Within a few days of beginning her apartment hunt this summer, Natalie Miscolta-Cameron got lucky: She found a one-bedroom walk-up she could afford on East 96th Street in Manhattan.
But she was surprised when the landlord’s broker asked her to pay a $100 application fee, followed by a $400 “processing fee,” even though such upfront fees had been capped at $20 as a result of new rent laws passed by state lawmakers in June.
“It looked like a bit of a red flag,” said Ms. Miscolta-Cameron, 33, a nanny and skin care entrepreneur who had read about the rent reforms in the news. “But it wasn’t really negotiable if I wanted this apartment.”
When New York State enacted landmark changes to strengthen tenant protections and curb housing costs, progressive lawmakers heralded the legislation as a once-in-a-generation victory for renters that would offer immediate relief to the thousands of people searching for an apartment over the summer.
Instead, some of the new laws have confused tenants and landlords at the peak of New York City’s rental season.
Landlords say lawmakers rushed the new statutes through the Legislature, resulting in ambiguities. As a consequence, brokers citywide are continuing to charge renters hundreds of dollars in application fees, hurting the people the laws were meant to protect.
State regulators have yet to step in and have been slow to offer clarity on the interpretation and enforcement of the new laws. Progressive lawmakers have been quick to accuse the real estate industry of misconstruing the laws.
“It has become a trap for the unwary,” said Mitchell Posilkin, general counsel at the Rent Stabilization Association, a group that represents 25,000 landlords. “Even the most sophisticated owners who we deal with are really perplexed about how they’re supposed to implement many of these provisions.”
The changes, propelled by the Democratic takeover of both houses of the state Legislature, sought to stem the loss of regulated apartments in New York City and to address inequality driven by rising housing costs.
They eliminated vacancy decontrol, which had allowed landlords to take apartments out of rent regulation when the rent rose above a certain threshold. They limited security deposits to one month's rent and gave tenants in eviction proceedings more time to hire a lawyer and pay overdue rent.
The legislation was a humiliating defeat for the real estate industry, one of the most influential lobbies in Albany. Industry leaders warned the changes would devastate the housing stock, and two groups recently filed a challenge to the laws.
Now many landlords are perplexed about whether they can even charge tenants who are pet owners an additional security deposit. Owners of co-op apartments are concerned about changes that were aimed at rental buildings, but could affect co-op boards and have expensive consequences for co-op tenants.
For example, the new law states that landlords can no longer collect fees to cover the “processing, review or acceptance of an application.” They are also barred from charging more than $20 to cover background and credit checks of potential tenants.
But the law doesn’t specify whether brokers, who often act on behalf of landlords, are also bound by those new rules. So many brokers have continued to charge application fees, which are often nonrefundable and, along with broker fees can be expensive hurdles to securing housing in the city.
“This issue about the application fees, it just highlights ambiguities in the legislation,” said, Carl Hum, the general counsel for the Real Estate Board of New York, or REBNY, an influential trade group. “It reflects what happens when there is not enough debate or scrutiny over a law.”
Even though legislators held statewide public hearings on the proposed rent laws, the package of rent rules was unveiled and voted on in a matter of days, right as the session came to an end, catching real estate lobbyists by surprise.
Mr. Hum said a strict reading of the law suggests brokers are indeed allowed to charge application fees. In August, The City, a local news outlet, reported brokers were charging more than $20 for application fees. REBNY subsequently emailed its members encouraging brokers to err on the side of caution and avoid collecting excessive fees until state regulators at the Division of Housing and Community Renewal weighed in.
Citi Habitats, the brokerage firm that charged Ms. Miscolta-Cameron the fees, did not respond to multiple requests for comment.
Some legislators have been quick to accuse the real estate industry of intentionally misleading renters.
“This deceptive practice is costing tenants money, and I would bet landlords are banking on the fact that not every tenant knows what the new law is,” said Assemblywoman Linda B. Rosenthal, a Democrat whose district includes the Upper West Side of Manhattan.
