Update: Temporary Restraining Order Granted on New DOS Guidance Barring Tenant-Paid Commissions

NEW YORK—Terming the recently released guidance by the Department of State on brokerage commissions as “misguided” and “harmful,” the New York State Association of Realtors and the Manhattan-based Real Estate Board of New York announced on Feb. 7 their intent to file suit against New York State charging that the DOS overstepped its legal authority.

The litigation was  filed on Monday, Feb. 10. The litigation alleges that the Department of State usurped its role by engaging in improper rulemaking rather than following the necessary and required legal procedures for implementing a new regulation.

UPDATE: On Monday, Feb. 10, a New York State Supreme Court Judge in Albany granted a temporary restraining order that halts enforcement, at least until a hearing next month, Department of State guidance that would bar tenant-paid commissions. A full hearing on the Article 78 filing by NYSAR, REBNY and a host of major brokerage firms is scheduled for March 13.

The leaders of NYSAR and REBNY released a statement after the judge’s issuance of the temporary restraining order. “The entry today by the court in Albany of an order temporarily halting the implementation of New York State Department of State’s (DOS) interpretation of the Statewide Housing Stability and Tenant Protection Act 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,” NYSAR and REBNY stated. ” We look forward to ultimately resolving this matter in court in the weeks ahead. Meanwhile, we appreciate all of our members’ support and vigilance during this period of upheaval and confusion. We also want to thank Claude Szyfer and his team at Stroock & Stroock & Lavan LLP for their tireless efforts on this matter.”

The Department of State’s decision to announce this new rule in such a way has created widespread disruption for property owners, rental agents, and prospective tenants themselves—resulting in losses for brokers and landlords alike, NYSAR and REBNY stated in a joint announcement prior to the judge’s ruling.

“The New York State Association of Realtors is deeply concerned with the regulation’s content and the manner in which it was developed and promulgated. Real estate brokers provide valuable services to the consumer and the property owners and they should be fairly compensated. These regulations will severely and wrongly impact the incomes of hard-working real estate professionals,” said Jennifer Stevenson, president of the New York State Association of Realtors.

She continued, “It is unconscionable that a serious disruption of the marketplace has occurred without any industry input or even proper review by the State Board of Real Estate. We will use every resource available to us to fight against these unreasonable and punitive regulations.”

REBNY President James Whelan added, “We are asking the court to recognize that the Department of State illegally overstepped its role in issuing its new guidance on rental brokerage commissions. 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.”