Mark E. Fitzgerald, Plaintiff, v. LLC (2026)

In this small claims matter the court is tasked with interpreting section 238—a of the Real Property Law (238-a). This section, titled "Limitation on fees," was part of a 2019 legislative act which provided for a massive and extensive overhaul of many of the state's housing, real property and landlord-tenant laws. Enacted as the "Housing Stability and Tenant Protection Act of 2019" (HSTPA), the act was signed by Governor Andrew Cuomo and immediately became effective June 14, 2019 (L 2019, ch 36). It has since been amended by modifications not relevant to this case, L 2021, ch 789, § 3, eff. Dec. 22, 2021; L 2022, ch 93, § 3, eff. Dec. 22, 2021; L 2025, ch 431, § 1, eff. Oct. 16, 2025.

History

Here, plaintiff Mark Fitzgerald (Fitzgerald) seeks return of a $500 "holding fee" he concurrently paid by credit card as part of a March 12, 2026 online, digitally signed, application for a residential apartment unit owned by defendant New Horseheads Associates, LLC (NHA). The pertinent credible facts as found by the court and largely stipulated to, follow.

The application, titled "APPLICATION AND HOLDING FEE AGREEMENT" (Agreement) reads as follows:

"The application fee is a non-refundable fee used to process the application(s) and to obtain credit/criminal report(s). The holding fee will hold an assigned apartment in the prospective resident's name until the application process is completed, and move-in occurs. Should the prospective resident's application be denied by management, the holding fee will be returned. Should the application be approved by management, the holding fee will be applied to the security deposit.

Should the prospective resident(s) extend the move-in date beyond the initial move-in date scheduled, the monthly rental rate will be subject to change. Additionally, if the new move in date is extended 14 days beyond the original move in date an additional holding fee equal to one month's rent must be submitted at the time of the requested extension. (Only one (1) request for extension will be granted) Upon move-in, the holding fee will be applied to the security deposit.

Should the prospective resident(s) cancel the application after approval, for any reason, the entire holding fee will be retained as liquidated damages to compensate for expenses incurred in making and keeping the apartment available for the prospective resident(s).

The property retains the right to cancel this application and retain the entire holding fee as liquidated damages should applicant fail to:

A. Provide all required documentation within three (3) days from date of this agreement or within a reasonable period of time deemed expedient and/or

B. Move in within 45 days of the original move in date requested.

CONSUMER REPORT AGREEMENT

By this disclosure you are being informed that application approval for tenancy at this property is subject to credit and criminal background screening on all applicants and/or co-signers. Approval of my application will be based on results of these/this investigation(s).

By signing below, I certify that this property has provided me with a copy of this Disclosure, including a summary of rights under the Fair Credit Reporting Act, that I have read and understood the Disclosure and summary, and that I hereby authorize this property to procure consumer reports on me as applicant of the attached residential lease application. I understand that misrepresentation of my criminal background of any kind whatsoever will result in an immediate denial of my application."

Although Fitzgerald had hoped for a sooner opportunity, he was able to visit a proposed unit March 17 (after providing additional financial information on March 16). The visit to the apartment (#218-6) revealed a noticeable odor of (tobacco) smoke, and Fitzgerald declined it, asking if another unit might be available. A tour of apartment #239-4 was then arranged for and conducted March 18. After further negotiations that day, NHA's representative "Bobbi" proffered a written approval notice (Exhibit "2") which included a "Monies Due" listing. Included were such things as a $200 "non-refundable administrative fee;" a "prorated utility charge for March," and "utility charges for full month (April 2026)." The listing did show a credit for Fitzgerald's "holding fee." Later on March 18, upon revelation of the previously unbeknownst utility fee  ¹ and experiencing numerous potholes in accessing the second unit by vehicle, and upon further reflection regarding the enumerated costs, Fitzgerald advised NHA that he no longer was interested in renting from them and terminated negotiations. No lease was signed. He requested return of the $500 "holding fee." Ostensibly pursuant to the "liquidated damages" provision in the Agreement, NHA declined to refund said amount in full. Fitzgerald now asserts that assessing and collecting the holding fee was impermissible under § 238-a.²

Law

In addressing allowable charges that residential landlords can impose on tenants (or those applying to become same), Section 238-a reads as follows, in relevant parts:

"In relation to a residential dwelling unit:

1. (a) Except in instances where statutes or regulations provide for a payment, fee or charge, no landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge for the processing, review or acceptance of an application, or demand any other payment, fee or charge before or at the beginning of the tenancy, except background checks and credit checks as provided by paragraph (b) of this subdivision . . .

"(b) A landlord, lessor, sub-lessor or grantor may charge a fee or fees to reimburse costs associated with conducting a background check and credit check, provided the cumulative fee or fees for such checks is no more than the actual cost of the background check and credit check or twenty dollars, whichever is less, and the landlord, lessor, sub-lessor or grantor shall waive the fee or fees if the potential tenant provides a copy of a background check or credit check conducted within the past thirty days . . .³

3. Any provision of a lease or contract waiving or limiting the provisions of this section shall be void as against public policy."

