute an illegal exercise of legislative power.”

The Department of State did not respond to requests for comment.

The real estate industry has been “rocked by havoc and confusion” since brokerages became aware of the ruling on Feb. 4, with tenants threatening to withdraw from pending rental transactions and refusing to pay fees, the industry groups and brokerages said in court papers.

Wendy Sanders, a Great Neck-based real estate agent with Douglas Elliman who specializes in rentals, said the judge’s ruling that temporarily blocked the order “allows us to go back to business as usual and shift our focus back on providing a much needed service.”

By Maura McDermott

maura.mcdermott@newsday.commauramcdermott

Maura McDermott covers education. Since joining Newsday in 2012, she also has worked on the investigations team and covered real estate and the business of health care.