NYC broker fee law — which protects tenants from costs — challenged by real estate agents in 11th-hour push

New York Post

6 days ago

These agents are trying to broker a last-minute deal.
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.
Here's everything you need to now about the new rules — which will launch on June 11 unless a federal judge agrees to REBNY's motion.
3 New York City's real estate industry is making an 11th-hour bid to halt the new broker fee ban before it takes effect next month.
BullRun – stock.adobe.com
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.
Andrew Lieb, managing attorney of boutique real estate litigation law firm Lieb at Law, declares the Big Apple rental market will be 'forever changed' by the FARE Act.
'It will result in tenants losing access to housing from landlords who simply decide it's not worth it to be a landlord anymore,' Lieb told The Post. 'New York City is really making it impossible for a residential landlord to operate given the plethora of red tape that needs to be navigated just to sign a lease — and then enforcing that lease is a whole other disaster.'
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.
3 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
New York landlord-tenant lawyer Altagracia B. Pierre Outerbridge expects the mandate to go into effect, and that a federal judge is 'probably not going to block the law' since the court hasn't yet issued a decision.
'The fact that a month has passed (and the law is going into effect in two weeks) without the Court doing anything suggests that it doesn't feel a huge rush to get involved,' Pierre Outerbridge told The Post.
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.'
3 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
'The landlords who still want to use a broker and are allowed to raise the rent to accommodate the shift in responsibility will do so,' Pierre Outerbridge said, adding that some tenants are 'going to be shocked to pay an extra month's rent in broker fees in order to sign their lease.'
'It will exacerbate rental unaffordability,' Violetta Weddepohl, a broker at Serhant, concurred. 'As a result, when leases come up for renewal in a year or two, tenants will face even steeper rent increases.
'I have sympathy for the argument that the broker should be paid by the person who hires them,' she said, 'but the reality is that the landlords can get away with charging higher rent.'
But real estate listing website Streeteasy estimated the average cost to sign a lease on rentals that would have currently charged a broker fee will fall by 41.8% once the law takes effect.
'Rental properties that stopped charging tenants a broker fee in the past did not increase rents beyond broader market trends,' reads a December report from the site. 'The lock-in effect of high upfront costs made it easier for landlords to raise rents faster.'
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.
'That's why they're insecure,' he added. 'That's why they're always hustling because it's a job that doesn't need to exist.'
Georgi Georgiev, a bartender from Bulgaria who now resides in Fort Greene, is less optimistic.
'One way or another, we are going to pay it if we are getting an apartment, no matter what. We're never gonna not pay,' Georgiev, 45, said. 'There is gonna be so many loopholes.'
What happens if an apartment has a broker fee after the law is in effect?
The city's Department of Consumer Protection will be enforcing the law after it goes into effect.
It's estimated the agency will require about $500,000 in the next fiscal year for outreach and education related to the law, according to City Council records.
Those caught in violation of the law will be subject to a $1,000 fine for the first violation and a $2,000 fine for each violation within a two-year period.
To file a complaint regarding a FARE Act violation, consumers can visit nyc.gov/consumers or call 311 once the law is in effect.