A major change is coming to New York City’s rental market this week: the end of costly, upfront broker fees for most tenants searching for apartments.
The Fairness in Apartment Rental Expenses (FARE) Act, slated to go into effect on June 11, mandates that broker fees be paid by whoever hired the broker – most often, the landlord or property management company, not the prospective tenant.
Almost half of all NYC leases in the last year charged tenants a broker fee, according to data collected by real estate search engine StreetEasy.
“Anyone who has paid 15% of their annual rent in brokers fees for someone to let you in an apartment for 10 minutes knows the practice is nothing more than legalized theft,” said Bradley Tusk, founder of Tusk Philanthropies.
Broker fees have been recognized as financial hurdles for many lower-income New Yorkers.
Rob Solano of Churches United for Fair Housing called the new law “a historic victory for tenants across New York City.”
StreetEasy projects that with the broker fee burden lifted, renters can expect the average upfront cost of signing a new lease to decrease 41.8%, from $12,942 to $7,537. There’s no legal cap on what brokers can charge, but fees typically range from 12-15% of annual rent.
New York City Council Member Chi Ossé, who created the FARE Act, cited rising housing costs as his motivation to create the bill.
“The system of forced broker fees is an affront to all New Yorkers,” Ossé said. It “truly prohibits people from moving from one apartment to another.”
The bill faced intense opposition from landlords, including from the Real Estate Board of New York (REBNY). A judge denied the board’s attempt to stop the FARE Act from going into effect, even as their lawsuit continues.
“New Yorkers will soon realize the negative impacts of the FARE Act when listings become scarce, and rents rise. We will continue to litigate this case as well as explore our avenues for appeal,” REBNY President James Whelan reacted to the judge’s decision.
Some housing experts disagree. Ahead of the FARE Act, brokered apartments saw “an average increase in rent around 5.3% compared to the rest of the market, which saw an increase of 4.6%,” StreetEasy Senior Economist Kenny Lee, said, emphasizing the minimal difference.
Council Member Ossé addressed the concerns of New Yorkers who worry that rent will rise in response to the law: “Even if some portion of the cost were passed onto tenants as rent, it would be distributed over the course of 12 or 24 months, alleviating the prohibitive upfront costs.”
Supporters of the law say it will break down some financial barriers.
“I’m very happy about that. It definitely makes it easier … It’s expensive to live here, it’s expensive to find apartments, it’s expensive to move apartments,” one renter told Eyewitness News.
Unsure of whether you’ll have to pay a broker fee? Here’s how the new law impacts prospective renters looking for an apartment this summer:
I found an apartment listed online and a broker met with me to show me that apartment. Do I pay the broker fee when I sign the lease?
No.
The rule is simple: If a landlord hires a broker, the landlord pays the broker. If you hire a broker, you pay.
That means if you found an apartment through a listing on a housing site (such as Apartments.com, RentHop or StreetEasy), the landlord or management company bears the responsibility of paying the broker.
The law prohibits brokers who represent landlords from charging broker fees to tenants.
This includes brokers who publish listings with the landlord’s permission. Landlords or their agents must disclose other fees that the tenant must pay in their listings and rental agreements.
What happens if I haven’t hired a broker, but the broker or landlord demands I pay a broker fee?
FARE Act violators are subject to penalties, the NYC Department of Consumer and Worker Protection (DCWP) says.
Renters who encounter an attempt at illegal broker fee collection can visit nyc.gov/consumers or call 311 to report a FARE Act violation.
You can also report scams and illegal listings to the host website.
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