Industry Gets Reprieve in Broker Fee Battle REBNY Mobilized Quickly Against the Policy Change
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ASKED & ANSWERED Meet Memorial Sloan Kettering’s rst-ever tech chief PAGE 11 SAFETY FIRST The city stakes its claim as a cybersecurity hub PAGE 3 CRAINSNEWYORK.COM | FEBRUARY 17, 2020 | $3.00 REAL ESTATE Industry gets reprieve in broker fee battle REBNY mobilized quickly against the policy change BY RYAN DEFFENBAUGH n Albany judge’s decision to press pause on a state policy that would have outlawed Acommissions paid by tenants has disappointed renters and o ered a reprieve to brokers, who say the business of leasing New York City’s 2 million apartments has been thrown into chaos in the past week. Brokers and tenants were whip- sawed by the Department of State’s interpretation of rent-reform laws. Seemingly out of nowhere, the de- partment outlawed nders fees, but days later state Supreme Court Jus- tice Michael Mackey placed a tem- porary restraining order on the pol- icy. “We were told, overnight, ‘Well, you’ve run your business this way for decades, but you have to make a change right now,’” said Sarah Saltzberg, co-founder of the Bohe- mia Realty Group brokerage. “ e judge’s order was absolutely the RETAIL n his more than 30 years right thing to do.” running supermarkets in e industry mobilized quickly against the policy change. e Real New York, Nick D’Agostino Estate Board of New York, which has seen traditional grocers represents landlords and thou- get walloped from all sides. sands of brokers, promised to sue I as soon as the state published the FOOD FIGHT Along with high rents and new document Feb. 4. Less than a week regulations, neighborhood su- later, the rule was placed on hold. Local supermarkets are under siege, but are e lawsuit, which REBNY led permarkets must contend with in collaboration with the New York fruit-and-vegetable street carts to blame? deep-pocketed, nonunionized State Association of Realtors, claims newcomers Whole Foods and there is no clear legislative history BY MATTHEW FLAMM to back the state’s interpretation of the rent laws. Broker fees were not D’AGOSTINO says he has laid off produce workers in his stores as street vendors eat into his pro ts. See VENDORS on page 18 BUCK ENNIS See BROKERS on page 4 VOL. 36, NO. 5 © 2020 CRAIN COMMUNICATIONS INC. ARTS & CULTURE INSTANT EXPERT ST. MARTIN ON Why New Yorkers BROADWAY’S KEY ECONOMIC ROLE are no longer NEWSPAPER PAGE 17 Trusted Travelers PAGE 10 P001_CN_20200217.indd 1 2/14/20 5:39 PM OUR DEALS PUT US AT THE TOP. OUR PEOPLE KEEP US THERE. For the 23rd consecutive year, CBRE leads New York City in office leasing, completing 21 of the top 50 largest deals in 2019. Our continued success is a direct result of the exceptional outcomes our sales professionals deliver for every client they serve. Thank you to our clients, partners, and talented people, who helped CBRE achieve a record year once again. Learn more at cbre.com/newyorkcity CN019586.indd 1 2/11/20 3:24 PM POLITICS MARGALIT sees great opportunity Council in the city. con rms Taxi and Limousine chief Jarmoszuk takes the wheel at the agency at a contentious time BY WILL BREDDERMAN here's a new commissioner in the drivers seat at the city's cab and for-hire vehi- Tcle regulator. e City Council approved Mayor Bill de Blasio's nomination of Aloysee Heredia Jarmoszuk to lead the Taxi and Limousine Commission on Tuesday. e of- ten-controversial o ce has lacked an o cial czar since the resignation of Meera Joshi in March 2019. Members of the local legisla- ture lauded Jarmoszuk, the for- mer chief of sta to Deputy Mayor Laura Aglin, almost as ercely as they hammered de Blasio's previ- ous nominee Je ery Roth last year. "I'm excited about her coming in to lead the TLC," said Bronx Councilwom- an Vanessa Gibson. "I be- lieve her expe- rience working in the deputy mayor's o ce and the De- partment of TWITTER Education, JARMOSZUK and really coming to this with a really unique perspective, is going to be transformative." But Jarmoszuk takes the wheel at the agency at a contentious time. e value of yellow cab me- dallions has cratered in recent years—which the administration has blamed on the advent of Uber and Lyft, but which e New York Times and others have attributed to mounting driver bankruptcies driven by risky loans and the city's own irresponsible auction poli- cies. TECHNOLOGY Medallion holders Recently, the council and the industry convened a task force which outlined a number of mea- sures the city could take to