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Despite New Law Restricting Them, NYC Brokers Still Hitting Renters With Large 'Processing Fees'

NEW YORK (CBSNewYork) -- New York renters say they are still paying hundreds of dollars just to apply for a new apartment, despite a new law meant to protect them.

Back in June, Gov. Andrew Cuomo signed legislation that mandated landlords charge no more than $20, but no one seems to be enforcing it, CBS2's Lisa Rozner reported Monday.

"It's just ... really, it's like a rat race trying to find a place to live," Nina Baumann said.

Baumann and her roommate finally found a place after viewing 30 apartments in two weeks.

"Almost every one that we looked at the broker or whoever was showing us, was like I have like six other people and if you want it you have to get your application in," Baumann said.

NYC Apartment Building
(Photo: CBS2)

And that application came with a fee to cover a background and credit check. Some refer to it as a "processing fee." One place?

"Two hundred dollars, each," Baumann said.

Another broker asked her and her roommate to Venmo over $100 each. They told Rozner they wanted the place, so they complied, but new rent legislation signed by Cuomo a few months back limits the fee to just $20 by a landlord, lessor, sub-lessor or grantor.

FLASHBACKNew York Lawmakers Reach Deal To Protect NYC Tenants, Impose New Rent Restrictions Across State

But it does not mention brokers. It turns out, some brokers are using the ambiguity as an excuse to keep charging more, as Rozner found in several ads online. So she asked state Sen. Brian Kavanaugh, who sponsored the legislation and chairs the Housing Committee.

When asked if enforcement of the law was discussed, Kavanaugh said, "I mean, again, there's ... this law affects millions and millions of everyday transactions between landlords and tenants."

"There's going to be a little bit of time necessary to clarify these things," Kavanaugh added. "Tenants also do have the option of going to court and small claims court and claiming a fee they paid was improper and should be returned to them."

He referred Rozner to several state agencies, including the attorney general, but the AG said it doesn't have regulatory oversight.

Rozner reached out to the Department of State, which regulates brokers, to get clarity on the law. It released the following statement:

"The Department of State is responsible for regulating real estate brokers. If a broker commits a violation of law, DOS has the ability to impose sanctions, including letters of censure, fines, suspensions, or even revocations. If a broker is working as an agent of a landlord, then the cap on fees that can be imposed by a landlord would apply to that broker as well. The Department of State will be issuing guidance to real estate brokers regarding this issue in the ensuing week."

The Real Estate Board of New York -- or REBNY -- represents brokers and property managers. General counsel Carl Hum said for now, "We are telling our members that they should read the law very strictly and limit the fees to $20," adding, "The Legislature has the responsibility to create clear and concise guidance and in this case that wasn't done."

Eddie Shapiro, CEO of Nest Seekers, said his company is waving the fee "because of the confusion."

That aside, it looks like it's up to the tenants to speak up.

With luck, Baumann found a place following the rules on the Lower East Side, but now she knows the laws for next time.

"I feel like I would have put my foot down and just been like this isn't right," Baumann said.

The law also states the "grantor shall waive the fee or fees if the potential tenant provides a copy of a background check or credit check conducted within the past 30 days." Also, security deposits are limited to one month's rent.

CBS2 asked Gov. Cuomo's office multiple times which state agency would oversee the enforcement of the new rules. A spokesperson never got back to us.

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