Broker fees are back, at least for now.
Just days after New York's real estate industry reacted with shock and confusion to a state ban on broker fees, a judge temporarily blocked the new rule.
The decision put the new regulation on ice until at least next month, giving a victory to the real estate agents who railed against the rule when it was unearthed last week. For tenants, it could mean a return of a costly fee that has been paid grudgingly for decades by renters in New York City.
Broker fees, which aren't common in the U.S. outside New York, can run as high as 15% of a year's rent. The cost, which comes on top of other cash payments required to take the keys to an apartment, is often a surprise to newcomers. Even longtime city residents complain about the fee, arguing it should be covered by landlords.
The Real Estate Board of New York, an influential trade group, sued Monday to block the state's ban, saying it "created widespread disruption for property owners, rental agents and prospective tenants."
New York State Supreme Court Justice L. Michael Mackey in Albany responded by issuing a temporary restraining order putting the regulation on hold at least until he holds a hearing in March. The ruling means "thousands of hardworking, honest real estate agents across New York State can do business in the same way they did," the board said in a statement.
Mayor Bill de Blasio said he was surprised by the lawsuit, adding the "system is breaking down" and the city has gotten more and more unaffordable.
"If we don't take these kinds of aggressive actions quickly the place is not going to be livable for working class and middle class people," de Blasio said.
The ban on fees was discovered last week in a state document dated Jan. 31. The rule, preventing brokers working for landlords from charging a fee to tenants, was issued as part of guidance meant to clarify a broader package of rent reforms that passed last year.
It added to the frustration of landlords still smarting from the broader legislation, which they've argued makes it difficult to raise rents or cover the cost of improvements in the city's roughly 1 million rent-regulated apartments. Values of buildings with regulated units have declined, and interest in acquiring them has plummeted as investors mull how much they're now worth.