New York City renters will no longer have to pay brokerage fees, city passes new law

New York has eliminated brokerage fees. A landlord has been banned from charging people the same fees that their broker actually charges them, reports Curbed.

The law passed on November 13 after years of opposition from the real estate industry.
The FARE (Fairness in Rent) Act was first introduced by Chi Ossa in 2023. It states that landlord must pay a commission to the broker who lists the apartment for him. Brokers and landlords must disclose any other fees to tenants in advance.

It sounds simple, but in reality it was extremely difficult to achieve.

On November 13, a veto-proof majority of the 42-member City Council voted in favor.

Wasted money

New York is one of the few cities in the country where to tenants regularly have to pay brokers. They are hired by landlords to show clients properties that are available for rent. In practice, this means that brokers cheat tenants by charging them fees that can reach 15% or more of their annual rent.

On the subject: What kind of housing can you rent in New York for $1500?

Typically this is thousands of dollars in fees for a broker hired by your landlord who may not even show up.

Long fight

The first attempt to abolish the mandatory brokerage fee was in 2020.

The state legislature passed a series of measures to protect renters. Then the New York State Department issued a surprising guideline banning the city's silly fee system.

For a few weeks that year, charging tenants for what were actually landlord expenses was illegal. But the Real Estate Board of New York sued. It said the State Department had “unlawfully exceeded its authority.” A judge eventually agreed and overturned the ban.

Then, in June 2023, Osse introduced the FARE Act. It went nowhere. The Real Estate Board of New York made a private deal with then-Board Member Marjorie Velazquez. She was the chair of the Consumer and Worker Protection Committee. The Board blocked the bill from reaching a hearing. Osse reintroduced it in early 2024, rallying support from labor unions and reaching out to various social media influencers.

“It created a natural public outcry around the bill that made it hard for the City Council to ignore,” Osse said. Plus, Velasquez lost her reelection bid.

The real estate industry has gone nuts over the bill. Brokers opposed to the bill took over City Hall Park this summer ahead of a hearing, wearing sweaters with the Corcoran logo and holding signs with slogans like “Agents Are Renters Too.” REBNY even tried to push through its own version of the bill in October. It would have required agents to provide apartment hunters with a “tenant bill of rights.” It would have informed them that brokerage fees are negotiable “between all parties.”

Not all brokers were against the idea.

“The FARE Act does not cap agent commissions,” Anna Klenkar, a broker at Sotheby’s, said at the hearing. “If our revenues are going down because landlords are paying us less than they expected tenants to pay, that just shows that the current system is built on exploitation.”

Now regarding potential legal issues this time.

“There’s always the possibility of suing anything, especially REBNY,” Osse says. “But I feel good about this bill.” Let’s hope he’s right.