New York City’s real estate industry is making a last-minute legal push to halt the Fairness in Apartment Rental Expenses Act, a new law that bans landlords from charging broker fees to renters starting June 11. The Real Estate Board of New York filed a motion to pause the law’s implementation while a court battle unfolds. Tenants and housing advocates support the law as a way to ease upfront rental costs.
What is the FARE Act?
The Fairness in Apartment Rental Expenses, or FARE Act, passed the City Council on November 13 with a veto-proof majority of 42-8. It prohibits agents representing property owners from charging prospective renters a broker fee and mandates that all tenant fees be clearly included in rental agreements and listings. Supporters argue this will reduce upfront costs for tenants, as broker fees typically amount to about 15% of annual rent, according to OpenIgloo.
Industry’s Last-Minute Legal Bid
The Real Estate Board of New York, representing over 10,000 professionals, filed a motion earlier this month seeking to pause the FARE Act until the legal battle is resolved. They argue the law violates federal and state statutes, including constitutional free speech and contract rights. A REBNY spokesperson said, “The FARE Act is constitutionally flawed on multiple accounts. We are confident that the Courts will agree with us.”
Concerns from Experts and Realtors
Andrew Lieb, managing attorney at Lieb at Law, warned the FARE Act will “result in tenants losing access to housing from landlords who simply decide it’s not worth it to be a landlord anymore.” He added, “New York City is 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.” The New York State Association of Realtors also claims the law will drive up rents, reduce online listings by over half, and open “floodgates for baseless lawsuits and penalties against brokers.”
When Do Broker Fees End?
Unless a federal judge intervenes, the law takes effect June 11. Landlords will be barred from passing broker fees onto tenants, even for leases signed before that date. New York is one of the few cities where landlords can hire brokers and transfer fees to tenants. Altagracia B. Pierre Outerbridge, a landlord-tenant lawyer, said she expects the law to stand, noting, “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.”
What Fees Remain Legal?
Under the FARE Act, landlords and tenants may still hire their own brokers. However, landlords cannot shift costs for brokers “exclusively representing the landlord’s interests” onto tenants. This includes brokers publishing listings with landlord permission. The City Council stated, “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.”
Market Fears of Rent Hikes
Some real estate professionals warn that the law will increase rental costs. Violetta Weddepohl, a broker at Serhant, said, “It will exacerbate rental unaffordability when leases come up for renewal in a year or two, tenants will face even steeper rent increases.” Altagracia B. Pierre Outerbridge added, “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,” warning some tenants are going to be shocked to pay an extra month’s rent in broker fees to sign their lease.”
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Evidence of Price Declines
Contrasting this, real estate website Streeteasy estimates lease signing costs will drop by 41.8% after the law’s implementation. Their December report stated, “Rental properties that stopped charging tenants a broker fee in the past did not increase rents beyond broader market trends.” They noted the prior high upfront costs had “made it easier for landlords to raise rents faster,” implying the new law may slow rent growth.
Public Opinion Divided
Many New Yorkers favor the law, citing affordability concerns. Betsy Laikin, a film producer, said, “This is great… The rents are higher than they’ve ever been. Why should we pay a broker fee, on top of these rents?” Painter Luke Atkinson added, “I think the broker fee should not exist. [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. That’s why they’re always hustling because it’s a job that doesn’t need to exist.” However, some like bartender Georgi Georgiev remain skeptical, saying, “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. There is gonna be so many loopholes.”
Enforcement and Penalties
After June 11, New York City’s Department of Consumer Protection will enforce the FARE Act. The agency is expected to need approximately $500,000 next fiscal year for outreach and education about the law. Violators face fines of $1,000 for the first offense and $2,000 for subsequent violations within two years. Tenants may file complaints via nyc.gov/consumers or by calling 311 once the law is in effect.
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