For reasons noted below which render a review of the legislative intent surrounding the adoption of the HSTPA unnecessary, the Court nevertheless notes state senator Andrea Stewart-Cousins' revised memorandum in support of the 2019 legislation (see, bill number: s6458, 6/12/2019). Its "justification" portion included the following language:

"As has been extensively documented, New York State ranks only 39th in the nation for tenant protections. For tenants who rent market-rate units, this legislation would ensure they do not face unreasonable barriers to applying for and being offered leases; have more notice if a landlord wants to bring a court proceeding against them; allow more leniency throughout any eviction proceeding, including stays of eviction and executions of warrants; and ensure that any eviction that is executed is done so in the interest of justice."

Discussion

In interpreting a statute, it has been held that, "[W]here the language of a statute is clear and unambiguous, courts must give effect to its plain meaning," State of New York v. Patricia II., 6 NY3d 160, 162, 811 N.Y.S.2d 289, 844 N.E.2d 743 (2006). Moreover, as earlier held by the United States Supreme Court, ". . . when the language of the statute is plain, legislative history is irrelevant. See, e.g., United States v. Gonzales, 520 U.S. 1, 6, 117 S.Ct. 1032, 137 L.Ed.2d 132 (1997). "We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. See, e. g., United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 241-242 (1989); United States v. Goldenberg, 168 U. S. 95, 102-103 (1897); Oneale v. Thornton, 6 Cranch 53, 68 (1810). When the words of a statute are unambiguous, then, this first canon is also the last: judicial inquiry is complete." Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253—254, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (citations and internal quotation marks omitted)."

This court finds that the language of § 238-a is plain and unambiguous; one thus does not need to look beyond it as to what might have been its legislative history or intent.⁴

As to assessing a "holding fee" as part of the application process, it is unquestionably an unpermitted payment, fee or charge prohibited by § 238-a(1)(a). Moreover, its potential forfeiture as and for liquidated damages is similarly forbidden. Counsel for NHA argues that as a damages provision it represents a fair, reasonable and necessary sum used to help cover landlord's general expenses in processing applications, showing rental units, preparing and assembling leases, taking available units off the market and the like. But while such liquidated damage clauses might formerly have been fairly common, these expenses are all presumptively obvious and regularly incurred by landlords in the ordinary course of business, the legislature nevertheless chose to preclude landlords from charging tenants at this stage for anything beyond the delimited costs of background and credit checks. Further, even if allegedly accepted by a tenant in signing the Agreement, any provision waiving the protections and limitations of 238-a is also plainly void and must fail pursuant to § 238-a (3). And while the Court is not here called upon to directly address NHA's "non-refundable administrative fee," caution is urged in attempting to impose such a charge "before or at the beginning of [any] tenancy."

This court is drawn to a recent Third Department case wherein the underlying court dealt with a landlord who devised a discounted rental payment schedule under which tenants would be entitled to a rent discount if they pre-paid their monthly rent in full. The court held that such a device effectively amounted to an unenforceable late fee exceeding the statutory limit contained in 238-a (2); the court found that it was no different than if the landlord charged tenants a prohibited flat late fee each time they failed to timely pay rent. In analyzing the realities of being a landlord in juxtaposition to the limitations of 238-a, the appellate court opined that, "[a]lthough we are sympathetic to the statutory and administrative costs of doing business as a landlord, defendant may not avoid the late fee limits imposed by Real Property Law § 238—a by labeling an otherwise impermissible late fee as. . ." something else, Beco v. Ritter, 190 AD3d 1150 (3d Dept. 2021). In short- and with like reasoning- this Court holds that NHA's provisions as outlined above amount to proscribed payments, fees or charges dressed up as something else and are hereby found to be prohibited and unenforceable under RPL 238-a. As in Beco, and to paraphrase Shakespeare, a rose by any other name is still a rose (see, Romeo and Juliet, Act II, Scene II).

ACCORDINGLY, judgment is entered in favor of plaintiff Mark Fitzgerald in the amount of $500.00 together with his filing fee of $10 for a total of $510.00, and defendant New Horseheads Associates, LLC is ordered to pay said funds to defendant promptly.

Dated: June 18, 2026

ENTER:

Hon. David M. Brockway

Village Justice

FOOTNOTES

1.   The "administrative fee" was also an unplanned financial surprise to Fitzgerald.

2.   Also imposed and paid at the time of the online application was a $20 fee to obtain a credit/criminal report(s). Beyond a small added charge (presumably a credit card processing fee), Fitzgerald does not contest this charge.

3.   Paragraphs (2) and (2-a) place limitations on the imposition of fees, charges and penalties regarding late rent and dishonored checks.

4.   In any event, the history is fully congruent in this instance.

David M. Brockway, J.