Legal and Industry Updates for Realtors and NY Licensees

The real estate landscape in New York is continuously evolving, with significant updates from the National Association of Realtors’ new local regulations like the New York City Fairness in Apartment Rental Expenses Act (the FARE Act), and updates to New York State’s Property Condition Disclosure Statement. This article provides a comprehensive summary of these developments to help real estate agents stay informed and compliant while effectively serving their clients.

National Association of Realtors Updates

Update to Standard of Practice 10-5

On June 5, 2025, at its Mid-Year Legislative Meetings held in Washington, D.C., NAR updated Standard of Practice (SOP) 10-5 and Professional Standards Policy Statement 29 (“Policy Statement 29”), which are part of Article 10 of NAR’s Code of Ethics. [See https://bit.ly/4kTr7tR]. As NAR explains, “Article 10 prohibits REALTORS® from denying equal professional services and employment opportunities based on protected characteristics. NAR adopted SOP 10-5 in 2020 to further clarify the application of Article 10 by prohibiting REALTORS® from using harassing speech, hate speech, epithets, or slurs.” NAR further explains that “the updated language now aligns the definition of ‘harassment’ with the NAR Member Code of Conduct and focuses its application on instances in which REALTORS® are operating in their professional capacity, consistent with similar ethical requirements applied by other large trade associations across the country.”

Policy Statement 29, which applies to the “applicability of the Code of Ethics” to professional standards matters, was revised to read as follows, in part: “…a REALTOR® shall be subject to disciplinary action under the Code of Ethics only with respect to their capacity as real estate professionals, in association with their real estate businesses, or in their real estate-related activities.” [See http://bit.ly/3HGIwY1].

Additionally, SOP 10-5 was revised as follows: “REALTORS®, in their capacity as real estate professionals, in association with their real estate businesses, or in their real estate-related activities shall not harass any person or persons based on race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity.” [See https://bit.ly/3FZhUks]. The updated SOP 10-5 now explicitly limits violations to activities directly associated with an agent’s real estate practices.

For Realtors, this update reinforces the importance of maintaining high ethical standards in all client and professional interactions. For example, a Realtor who engages in behavior prohibited by SOP 10-5 could face disciplinary action, but personal conduct unrelated to the agent’s real estate activities would generally fall outside this scope. According to NAR, the goal of these amendments was to create additional clarity for state and local associations as they enforce the NAR Code of Ethics.

NAR has clarified that the recently announced changes do not override prior enforcement actions that were reviewed and rendered prior to June 5th. However, any ongoing cases related to SOP 10-5, which have been filed prior to June 5th and for which a decision has not yet been rendered, state and local associations are to use discretion when deciding whether to apply the amended language based on the individual circumstances of each case.

NAR provides further guidance and explains that in a case where a hearing panel has begun the review and grievance process prior to June 5th, utilizing the original SOP 10-5 (and Policy Statement 29), that panel should continue using those provisions to address an Article 10 complaint. However, where an Article 10 case arose prior to June 5th, but the review and grievance process commenced after June 5th, then the newly amended language of SOP 10-5 (and Policy Statement 29) would apply.

Rescission of the Non-Commingling Rule

At its Mid-Year Meeting, NAR also officially rescinded its “Non-Commingling Rule,” which was an optional policy that permitted Multiple Listing Services to limit display of listings online. The rule, which was contained in Section 18.3.11 and Section 19.23 of NAR’s MLS Policy Handbook, allowed MLSs to prohibit brokers from displaying listings from Realtor-affiliated MLSs alongside listings from other sources (like non-MLS brokers or different MLSs) on the same search results page. This decision was recently supported by a Ninth Circuit Court of Appeals ruling in a lawsuit filed by REX Real Estate against NAR and Zillow. The Ninth Circuit held that the Non-Commingling Rule did not constitute an antitrust violation, as it was not mandatory and many MLSs chose not to implement it.

NYC FARE Act Updates

Recent Court Dismissal and Denial of Injunction

The NYC FARE Act, which went into effect on June 11, 2025, represents a dramatic shift in the New York City rental market by requiring landlords to pay broker fees for agents they hire, relieving tenants of this financial burden. Earlier this year, the Real Estate Board of New York and the New York State Association of Realtors filed a lawsuit against, and sought an injunction to block, the implementation of the FARE Act, arguing it could lead to higher rents and market confusion. They also alleged that the FARE Act violated constitutional protections based on First Amendment and Contract Clause claims. On April 3, Gov. Kathy Hochul’s administration filed an amicus brief asking the court to uphold the law and emphasizing that the FARE Act does not conflict with existing state regulations.