bail out underwater medallion hold- ers. Upper Manhattan Council- COMPUTER COPS man Ydanis Rodriguez, who BUCK ENNIS chairs the Committee on Trans- portation, urged Jarmoszuk to nside a cast-iron SoHo building, up a stair- Cybersecurity o ers peace of mind—until it swiftly adopt these proposals as As hackers’ tactics case designed by Apple Store architect Pe- doesn’t work, which is often. ere have been he welcomed her to the job. intensify, the city invests ter Bohlin, you’ll nd a bustling tech hub 10,000 publicly noti ed data breaches since "A lot of work has to be done," packed with busy young entrepreneurs 2005, according to the Identity eft Resource Rodriguez said. "Drivers are fed $30 million to become a preparing for their auditions. Center. Last year alone there were 1,473, a 17% up, they're tired. ey cannot wait Many of them are developing and selling cy- increase from 2018. e number of personal re- for another study, they cannot cybersecurity hub Ibersecurity solutions, which are what just about cords exposed last year fell by 65%, but that’s wait for another task force. ey every business desperately wants more of these need action." ■ BY AARON ELSTEIN days. See CYBER on page 19 FEBRUARY 17, 2020 | CRAIN’S NEW YORK BUSINESS | 3 P003_CN_20200217.indd 3 2/14/20 2:41 PM our members,” McDonough Domi BROKERS said. FROM PAGE 1 If the state’s guidance stands up 5 THINGS YOU SHOULD KNOW to the court challenge, the rule mentioned when the law was up change could threaten the liveli- ABOUT THE BROKER FEE LAWSUIT for debate in June, REBNY said. hood of the city’s more than 25,000 e restraining order does not brokers, because it is unclear how guarantee that the courts will side many landlords would be willing to 1. THERE WAS NO DISCUSSION with the real estate groups. e De- absorb the fees and continue to use REBNY’s lawsuit argues that the partment of State will present its the agents. guidance violated the state’s legis- side in a hearing in March. A company such as LCOR, which lative procedure. Broker fees, the “ is is de nitely more of a pyr- has a rental portfolio in New York ling asserts, did not come up in rhic victory,” said Lisa Faham- and several other U.S. markets, is debate leading up to the June vote Selzer, a partner at Manhattan real better set up to continue paying on rent-law reform. As evidence, estate law rm Kucker Marino. “For brokers; most of its apartments are the ling includes an exhibit of a now it’s business as usual, but ulti- already no-fee or handle leasing description of the legislation that mately this issue can swing either in-house. Manhattan state Sen. Brian Kava- way, with no one privy to how the “But if you are a smaller land- nagh, chairman of the Committee judge will rule.” lord, less capitalized, and have a on Housing, provided during a Even if the real estate industry rent-regulated building, this really hearing on the bill. His remarks were to overturn the changes the way you do do not include a direct reference guidance, Faham- business,” said David Sig- to broker fees, although he did Selzer said, state law- % man, an executive vice discuss measures to cut costs for makers could amend the 6 president and principal renters before they move in. rent-reform laws to out- RENTS at LCOR. 2. CHANGE IS SLOW INCREASE law broker fees. ose landlords could It was business as usual in the ISTOCK ere also could be ac- on average for be unable to raise rents apartment market for the seven apartments tion at the city level. to pay for a broker, Sig- months following approval of the law, the lawsuit says, at least when it came to the payment of commis- where fee was Councilman Keith man said, “but they don’t sions. Brokers working for landlords still collected their fees from the renters. “This is not surprising since removed Powers, who introduced have the time to show nothing in the language of the act, or in any public announcements or guidance by the DOS, had signaled a bill during the summer apartments and vet all of that [the law] called for a fundamental change in how real estate brokers should be compensated,” the to limit the cost of such fees, said the potential tenants.” lawsuit says. he would like to see the state’s pol- 3. THERE ARE NO REFUNDS icy codi ed into city law. He has ‘Only-in-New York creation’ The day after the guidance came out, renters were disappointed to hear that they couldn’t get a refund not yet introduced any legislation A long history exists of millions for leases they signed after the law was enacted, only for leases signed beyond the Feb.