REBNY sues to block NYC broker fee law
James Whelan, President of the Real Estate Board of New York (REBNY), at a rally opposing the FARE Act in June. Courtesy of REBNY
The Real Estate Board of New York sued the city on Monday to stop a new law that would shift the payment of broker fees from renters to landlords. The Fairness in Apartment Rental Expenses (FARE) Act, which requires the party who hired the broker to pay the fees, became law over the weekend and takes effect in six months. In a lawsuit filed in Manhattan federal court, REBNY argues the FARE Act violates brokers’ rights to free commercial speech under the First Amendment and will lead to “higher rents, fewer properties advertised, and decreased overall transparency of the markets for consumers.”
New York City is one of the only cities in the country where tenants pay broker fees, a one-time sum, usually ranging from one month’s rent and 15 percent of the total annual rent, in addition to a security deposit.
The renter is responsible for paying the fee even if the agent is hired by the landlord or building management company. Since no law sets guidelines for how much agents can charge, the fees are negotiable. According to a report from the City Council, the average NYC renter moving to a new apartment spent $10,454 in upfront costs in 2023.
The bill, sponsored by Council Member Chi Ossé, also mandates landlords or brokers disclose all upfront fees to tenants with an itemized list, including those owed to the landlord and other parties, before the tenant signs a lease.
In the lawsuit, REBNY claims the FARE Act will discourage brokers and landlords from publishing “open listings,” listings without an exclusive agreement with a landlord, which not “only infringes on the First Amendment rights of brokers and landlords, but will have the net effect of reducing the level of advertising of open listings,” according to the lawsuit.
The suit also says the law violates the Contracts Clause in the Constitution by voiding contracts between brokers and landlords and preempts New York State law.
“The FARE Act is bad policy and bad law,” Carl Hum, general counsel at REBNY, told the Real Deal in a statement. “This legislation will not only raise rents and make it harder for tenants to find housing but it also infringes upon constitutional guarantees of free speech and contract rights, as well as New York state law.”
The New York City Council approved the bill in a veto-proof 42-8 vote in November.
In a statement to the New York Times, Ossé called the lawsuit a “last desperate attempt by the real estate lobby to undermine the voices of city residents.”
“New Yorkers deserve a rental system that works for them — not one that exploits them.”
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