On June 10th, the trial court denied REBNY’s and NYSAR’s motion, allowing the FARE Act to take effect as expected on June 11th. While the judge in the case dismissed most of the constitutional claims, the “Contract Clause” claim was allowed to stand. REBNY and NYSAR immediately filed a notice on June 12th that they would be appealing the judge’s decision to the Second Circuit.

For real estate agents, this means a significant change in how rental transactions are structured in New York City. Tenants will no longer be responsible for paying broker fees when the landlord hires the agent, potentially saving renters thousands of dollars in upfront costs. Agents must now focus on negotiating clear agreements with landlords to ensure that their commissions are paid directly by the property owner. This shift may also increase demand for rental properties, as tenants face lower move-in costs, but agents and tenants should be prepared for potential pushback from landlords who may attempt to offset the added costs by raising rents significantly.

Prior Court Decision in 2021:
NYS DOS Guidance in 2020 on Rental Commissions

In 2020, the New York State Department of State, after the passage of the 2019 Housing Stability and Tenant Protection Act (“2019 Act”), issued a guidance interpreting a part of the 2019 Act as a ban on tenants being forced to pay broker fees. REBNY filed a lawsuit alleging that the DOS had overstepped its authority in issuing its guidance. In April 2021, a judge decided in REBNY’s favor and held that “the guidance was issued in error of law and represents an unlawful intrusion upon the power of the Legislature and constitutes an abuse of discretion.” This decision was likely an important catalyst which ultimately led the New York City Council to pass the FARE Act.

While the DOS has not issued a formal statement specifically addressing the new FARE Act as of the latest available information, the DOS typically oversees real estate licensing and regulations, ensuring compliance with New York State’s real estate laws and pertinent regulations. Given the FARE Act’s local scope within New York City, the DOS is likely to monitor its implementation to ensure consistency with broader real estate regulations, such as those governing broker conduct and commission agreements, and ensure compliance with the law.

Property Condition Disclosure Act: Septic System Disclosure

Effective July 1, 2025, New York’s Property Condition Disclosure Act (PCDA) [see https://bit.ly/3Xi8B5C] has been amended to introduce new requirements for septic system disclosures in real estate transactions. Paragraph 36 has been added to the PCDS, which requires a seller to disclose the type of sewage system services at the property (i.e., public sewer, private sewer, septic, or cesspool). If the property is served by a septic system or cesspool, it requires the seller to disclose the age of the system, when the system was last pumped, and the frequency of pumping of the system. Lastly, the seller is required to disclose any known material defects. The PCDS also refers purchasers to an informational pamphlet regarding the operation and maintenance of septic systems provided by the New York State Department of Health [see https://bit.ly/43N3rRV].

Sellers now will be required to provide detailed information about the condition, maintenance history, and any known issues with septic systems or cesspools on the property. This change aims to enhance transparency and protect buyers from unexpected repair costs, which can be substantial for septic system failures. For seller agents, this update underscores the need to educate sellers about their disclosure obligations and to advise their clients to discuss any potential issues with their attorneys when completing the PCDS. Buyer agents, meanwhile, should ensure that their clients review septic disclosures carefully and consider hiring specialists to inspect and verify the system’s condition. Compliance with the updated PCDA will be critical to avoid liability and ensure smooth transactions.

It is also important for real estate licensees to note that nothing has changed with respect to their obligations under Section 466 of the PCDA, which requires real estate licensees to timely inform their clients of their rights and obligations under the PCDA. [See https://bit.ly/3ToS8Jw]. Seller agents should not assist sellers with completing the PCDS and should recommend that they reach out to their attorney for assistance.

Agents Must Be Proactive in Updating Their Knowledge

The real estate industry in New York is undergoing significant changes, from NAR’s ethical and operational updates to local and state regulations like the FARE Act and PCDA amendments. Coupled with recent court decisions, these developments require agents to stay proactive in updating their knowledge and practices. By understanding and adapting to these changes, real estate professionals can maintain compliance, build client trust, and navigate the complexities of the real estate market with confidence.

Legal Column author John Dolgetta, Esq., is the principal of the law firm of Dolgetta Law, PLLC. For information about Dolgetta Law, PLLC and John Dolgetta, Esq., please visit http://www.dolgettalaw.com. The foregoing article is for informational purposes only and does not confer an attorney-client relationship and shall not be considered legal advice. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views or positions of HGAR, its affiliates, or any other entity.