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Wednesday, March 31, 2021

Court Finds that Landlord's Agent CAN be Sued for Charging Brokerage Fee to Tenant under HSTPA

Can a landlord's agent charge a tenant its commission?

That issue is going to be decided by the New York County Supreme Court in the case of McLendon v. Kelley after the court refused to dismiss the case, but the case should already be dismissed under the Court's own reasoning.

The law that the tenant is relying on in this case to block the fee charge is called The Housing Stability and Tenant Protection Act (HSTPA) and specifically, Real Property Law 238-a(1)(a), which states as follows:

Except in instances where statutes or regulations provide for a payment, fee or charge, no landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge for the processing, review or acceptance of an application, or demand any other payment, fee or charge before or at the beginning of the tenancy, except background checks and credit checks as provided by paragraph (b) of this subdivision, provided that this subdivision shall not apply to entrance fees charged by continuing care retirement communities licensed pursuant to article forty-six or forty-six-A of the public health law, assisted living providers licensed pursuant to article forty-six-B of the public health law, adult care facilities licensed pursuant to article seven of the social services law, senior residential communities that have submitted an offering plan to the attorney general, or not-for-profit independent retirement communities that offer personal emergency response, housekeeping, transportation and meals to their residents.

In refusing to dismiss the case on this law, the Court focused on the Department of State's Guidance on the topic wherein the Department had opined "that a broker for the landlord could not collect a broker fee from a perspective tenant pursuant to the above provision." However, the Court's reasoning is in error and the broker should bring a motion to reargue / renew this application for dismissal.

Operatively, the Department of State's Guidance was withdrawn on February 10, 2020 and therefore it holds no weight in this case. To substantiate this withdrawal of Guidance, see the notation at question 5. on page 4 of this hyperlink.

More importantly, in Real Estate Bd. of New York v. New York State Department of State, the Judge issued a full injunction preventing the statute from being utilized against brokers until the Court issues a decision on REBNY's Order to Show Cause, which has not yet occurred. 

This case should therefore be dismissed.


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