Is The Real Estate Broker Commission Rebate Legal in New York?

Clients frequently ask: Is the real estate broker commission rebate legal in New York City? Thus, the topic of my first blog post — is the commission rebate legal?

The answer is, in New York, the rebate is most definitely legal.

Section 442 of New York’s Real Property Law was amended to carve out rebates from the provision which otherwise prohibits splitting commissions with an unlicensed broker. This amendment codified what was already deemed a legal practice by the Department of State and the Attorney General’s office.  They had each previously issued opinions, letters and/or decisions agreeing that a licensed broker could offer rebates to their clients as an incentive for using its services.  The operative section reads as follows (with the new amended language in underline):

“Except when permitted pursuant to the foregoing provisions of this Section, no real estate broker shall pay or agree to pay any part of a fee, commission or other compensation received by the broker, or due, or to become due to the broker to any person, firm or corporation who or which is or is to be a party to the transaction in which such fee, commission or other compensation shall be or become due to the broker; provided, however, 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.”

Not only is a broker commission rebate legal, but the Attorney General encourages it:  A.G. Schneiderman Urges Brokers and Home Buyers in New York to Take Advantage of Law Allowing Lower Commissions

Please reach out if you are interested in learning more about our broker commission rebates in NYC.

Dan Gotlieb

(917) 675-0037

dan@digsrealtynyc.com