Can a property manager collect a broker's fee, or is that illegal?

By Alanna Schubach | December 4, 2017 - 2:00PM

I signed a lease with my rental building's property manager, who charged me a broker's fee. Is this considered illegal key money? And if so, can I get my money back?

It's unlikely you can get a refund, our experts say, but in the future, you can refuse to pay a fee if you're being charged by someone who is not a licensed real estate broker.

"Under New York law, anyone can charge you a fee to rent an apartment, and the problem only arises if you refuse to pay it," says Toby Cohen, an attorney with Holm & O'Hara LLP. Under Real Property Law 442-D, he explains, only a licensed real estate broker can sue tenants for refusing to pay a fee. All others can't bring an action against you.

Licensed brokers, meanwhile, are legally permitted to charge any commission that you both agree to.

"If you don't agree to it, and if they don't have something in writing, a court will enforce a reasonable commission," Cohen says.

Key money, meanwhile, is a term that refers to an under-the-table payment, often to a landlord, superintendent, or building manager, and that is illegal, as tenants' rights attorney Sam Himmelstein explained previously.

The prohibition doesn't extend to fees for processing credit or background checks, Cohen adds:

"Property managers are allowed to recoup those expenses. A $150 application processing fee is okay, but if it's $850, that's different."

In these cases, you could report the managing agent who is trying to overcharge you to the Attorney General's Office, but unless the offending party put something in writing, you may have little recourse.

On the bright side, key money cases are unusual these days, according to Cohen.

"They are few and far between," he says.

Trouble at home? Get your NYC apartment-dweller questions answered by an expert. Send us your questions at experts@brickunderground.com.

For more Ask an Expert questions and answers, click here.

A photo of a stop sign in front of an NYC apartment building.

The Search Fake listing alert: Don't fall for any of these rental apartment scams

Troubleshooting How to tell if your property manager is taking kickbacks—and what to do about it

Troubleshooting Decoding "key money," an old school NYC real estate gambit

Alanna Schubach

Contributing writer

Contributing editor Alanna Schubach has over a decade of experience as a New York City-based freelance journalist.

SEE MORE BY Alanna Schubach »

Brick Underground articles occasionally include the expertise of, or information about, advertising partners when relevant to the story. We will never promote an advertiser's product without making the relationship clear to our readers.