By David Goldfischer, Esq. Landlord/Tenant Rent Regulation Group Practice Lead
In June of 2019, when the State Senate introduced the Housing Stability and Tenant Protection Act (the “Act”), the majority of the public focused on the impact it would have on landlords of multifamily buildings containing regulated units. And rightfully so. However, some of the lesser-known administrative changes which were enacted have caused professionals in the industry to revamp their everyday business. For example, real estate brokers now have an obligation to advise their landlord-clients that they can no longer collect a security deposit in excess of one month’s rent. If they fail to do so and the landlord is found to have violated this restriction, they may be subject to discipline by the Department pursuant to Section 441-c of the New York Real Property Law.
In June of 2019, when the State Senate introduced the Housing Stability and Tenant Protection Act (the “Act”), the majority of the public focused on the impact it would have on landlords of multifamily buildings containing regulated units. And rightfully so. However, some of the lesser-known administrative changes which were enacted have caused professionals in the industry to revamp their everyday business. For example, real estate brokers now have an obligation to advise their landlord-clients that they can no longer collect a security deposit in excess of one month’s rent. If they fail to do so and the landlord is found to have violated this restriction, they may be subject to discipline by the Department pursuant to Section 441-c of the New York Real Property Law.
The new laws have also caused a high level of uncertainty in the industry by failing to account for many common-place scenarios. This has resulted in landlords being left to interpret the new rules on their own (certainly not something the legislators wanted) while simultaneously hoping they are acting correctly.
A question our firm receives on a near daily basis is what a landlord should do when they are holding a deposit greater than one month’s rent (tenant moved in prior to June 14, 2019) now that the tenant is up for a renewal. Is the landlord obligated to return the extra amount or are is the landlord ‘grandfathered’ under the old laws?
Unfortunately, there is no right or wrong answer in this scenario. New York State is aware there is a level of ambiguity amongst these new laws. Under the Act, a “landlord, lessor, sub-lessor or grantor” is now prohibited from collecting an application fee greater than $20.00. Sensing the confusion that ensued, the Department of State issued a memo in November 2019 which stated that the $20.00 limitation applied to licensed real estate brokers and salespeople acting as agent of the “landlord, lessor, sub-lessor, or grantor.” It also clarified that the rule does not apply to licensed agents when the agent has been formally engaged to represent the interests of the prospective tenant.
The hope is that the next few months, by virtue of further amendments to the Act; as well as case law set by precedent from legal proceedings arising out of the new laws, continue to provide clarity and understanding for all professionals in the real estate industry.
David Goldfischer, Esq.
Direct: (212) 897-5691
Email: dzg@cpllawfirm.cwdevelop.com
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