“The intent clearly was not to have a tenant applicant pay more than $20, regardless of who it is they are paying the money to,” she added.
Ms. Rosenthal said Manhattan residents have called her office about application fees of up to $700, and she is considering legislation to impose steep fines on landlords who violate the new provision. Some of her constituents in rent-controlled apartments have said their landlord is still charging them for fuel costs, even though such charges were explicitly banned in the recent laws.
State Senator Brian P. Kavanagh, the Democratic chairman of the Committee on Housing, Construction and Community Development, urged patience, adding that regulatory agencies should offer guidance on the law soon.
“It was our intent to reshape the full range of laws that are governing the relationships between landlords and tenants,” he said. “Obviously something this complicated will require some time before people are properly educated about their obligations under the new laws.”
A spokesman for the state’s Division of Housing and Community Renewal, which enforces laws related to rent-regulated apartments, said it was “working diligently” to craft a new regulatory framework.
But the division does not oversee apartments where rents are unregulated, which make up half of New York City’s rental stock. Instead, tenants of market-rate apartments can contact the New York attorney general’s office or bring their landlord to court if they suspect unlawful activity, like high fees.
Some tenants have found success by informing brokers of the law change.
After years of living in the same studio apartment in Flatbush, Brooklyn, David Cohen and his wife began searching for a bigger apartment this summer, partly to make space for their 2-year-old.
They found a two-bedroom in Park Slope. They paid $120 in application fees to Corcoran, a brokerage firm, and $37.60 for a credit and background check to TenantAlert, an online tenant-screening platform.
“We were in a bind because we saw a place we liked,” Mr. Cohen, 52, said. “I had a feeling it wasn’t right, but we had to pay the fees to apply and get in there.”
They quickly withdrew from the application process, however, when the broker asked for a higher rent than originally advertised. Mr. Cohen told the broker he had contacted the state government and The New York Times because he believed the fees he was charged were unlawful; he was subsequently issued a refund.
In a statement, a representative of the Corcoran Group said it had recently “changed its practice” after the latest guidance from REBNY urging brokers to abide by the $20 ceiling on fees.
The new rent laws may have other unintended consequences: The new limits on application fees and security deposits (now capped at one month’s rent) could possibly apply to the purchase of co-op apartments.
The new law states that the caps apply in part to landlords and “lessors” — which could include the cooperative boards of tenants that typically run co-op buildings, according to Jeffrey Schwartz, a real estate lawyer, who said the new restrictions significantly curtail the charges co-op boards are allowed to collect from buyers.
He said co-op boards typically charge $500 to $650 in application fees and collect a deposit equal to several months’ worth of maintenance charges. Now, co-op boards might decide to collect higher monthly charges from existing owners to offset the new restrictions on those fees, he said.
“I think when people first heard about the changes and started to digest the changes, a lot of folks thought we were just talking about rental apartments,” Mr. Schwartz said. “Now it’s uncertain. It’s causing a lot of uncertainty out there in the co-op world.”
And for Jon Lucente, the co-owner of the Village Solars Apartments in Ithaca, N.Y., the new restrictions on security deposits raise questions about whether he can continue to charge pet-owning tenants a $400 partially refundable deposit to cover damages, like scratched floors or chewed wall corners, on top of the regular security deposit. The new cap, he said, could mean higher rents for tenants.
“We’re trying to figure out what our obligation is,” Mr. Lucente said. “It’s not clear.”
Ask Us Your Questions About New York’s New Rent Laws
Renters are scrambling to understand how the state’s new rent regulations apply to them. We’re here to help. Submit your question and our housing reporter, Luis Ferré-Sadurní, may answer it in a future article.
Luis Ferré-Sadurní writes about housing in New York City for the Metro Desk. He joined The Times in 2017 and is originally from San Juan, Puerto Rico. @luisferre
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