Mandatory Broker Fees in New York City Banned Under FARE Act
Introduction
In a historic move, the New York City Council has passed the FARE Act, effectively banning mandatory broker fees for renters. This long-standing practice, unique to New York and a few other parts of the country, has been a source of frustration for many city residents.
Background
Under the current system, tenants are often forced to pay the commission of a real estate agent, even if the agent was hired by the landlord. These fees can be steep, typically totaling up to 15% of the annual rent, which can be as much as $7,000 for the average-priced New York City apartment.
Legislation
The FARE Act was passed by a vote of 42 to 8, a veto-proof margin, and will take effect in six months. While Mayor Eric Adams, a former real estate broker, declined to sign the bill into law, his signature was not required due to the veto-proof margin.
Impact on Tenants and Brokers
The legislation aims to stop landlords from saddling tenants with these fees, at least as an up-front payment. Tenants will no longer be forced to pay for brokers who only represent the interests of their landlords. While renters may still choose to hire their own representatives, they will not be required to pay for brokers who do not provide additional services.
Reaction from Brokers and Landlords
Brokers and their representatives have expressed concerns about the potential impact of the bill on the industry, which employs 25,000 agents. They warn that it could send shockwaves through the sector. Landlords, on the other hand, may try to pass these added costs onto tenants in the form of higher monthly rents.
Support for the Bill
The FARE Act has received widespread support from the public, with many New Yorkers speaking out against the fees at a City Council hearing. Agustina Velez, a house cleaner from Queens, recalled paying $6,000 to switch apartments and called for an end to what she saw as "injustices." "In most businesses, the person who hires the person pays the person," she said.
Conclusion
The FARE Act is a significant step forward for renters in New York City, who have long been frustrated by the mandatory broker fees. While some have expressed concerns about the potential impact on the real estate industry, the bill’s supporters argue that it is a necessary step to protect tenants and promote fairness in the city’s housing market.
Frequently Asked Questions
Q: What is the FARE Act?
A: The FARE Act is a new law that bans mandatory broker fees for renters in New York City.
Q: How much do broker fees typically cost?
A: Broker fees can total up to 15% of the annual rent, which can be as much as $7,000 for the average-priced New York City apartment.
Q: Who opposed the bill?
A: Brokers and their representatives, including the Real Estate Board of New York, opposed the bill, warning that it could send shockwaves through the industry.
Q: What is the next step?
A: The FARE Act will take effect in six months, and renters will no longer be forced to pay for brokers who only represent the interests of their landlords.
