Manhattan real estate brokerages are sued for inflating commissions

Douglas Elliman

13/11/2023 20:18

By Jonathan Stempel
       NEW YORK, Nov 13 (Reuters) - A lawsuit filed on Monday
accuses the Real Estate Board of New York (REBNY) and more than
two dozen brokerages and companies of conspiring to artificially
inflate commissions paid to agents who help sell residential
real estate in Manhattan.
    The proposed class action against the REBNY trade group, the
Corcoran Group  HOUS.N , Douglas Elliman  DOUG.N  and others
followed an Oct. 31 verdict by a federal jury in Missouri
awarding home sellers $1.78 billion, in a similar case against
the National Association of Realtors and several brokerages.
    That verdict, which a judge can triple to more than $5.3
billion, could upend decades-old practices that require sellers
to pay commissions to buyers' brokers. NAR faces at least two
other similar proposed class actions.
    In Monday's lawsuit in federal court in Manhattan, plaintiff
Monty March said commissions on Manhattan residential sales
remain a stable 5% to 6% even as home prices soar, with the
average apartment price topping $2 million by early 2022.
    March said sellers using REBNY's listing service should not
pay 2.5% to 3% commissions to buyers' brokers given how
commissions are lower in "fully competitive" markets such as
Brooklyn, where they are negotiated separately and average 1%.
    REBNY General Counsel Carl Hum said the group was reviewing
the complaint with its lawyers, and was confident its listing
service's practices and procedures "abide by all relevant laws."
    Corcoran and Douglas Elliman did not immediately respond to
requests for comment.
    March said he paid inflated commissions when he recently
sold property on Manhattan's Upper East Side. Property records
show he sold an apartment there for $5.6 million in July 2022.
    Starting on Jan. 1, REBNY will begin requiring sellers, not
their brokers, to directly pay any commissions to buyers'
brokers, to promote "transparency and consumer confidence in the
residential marketplace."
    March said it is unclear whether this would result in lower
commissions, or delay sales while buyers' brokers negotiate with
sellers.
    The lawsuit seeks damages for sellers of Manhattan
residential property in the last four years who paid buyer
brokers' commissions under REBNY rules.
    The case is March v. Real Estate Board of New York et al,
U.S. District Court, Southern District of New York, No.
23-09995.    

 (Reporting by Jonathan Stempel in New York; editing by Jonathan
Oatis)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))