DHCR, AG Get Preliminary Injunction Against Collection of Excessive Brokerage Fees from Tenants

The DHCR and the NY State Attorney General sued landlord and others, claiming that the defendants violated NY's rent regulation laws and Executive Law Section 63(12) in the collection of brokers' fees from prospective tenants. The court granted a motion by the DHCR and the AG for a preliminary injunction against landlord and its real estate broker while the case was pending from collecting brokerage fees from prospective tenants that were greater that one month's legal regulated rent for the apartments in question.

Tenants showed that they were likely to succeed on the merits of the case. Among other things, landlord's principals exercised direct decision-making authority over its real estate brokers' principals. Landlord also controlled the bank accounts of the broker and directed fund transfers from one to the other as needed. And landlord retained internal records of paid commissions to individual brokers. Landlord also directed its bank to remove landlord's name from credit card receipts given to tenants from the broker.

The court also found that a balance of the equities involved favored the DHCR and the AG. The requested injunction didn't categorically bar the broker and its real estate agents from operating as brokers for apartments in buildings owned by landlord. Instead, it barred them from collecting broker fees, application fees, etc. from rent-stabilized tenants. 

DHCR v. Zara Realty Holding Corp.: Index No. 450245/2019, 2025 NY Slip Op 50546(U), 85 Misc.3d 1256(A)(Sup. Ct. NY; 4/7/25; Liebovits, J)