Real estate agent commissions on rental property in New York


New York City definitely does nothing like any other place. Its real estate agent commission system for property rentals is further proof of this. The rental market is different from many parts of the country as all brokerage fees are usually paid by the tenant, rather than the owner. However, that was before. A law passed on February 4, 2020 called this rule into question, triggering a great dissatisfaction in the profession and among the renters. The NY Real Estate Board lawsuit has put this new measure on hold, but what will come next?

Real estate agents’ commission system

In principle, in most parts of the United States, the landlord (renter) pays the commissions of the real estate agent who represents him and the one who defends the interests of the tenant. In New York, it’s different, it’s the tenant who has this double burden: he must not only pay the commission for his own agent but also that of the owner’s real estate agent. This “double commission” is around 15% of the annual amount.

The Department of State (DOS) decision

The State Department intervened in the economy of the New York rental market last February.

It has been decided that owners will now have to pay brokerage fees for the real estate agents they hire to represent their interests.

It was a reversal of the tenant-pays system which had been the norm in rental transactions in New York.

Any real estate agent acting on behalf of a landlord who accepts brokerage fees paid by a tenant may be subject to disciplinary action. Agents representing a tenant are not affected by the guidelines.

It should be understood that this measure only affects owners who rent out their property, since they are now obliged to pay the agency fees formerly paid by the tenant. A logical and inevitable consequence, this additional cost for the owners will lead to an increase in rents … and dissatisfaction with the tenants. What started out as good news for them may well become a poisoned gift.

Following the announcement of this measure, the Real Estate Board of New York immediately brought the case to justice, at least to have the decision postponed until March 13, 2020. A case to follow…

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