NYC brokerage to pay state $260K after allegedly charging excessive broker fees

January 26, 2024

Photo by Tomas Anton Escobar on Unsplash

A Manhattan real estate brokerage accused of scamming tenants with excessive broker fees has agreed to pay the state $260,000 in penalties. Gov. Kathy Hochul on Thursday announced a settlement with brokerage firm City Wide Apartments, Inc. after an investigation by the New York Department of State, which licenses real estate agents, found the firm charged exorbitant brokerage fees, in one case charging more than $20,000 in added fees to tenants searching for housing.

The investigation by the state’s Licensing Services Division found City Wide Apartments violated the Real Property Law by collecting one or more real estate commissions containing excessive fees that did not correlate with the work involved in earning the commission.

Under the settlement, City Wide has agreed to pay $260,000 in penalties and restitution, including a $50,000 fine and $210,000 in restitution to the tenants who fell victim to their scam.

The New York Post first brought the alleged scam to light in August 2022, when Ari Wilford, who at the time worked as a broker for City Wide, asked a tenant to pay roughly $20,000 in fees to secure a rent-stabilized one-bedroom apartment on the Upper West Side. The charge was significantly more than the usual broker’s fee of between one month’s rent and 15 percent of the annual rent.

The tenant ended up paying $19,500 after negotiating with Wilford to take $500 off the $20,000 broker fee.

According to state law, there is no limit set on broker’s fees but there are guidelines that state brokers cannot charge “exorbitant commissions that have no reasonable relationship to the work involved in earning the commission,” as reported by the New York Post.

State officials said that City Wide and its brokers have cooperated with the DOS investigation and are committed to changing their business practices for the future.

DOS is reminding tenants of the following tips while working with licensed agents and brokers:

To confirm the agent and firm are properly licensed by checking our website at https://dos.ny.gov/licensing-services
Commission fees are negotiable;
Remember to get a receipt for any funds paid;
Where possible, provide all fees with traceable funds; and
Never pay a commission to the name of the licensed salesperson (commissions should always be paid to the name of the real estate company).

?With our state staring down a housing crisis, excessive broker fees are not just unfair ? they?re a threat to hard-working families looking to call New York home,? Hochul said.

?This settlement doubles down on my administration?s crackdown on deceptive business practices and starts the process of making dozens of families whole, and I will continue fighting to protect New York consumers and make our state more affordable and more livable.?

Broker fees have long been a sore spot for renters, who usually owe a large sum upfront when moving to a new apartment, including a security deposit and a broker fee, which could range between 12 to 15 percent of the total annual rent.

Last June, NYC Council Member Chi Oss? introduced legislation that would shift the payment of broker fees to the party who hired them, typically the landlord or building management company.

The bill is similar to guidance issued by the state in 2019 as part of a sweeping tenant protections law that temporarily banned broker fees but was ultimately struck down by the NY Supreme Court.

“Excessive brokers fees add substantial costs to the already high price of renting property,” New York State Secretary of State Robert J. Rodriguez said. “The New York Department of State recognizes the need for fair and transparent practices in the real estate industry and this settlement is a testament to our commitment to protecting the rights of tenants.

“For those who think they can take advantage of tenants seeking housing, you can rest assure the Department will hold them accountable.”

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