The end of upfront broker fees for most tenants searching for apartments
The End of the Much Maligned NYC Broker Fee
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.
A new law banning the fees, except in cases where tenants proactively hire brokers to help with their housing searches, is set to take effect Wednesday. The measure was approved last year by the City Council and is meant to clear a serious financial hurdle for tenants who are often forced to pay fees to brokers ranging from the equivalent of one month’s rent to 15% of their annual rent — $5,400 on a $3,000-a-month apartment — before signing leases.
Final implementation hinges on a judge’s decision in a lawsuit seeking to block the new law that the Real Estate Board of New York and a handful of brokerages filed late last year.
But regulators, brokers and even the Real Estate Board of New York are preparing for the law to begin as scheduled.
Here’s what to know about a seismic shift in the rental landscape.
The city’s Department of Consumer and Worker Protection will field complaints, investigate claims and impose penalties against brokers and property owners who illegally charge fees.
In April, they released a schedule of fines for people and companies found violating the ban.
The agency will fine brokers caught charging tenants who didn’t explicitly hire them $750 for a first offense, followed by fines of $1,800 for a second offense and $2,000 for any subsequent violation.
The consumer protection agency will also fine brokers $750 if they fail “to disclose in residential rental listing all fees to be paid by [the] tenant in a clear and conspicuous manner” and $375 for failing to provide tenants with an itemized list of all fees.
Agency spokesperson Stephany Vasquez Sanchez said renters can call 311 or visit nyc.gov/consumers to file complaints if they think they have been unlawfully charged fees.
“We are excited to expand consumer protections for millions of renters across the five boroughs,” she said.
But tenant-paid broker fees aren’t disappearing entirely. Renters who hire brokers to assist with their housing searches — a common practice for people moving from other parts of the country — will still be on the hook for the fee.
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How might this affect renting in NYC?
Time will tell, but tenants can expect to save money on upfront costs when they secure new apartments, according to industry experts, agents and the law’s lead sponsor, Councilmember Chi Osse.
That will be a big change and could encourage more people to consider moving. An analysis last year by the listings site StreetEasy, which supported the legislation, found the average renter pays nearly $13,000 in upfront costs — including broker fees, moving expenses and security deposit — when signing a lease.
But opponents of the measure warn that it could lead to higher overall rents if landlords bake broker fees into the monthly prices. That would not apply to the roughly 1 million rent-regulated apartments where price increases are set by a city panel each year.
Jonah Cohen, a broker with the firm Corcoran who typically works with owners of small properties, said he also expects to see demand for apartments surge.
“I have seen that in the last month nobody is pulling the trigger on places with fees because who is going to pay a fee on a place one month before the law takes effect?” he said. “My prediction is, on the lower and middle end, everyone waiting will jump in.”
He said the owners he works with will likely continue paying him the equivalent of one month’s rent for each new tenant. A larger company listing 20 apartments with the same broker may offer a lower per-unit rate because of the volume, he added.
Other housing experts say they think the new law won’t affect prices and listings as much as critics say.
“I don’t think we’re going to have this hyperbolic impact because the no-fee trend has been increasing,” said Allia Mohamed, the CEO and co-founder of apartment review platform openigloo. “There have been a lot of questions and scared brokers, but I think this is going to be a really good opportunity to assess what’s broken with this system and come up with constructive solutions.”
What are opponents saying?
The Real Estate Board of New York promptly sued to block the new law from taking effect last December. At the time, the organization’s general counsel, Carl Hum, told Gothamist that the law “infringes upon constitutional guarantees of free speech and contract rights” because it blocks brokers from posting apartments on online listings platforms without being explicitly contracted by landlords to do so.
The influential lobbying group previously succeeded in overturning a 2020 directive that had eliminated broker fees based on an interpretation of an ambiguous state law.
But the board is now bracing for the new rule to actually take effect this time. A spokesperson referred Gothamist to an email and fact sheet the organization sent its members, including brokers, earlier this month.
Their message: Be prepared to adapt to the new rules.
The fact sheet advises brokers and landlords to list all fees associated with an apartment, including “lost key, pet charges, move-in/move-out, etc.” The board also advises brokers to “ensure they have the landlord’s permission and authority to publish a rental listing to avoid unnecessary disputes with the landlord.”
Source: Gothamist
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