Introduction to NYC Broker Fee Law
New York City’s real estate industry is making an 11th-hour bid to halt a new law that shifts the burden of costly broker fees away from renters before it takes effect next month.
The Real Estate Board of New York, the city’s powerful group of over 10,000 real estate professionals, filed a motion earlier this month seeking to put the Fairness in Apartment Rental Expenses Act on pause until the court battle over the law plays out.
What is the Fairness in Apartment Rental Expenses (FARE) Act?
The FARE Act — passed in City Council with a veto-proof majority of 42-8 on Nov. 13 — prohibits agents representing property owners from charging prospective renters a “broker fee.” It also requires that all fees a tenant owes be included in rental agreements and real estate listings.
Proponents of the legislation say it will help ease the city’s housing crisis by cutting down prohibitive up-front costs for tenants, including broker fees — which are typically about 15% of the annual cost of a rental unit, according to real estate website OpenIgloo.
But critics of the law argue landlords may still sneak in broker fees onto tenants through higher monthly rents.
When do Broker Fees Go Away?
Unless a federal judge rules otherwise, landlords will be barred from passing on the fee to a tenant after June 11, even if a lease was signed before the effective date, a rep from the Department of Consumer Protection confirmed to The Post.
New York City is one of the few cities where landlords can hire a broker and pass the agent’s fee onto a tenant.
The Real Estate Board of NY (REBNY) has taken the measure to file an 11th hour push in federal court to stop the city’s new Fairness in Apartment Rental Expenses (FARE) Act from going into effect. rebny.com
Does this Mean that all Broker Fees are Illegal?
Landlords and tenants can still hire their own brokers under the FARE Act.
But landlords can’t shift the cost of a broker that is “exclusively representing the landlord’s interests” onto a tenant. This includes fees for brokers who publish listings with the landlord’s permission.
“The FARE Act ensures transparency for tenants to not unfairly be burdened with additional costs by placing the responsibility for a broker’s fees on the party that actually hired them,” the City Council said in a statement.
What are Real Estate Agents Saying?
In the lawsuit filed in December, REBNY attorneys claimed the city’s “profoundly misguided” legislation violated federal and state laws, including constitutional free speech and contract rights.
“The FARE Act is constitutionally flawed on multiple accounts. We are confident that the Courts will agree with us,” a REBNY rep told The Post.
The New York State Association of Realtors further argues the law would drive up rental costs, strip away “over half” of online rental listings and open the “floodgates for baseless lawsuits and penalties against brokers.”
Last year, the FARE Act was passed in the City Council, which will prohibit agents representing property owners from charging prospective renters a “broker fee.” J.C. Rice
What are New York City Residents Saying?
New Yorkers who spoke to The Post were largely in favor of the law taking effect, with nearly every local citing housing affordability as a major concern.
“This is great,” Betsy Laikin, a film producer, told The Post. “The rents are higher than they’ve ever been. Why should we pay a broker fee, on top of these rents?”
“I think the broker fee … should not exist,” Luke Atkinson, a 39-year-old painter from Bushwick, Brooklyn, added. “[Brokerage] is a job that doesn’t need to exist, and they know it deep down in their souls.
What Happens if an Apartment has a Broker Fee after the Law is in Effect?
The city’s Department of Consumer Prot
