From left: Corcoran’s Pam Liebman, Compass’ Robert Reffkin, REBNY’s Jim Whelan, Douglas Elliman’s Howard Lorber, BHS’ Bess Freedman and Serhant’s Ryan Serhant (Getty; Illustration by Kevin Rebong for The Real Deal)
Antitrust litigation has come for New York City residential brokerages.
A class-action complaint filed in New York Southern District Court on behalf of New York City homeseller Monty March against the Real Estate Board of New York and 26 firms alleges the trade group inflated commissions by way of its rules requiring sellers to pay buyers’ brokers.
The lawsuit, based on March’s experience in selling an Upper East Side property, comes amid a wave of legal filings centered on the National Association of Realtors requirement that sellers offer a commission to buy-side brokers in exchange for access to local MLS systems.
While New York City doesn’t have a citywide MLS, and NAR membership here is rare, the lawsuit is hooked on a similar rule in the REBNY Universal Co-Brokerage Agreement that mandated the same policy.
“This inflexible commission practice has become so ingrained in the system that people have either accepted its unfairness out of deference to tradition or do not understand the nature and economic implications of the commission fee,” the complaint says.
REBNY updated the UCBA in October, including a change to prohibit listing brokers from paying buyers’ agents and will instead require sellers to pay them directly.
“We are reviewing the complaint with our attorneys,” said REBNY general counsel Carl Hum. “In the meanwhile, we are confident that RLS practices and procedures abide by all relevant laws.”
Defendants Compass, Christie’s International, Corcoran, Douglas Elliman, Modern Spaces, Modlin Group and Brown Harris Stevens declined to comment.
The language in the filing is nearly identical to that of a landmark case in Missouri, where a jury last week delivered a landmark verdict that opened the door to a slew of copycat suits.
The Kansas City jury sided with the plaintiffs in the case known as Sitzer/Burnett, finding NAR and two brokerages guilty of colluding to keep commissions high. The industry group, HomeServices of America and Keller Williams were ordered to pay $1.8 billion in damages, which a judge could treble to more than $5 billion.
At least three similar suits have been filed in the week since: one in Missouri, one in Illinois and now one in New York.
The New York lawsuit points to the Brooklyn MLS, which doesn’t couple buyer and seller agent commissions, noting that buyers’ agents in that area receive a 1 percent commission, versus 2.5 percent to 3 percent in Manhattan, where there is no MLS.
The lawsuit entangles commercial real estate giant CoStar in the residential antitrust litigation, by way of its Homesnap.com portal, a residential listing site the company said earlier this year it will be phasing out.
It’s the third antitrust lawsuit filed against Compass, which was not named in the Sitzer case. The potentially expensive litigation and prospect of major settlement or damages come after a year of heavy cost reductions at the brokerage, which is under pressure to become profitable.
Douglas Elliman is also named in two other lawsuits filed in Missouri and Illinois.
Corcoran and Coldwell Banker’s status as defendants come after their parent company, Anywhere Real Estate, proposed a settlement in the Sitzer lawsuit and in another similar case called Moehrl, seeking to protect the firm and its subsidiaries from further litigation.
RE/MAX is also a defendant in the New York lawsuit. Last month the company agreed to settle its involvement in the Sitzer case for $55 million just before the trial began.
The full list of defendants in the suit is as follows:
- Brown Harris Stevens
- Coldwell Banker
- Core Marketing Services
- The Corcoran Group
- Douglas Elliman
- Elegran Real Estate
- Engel & Volkers
- Fox Residential Group
- Halstead Real Estate
- Keller Williams NYC
- Leslie J. Garfield
- Level Group
- M.N.S. Real Estate NYC
- Modern Spaces
- The Agency
- The Modlin Group
- Nest Seekers International
- Oxford Property Group
- R New York
- Sloane Square
- Sotheby’s International Realty Affiliates
- REBNY Listing Service