NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7979B
SPONSOR: Lavine 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 S 442 of the Real Property Law titled "Splitting Commis-
sions," 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 & 2. amends Section 442 of the real property law, to read:
"provided, however, nothing in this section shall prohibit a real estate
broker from offering any part of a fee, commission, or other compen-
sation 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 coop-
erative 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 3. This 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, howev-
er, 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 incen-
tives 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 S 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 clari-
fy and codify the practice.
PRIOR LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
Immediately.
