NYC Council bill would require broker fees be paid by ‘hiring party’

June 23, 2023

Photo by Rachel Martin on Unsplash

The New York City Council will once again take up the issue of broker fees, a unique-to-New York system that allows real estate brokers to charge prospective tenants a one-time fee, usually between one month’s rent and 15 percent of the total annual rent. Council Member Chi Ossé on Thursday introduced legislation that would shift the payment of broker fees to the party who hired them, which is often the landlord or building management company. The bill is similar to guidance issued by the state in 2019 that briefly banned broker fees, which was ultimately struck down by the court.

Currently, the tenant is responsible for paying the one-time broker fee, even if the agent is hired by the building’s landlord or management company. Ossé’s Fairness in Apartment Rental Expenses (FARE) Act would require the person who employed the broker to pay the fee.

“Far too often, tenants are paying fees to a broker that their landlord or building’s management company have hired,” Ossé said in a tweet. “This makes the already-stressful NYC housing process even more expensive and difficult than it already is.”

The legislation introduced by Ossé, who described his own struggles with finding an apartment in Brooklyn in a New York Times article earlier this year, would not cap broker fees in any way, according to the council member.

Under the sweeping Housing Stability and Tenant Protection Act signed into law by Gov. Andrew Cuomo in 2019, landlords were prevented from deregulating rent-stabilized apartments and security deposits were capped at one month’s rent. As part of the guidance issued by the Department of State, real estate brokers hired by landlords could not be compensated by the prospective tenant.

Several real estate brokerages filed a lawsuit claiming the rule change would negatively impact both residential agents and tenants. The New York Supreme Court issued a temporary restraining order, halting the very short-lived ban on the fees.

In 2021, a judge ruled a ban on broker fees was an “error of law” and struck down the law.

If this latest bill becomes law, real estate agents say the broker fee would just be passed on to tenants through higher rents.

“Contrary to Council Member Ossé’s claims, this legislation will negatively impact agent commissions while also leading to higher rents for many apartment seekers,” a spokesperson for the Real Estate Board of New York (REBNY) said in a statement to The Real Deal on Thursday.

In response, Ossé said the distribution of the broker fee over the course of a one- or two-year lease would be preferable to a hefty upfront sum.

“Finding an affordable apartment in New York City is a nightmare–and the towering cost of rent is just the beginning,” Council Member Shaun Abreu, who is co-sponsoring the bill, said.

“It isn’t fair to ask tenants to assume the costs for a broker they did not hire. If we are serious about empowering tenants, tackling our affordability crisis, and protecting renters across this city, we must be united in defense of the FARE Act.”


Get Insider Updates with Our Newsletter!

More: Policy
Tags: Brokers

Leave a reply

Your email address will not be published.

Your email address will not be published. Required fields are marked *