Paying brokers’ fees to rent an apartment might just become a thing of the past for many tenants in New York City.
The City Council on Wednesday is poised to pass a revised bill known as the Fairness in Apartment Rentals Act, which requires whomever hired the broker to pay the fee.
### The High Cost of Moving
New York City and Boston are the only U.S. cities where tenants often pay for brokers they didn’t hire. There’s no cap on what brokers can charge, and fees in New York City typically hover around 10% or 15% of the annual rent (equal to about a month or two of monthly rent). Fees on rent-stabilized stock with monthly rents around $2,000 have been reported as high as $20,000.
### How Valuable?
Michael Corley, a Brooklyn-based broker and president of Corley Realty Group, was one of the few real estate professionals to support the bill. “Most brokers are concerned about not being able to extract a certain percentage of the lease,” he told THE CITY. “It’s understood that an agent is brokering lease value. If they believe that the amount of money they’re annualizing for the owner is that valuable, the owner should pay it… but the owner won’t pay something like that.”
### The Bill and Its Implications
The amended version of the bill requires the landlord or broker to disclose all fees tenants pay up front, and stipulates that before a tenant signs a lease, the landlord or broker must provide an itemized list of fees the tenant must pay to the landlord and others. Failure to comply comes with penalties of at least $1,000.
Real estate groups have opposed the bill, cautioning the measure will ultimately hurt tenants and throw the housing market into disarray. Those in opposition have warned landlords who hire brokers will simply increase rents on market-rate apartments to incorporate the one-time fee. (Already, most no-fee apartments in New York City have higher monthly rents than those with fees.)
### Conclusion
The Fairness in Apartment Rentals Act has the potential to significantly reduce the financial burden on tenants in New York City. By requiring landlords and brokers to pay broker fees, the bill aims to increase affordability and fairness in the rental market.
### FAQs
Q: Who would pay the broker fee under the new bill?
A: The landlord or broker who hired the broker would pay the fee.
Q: Would this bill increase rents on market-rate apartments?
A: Opponents of the bill warn that landlords may increase rents on market-rate apartments to incorporate the one-time fee.
Q: Is this bill a new concept?
A: No, the New York Department of State issued guidance banning brokers hired by landlords from charging tenants as an interpretation of the 2019 rent law. However, in 2021, a state court overturned the ban after the Real Estate Board of New York sued.
Q: What is the current system for paying broker fees in New York City?
A: Currently, tenants often pay broker fees, even if they find an apartment themselves. There is no cap on what brokers can charge, and fees typically hover around 10% or 15% of the annual rent.
