2024 was a pivotal year for all of real estate’s major players: – landlords and tenants, buyers and sellers, owners and developers. Whether you’re looking to purchase a new home, rent out your vacation condo, or impress your realtor friends with your knowledge of the industry’s latest trends, you’ll want to know what these changes mean for you. The legal implications of three new actions, the NAR settlement, Local Law 97, and Good Cause Eviction laws, are highlighted below.
NAR Settlement
Some of this year’s most profound industry changes have emerged from a $418 million settlement agreement brought by the National Association of REALTORS® (NAR) in response to litigation claims brought by home sellers related to broker commissions.[1] The changes brought by NAR in the settlement continue to affect NAR’s member real estate agents nationwide. While most NYC real estate agents are not members of NAR, they, too, are affected by these changes because the Real Estate Board of New York (REBNY) and several national brokerages operating in NYC have opted in to the settlement.[2] Aimed at harmonizing American consumers and realtors’ choice and transparency goals of these changes took effect on August 17, 2024, with the settlement’s final approval hearing scheduled November 26, 2024.[3]
These changes can be grouped into two main categories. First, written buyer agreements are now required and must meet certain criteria.[4] The agreements must be completed before touring a home and must disclose the amount the agent will receive, compensation that is objective and not open-ended, a term prohibiting agents that broker commissions are not set by law and are fully negotiable.[5] This requirement gives consumers the choice to negotiate brokers’ commissions, a freedom that was previously unavailable. Second, offers of compensation can no longer be shared on Multiple Listing Services (MLS). While some home sellers might fear that this prohibition can lead to less transparency regarding agent compensation, they can still make offers of compensation off-MLS through private negotiations and consultations.[6] Also, sellers can offer buyer concessions on an MLS, even though agents can no longer use MLSs.[7]
Local Law 97
The implementation of Local Law 97 (LL-97) shook the real estate industry to its core this year..[8] NYC’s building managers and owners, in particular, must pay close attention to LL-97 and its hefty penalties.[9] In its efforts to reduce greenhouse gasses in the US, LL-97 limits carbon emissions associated with properties more than 25,000 square feet.[10] Every five years, buildings in NYC will be required to report on carbon emissions, with the allowable emissions thresholds decreasing at each compliance check.[11] Failure to stay within emission limits can result in significant fines.[12] In 2022, plaintiffs brought suit on grounds that the penalties for exceeding the annual GHG limits were “excessive, unreasonable, deprive them of their due process rights and amount to an unauthorized tax.”[13] The case was dismissed by the New York Supreme Court the following year.[14]
Understandably, the pressure to stay within GHG guidelines can be extremely stressful for building owners and managers. Fortunately, though, they can earn additional time to avoid penalties if they demonstrate a “good faith effort” to decarbonize by benchmarking energy usage and submitting a decarbonization plan.[15] Building owners and managers can rest assured that they are not alone in the fight to reduce carbon emissions. NYC anticipates technical and financial assistance on the local, state, and federal levels for the next compliance period.[16] NY Green Bank and NYSERDA also provide funding for decarbonization projects.[17] Investing in a combination of energy efficiency and electrification projects can be very costly, but also necessary to achieve compliance and minimize financial penalties.[18]
Good Cause Eviction
The third and final change in the 2024 real estate market, specifically the housing market, was the Good Cause Eviction Law (Good Cause).[19] Enacted on April 20, 2024, Good Cause largely affects NYC landlords and tenants, as its name suggests.[20] The law applies to NYC, but other jurisdictions can choose to opt-in as well.[21] Under this law, landlords can seek to remove a tenant from a residential unit only if there is good cause to do so.[22] Examples of good cause are non-payment of rent (unless the rent is unreasonable), nuisance, and illegal use of the premises.[23] Still, a landlord must obtain a court order to remove a tenant upon a showing of good cause, including removal by non-renewal of lease.[24]
Furthermore, the law imposes rent increase caps and notice requirements on landlords.[25] Unreasonable rent increases are those that are above the inflation index or 10%, whichever is lower.[26] In its reasonableness inquiries, a court considers property tax expenses and increases and increases based on completed “significant repairs.”[27] If a court finds that a rent increase is unreasonable, a tenant’s failure to pay the increase does not constitute good cause for removal.[28] Finally, under Good Cause, landlords must adhere to strict notice requirements. A Section 231-c “Good Cause Eviction Law Notice” must be attached to all initial leases, renewal leases, notices, and petitions for all apartments in New York City.[29]
[1] Suzanne Bouhia, National Association of REALTORS® Reaches Agreement to Resolve Nationwide Claims Brought By Home Sellers, National Association of REALTORS® (March 15, 2024), https://www.nar.realtor/newsroom/nar-reaches-agreement-to-resolve-nationwide-claims-brought-by-home-sellers.
[2] StreetEasy Team, The NAR Settlement’s Implications for the NYC Market: What We Know, StreetEasy Reads (Aug. 13, 2024), https://streeteasy.com/blog/nar-settlement-nyc-agents-what-we-know/.
[3] See id.
[4] NAR Settlement FAQs, National Association of REALTORS® (Updated Sept. 5, 2024), https://www.nar.realtor/the-facts/nar-settlement-faqs.
[5] See id.
[6] See id.
[7] See id.
[8] Randy Moss, How Owners and Managers Are Responding to Local Law 97, Multi-Housing News (March 26, 2024), https://www.multihousingnews.com/how-owners-and-managers-are-responding-to-nycs-local-law-97/.
[9] See id.
[10] See id.
[11] See id.
[12] See id.
[13] See id.
[14] See id.
[15] See id.
[16] See id.
[17] See id.
[18] See id.
[19] Erica Buckley, Julienne Hoffman & Richard Shore, New York Enacts Good Cause Eviction Law, Nixon Peabody (April 22, 2024), https://www.nixonpeabody.com/insights/alerts/2024/04/22/new-york-enacts-good-cause-eviction-law.
[20] See id.
[21] See id.
[22] See id.
[23] See id.
[24] See id.
[25] See id.
[26] See id.
[27] See id.
[28] See id.
[29] See id.
