New York City's ban on broker fees for residential renters explained
A law taking effect Wednesday bans broker fees for most residential renters in New York City. Credit: TNS/Dreamstime
A law taking effect Wednesday bans broker fees for most residential renters in New York City, the nation’s largest rental market. Here’s how renting will — and won’t — change.
What does the law prohibit?
The law, the Fairness in Apartment Rental Expenses Act or "FARE Act," which was passed last year by the City Council with a veto-proof majority, eliminates the status quo in which most apartments can be rented only if the renter pays a fee — typically equal to one month’s rent or more — just to see the unit, get the application processed and sign the lease.
Are residential rental broker fees totally gone?
No, but whoever hires the broker must pay the fee, and most brokers are hired by the landlord, not the renter. Broker fees are still allowed in other circumstances, such as for real estate purchases and sales.
Why do supporters say the law is necessary?
The legislation’s lead sponsor, Councilman Chi Ossé (D-Brooklyn), said last year upon its passage: "Tenants are done paying fees to brokers they never wanted nor hired for apartments they found themselves" via web listings.
Residential broker fees can pose an enormous and sometimes insurmountable burden to someone seeking a home, particularly when combined with requirements for up-front payments of the first and last month’s rent and a security deposit. Broker fees, the council found, exist almost nowhere else and have a harmful effect on housing mobility.
What do tenants think of broker fees?
Arielle Savoy, of Baldwin, was not a fan last year when she told Newsday that she and her would-be roommate had 15 minutes to check out a two-bedroom, one-bathroom walk-up in Manhattan’s East Village. That’s when the broker, who worked for the landlord, rushed them out so others could go on a tour. Savoy and her roommate ultimately took the place and had to pay the broker $2,100, plus $2,100 for a security deposit and the monthly rent of $4,200.
What do opponents of the law, such as the real estate industry, say?
Opponents predict that landlords will hike rents to market-rate tenants in order to offset the new costs of having to hire someone to show apartments to prospective tenants, process applications and handle the lease. And brokers are worried they’ll lose their jobs.
Has the law been challenged?
Yes. On Tuesday, Judge Ronnie Abrams, of U.S. District Court of the Southern District of New York, rejected a motion by the real estate industry for a preliminary injunction blocking the law. Abrams wrote that the "remedy is through the political process, not in court."
Are there broker fees on Long Island?
Yes. On the Island, residential rental broker fees are typically between a month’s rent and 15% of the annual rent, and are common for existing developments but less so for new developments, according to agent Wendy Sanders, of Douglas Elliman in Roslyn. In 2020, New York State tried to impose a statewide ban, but the rule was blocked by a judge following a real estate lawsuit.
Matthew Chayes, a Newsday reporter since 2007, covers New York City.
