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Albany Issues Blow To Landlords In NYC Broker Fee Debate

NEW YORK (CBSNewYork) -- There is big news for renters in the Big Apple.

A new program is aiming to simplify the housing market, and ban broker fees. The changes could save tenants a lot of money, CBS2's Scott Rapoport reported Thursday.

A potential seismic shift in the rental market is becoming reality.

Expensive fees, commonly paid by tenants to landlord-hired brokers, are now effectively banned.

New guidance from the Department of State in Albany, which regulates real estate brokers, said landlords who hired the brokers would now have to pay the fees, which can be as high as 15% of the first-year lease, instead of their tenants.

WATCH: How Will New York's New Broker Fee Rules Impact Renters? 

Supporters said the move would give relief to tenants who previously not only had to pay the broker fee, but also one month's rent up front as a security deposit.

"These are overdue consumer protections," said Michael McKee of the tenants rights group TenantPAC.

NYC apartments
(Photo: CBS2)

McKee said it's a win for cash-strapped renters trying to find housing they can afford.

"It's going to make it easier for regular working people to find a place to live," McKee said.

But real estate brokers, who could still collect a fee if the tenant hires them to look for the apartment, said if the landlords end up footing the bill they are only going to pass the cost on to the tenant.

"If the apartments rents for $3,000, the tenant, historically, has paid the commission, this rent is now going to be $3,200-$3,300 a month," said Andrew Barrocas of MNS Real Estate.

"Not if it's a rent-regulated apartment. They can't," McKee clarified. "They can't jack up the rent."

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Opponents of the move, like the Rent Stabilization Association, said this is just another undue burden on the backs of the landlord.

"It's just another act by government to take away the tools that owners need to effectively provide housing for the people of New York City, and they need it desperately," the association's Frank Ricci said.

As for how the new broker guidance would be enforced, CBS2 reached out to the Department of State, but did not immediately hear back.

Meanwhile, the Real Estate Board of New York -- or REBNY -- is exploring legal action, challenging the move excluding tenants from having to pay broker fees.

This as Mayor Bill de Blasio announced the first steps toward reducing the amount of security deposit tenants must pay landlords in city financed homes. He proposed a plan that would offer renter security insurance, allowing small monthly payments, or a smaller single payment upfront, in lieu of a full, one-month deposit.

All of this in what has become an ever changing and divided New York City rental market.

The change in the broker fees is a revision to a sweeping rent reform law passed last year.

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