Relates to clarifying the permissibility of commissions, fees, or other compensation paid to real estate brokers

2 Co-sponsors

• Patty Ritchie
• David J. Valesky

BILL NUMBER:S5693B

Title of bill

An act to amend the real property law, in relation to clarifying the permissibility of commissions, fees or other compensation paid to real estate brokers

Purpose or general idea of bill

The bill amends § 442 of the Real Property Law titled "Splitting Commissions," to state that nothing shall prohibit a broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant as an incentive for using the licensed services of that broker.

Summary of specific provisions

Section 1 amends section 442 of the real property law to include commissions earned in the sale or lease of cooperative apartments to the prohibition against splitting commission with a non-agent. Subdivision 2 clarifies that nothing in this section shall prohibit a real estate broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant who is buying, selling, exchanging, leasing, renting or negotiating a loan upon any real estate including the resale of a condominium or cooperative apartment. Such fee, commission, or other compensation must not be made to the seller, buyer, landlord or tenant for performing any activity requiring a license under this Article.

Section 2 provides that his act shall take effect immediately.

Justification

Section 442 of the Real Property Law prohibits a real estate broker from offering to pay any part of the broker's commission to any party to a real estate transaction if the purpose of the payment is to compensate an unlicensed party for providing services that would otherwise require a real estate broker's license. Generally speaking, section 442 was intended to discourage unlicensed activity. Section 442 does not, however, prohibit a real estate broker from offering cash, services, or products to attract new clients and customers.

Due to the confusing language of Sec. 442, there is uncertainty in the real estate community regarding the offering of rebates and other incentives to consumers. The Department of State and the Attorney General's office have both agreed in various opinions and decisions, the ability of brokers to offer buyers and sellers, landlords and tenants, rebates and other monetary incentives for using their licensed real estate broker services.

This legislation amends § 442 of the Real Property Law to clarify the statutory language to reflect the decisions of the Department of State and the Attorney General that nothing shall prohibit a broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant as an incentive for using the licensed services of that broker. Since Broker rebates/incentives are already legal in New York State, this

legislation simply amends the existing statutory language to clarify and codify the practice.

Prior legislative history

New bill.

Fiscal implications

None.

Effective date

Immediately.