City Council Passes Bill That Makes Landlords Pay Fees Of Brokers They Hire

A quintessential part of the New York renter experience has been the moment they are hit with a bill to pay a broker they didn't hire. The New York City Council voted to ban that practice Wednesday afternoon, pushing the legal responsibility for paying a rental broker to the hiring party.

The bill, known as the Fairness in Apartment Rental Expenses Act, is expected to become law, with 42 of the City Council’s 51 members voting in favor of the proposal, eight voting against and one abstention.

“This bill is common sense,” Council Member Chi Ossé, who proposed the bill, said at a press conference shortly before the hearing. “It replicates how every other transaction exists in this country: Whatever you hire or order, you pay for.” 

The FARE Act makes it illegal for landlords hiring a broker to pass the responsibility for paying the broker fee on to a tenant. It would also require landlords, or agents working on their behalf, to disclose any fees that tenants are responsible for when they list units online.

The legislation has received heavy pushback from the Real Estate Board of New York, the powerful landlord lobbying group, as well as from experts who say small and rent-stabilized landlords won’t be able to swallow the added cost.

REBNY rallied around 1,500 brokers and other industry members to testify against the bill at a hearing this summer. The organization argues that the FARE Act will result in higher housing prices because landlords will start incorporating the cost of a broker’s fee into the annual rent paid by tenants, and that it removes a tenant’s ability to negotiate with a broker over the fee. 

Owners of rent-stabilized properties, which make up around half of the city’s rental market, wouldn’t be able to bake the cost of a broker fee into the rent, according to the legislation.

The organization intends to continue fighting the legislation in spite of Wednesday’s vote, REBNY President Jim Whelan said in a statement.

“Wednesday's vote is yet another instance of prioritizing ideology over economic and practical reality when it comes to the city’s rental housing stock,” he said. “The FARE Act will make it harder for tenants to find housing, raise rents, and make the hard work of real estate agents even more difficult.”

Mayor Eric Adams, who has maintained his base of support in the real estate industry despite multiple corruption investigations and a federal bribery indictment, said at a Tuesday press conference that there are some problems with how the bill is written.

“There's nothing in the bill that states the property owners can't pass that fee into the cost of that real estate — I mean, to the cost of that rental,” Adams said. “I've witnessed this in Albany and I see it now. Sometimes our ideas are not fleshed out enough to know what are the full long-term ramifications.”

Fabien Levy, Adams’ deputy mayor of communications, declined to comment further when asked for clarification on the mayor’s position on the legislation or if he plans to veto it.

The FARE Act passed with a veto-proof majority — the council can override a mayoral veto with 34 votes — and City Council Speaker Adrienne Adams said shortly before the vote that she and the council would be ready to fight the mayor if he were to oppose it.

“This bill is very significant and important to this council, and the council would be prepared to meet any negative response from the administration with regard to passing this legislation,” she said.

Lawmakers and advocates in favor of the bill argue that the FARE Act — unlike past proposals at city and state levels that would have capped broker commissions or outright banned brokers from collecting fees from renters — simply pushes the responsibility for the broker fee on to the hiring party. 

“A renter can absolutely still hire a broker to represent them in the transaction, and landlords can still hire a broker to represent them in the transaction,” Casey Roberts, a StreetEasy spokesperson, told Bisnow. “It's important that in either scenario, a broker is paid fairly for their valuable services. That would continue to be an option.”

StreetEasy is in favor of the FARE Act, Roberts said. The online housing marketplace believes that tenants being responsible for paying high broker fees in NYC, especially amid the housing affordability crisis, means that fewer New Yorkers can afford to move.

As a result, she said, fewer brokers are able to make commissions: around 85% of brokers surveyed by StreetEasy said that the city’s housing shortage has had an impact on their business.

“When renters aren't able to afford to move, that's bad for renters,” Roberts said. “It's bad for agents. It's bad for the market and the industry overall.”

Anna Klenkar, a broker with Sotheby’s International Realty, believes the legislation will actually make doing business easier for brokers.

“I have a no-fee rental right now. The landlord is paying me. The tenants are coming direct, and they're not having to pay a broker fee,” she said. “It's just easier for everyone involved.”

The FARE Act will bring the industry into the 21st century, she said.

“You have to engage with the public,” she said. “For real estate agents, passing this bill will improve how the public views us because we won't be gatekeepers.”

She also thinks that while the bill means landlords might have to start paying for a service they currently get for free, the FARE Act could wind up helping them longer term.

“Right now, there's so much animosity and so much hate that it could lead to types of legislation that landlords don't want,” she said. “Why don't we use this as an opportunity to say, 'OK, got it.'? Let's all move forward and focus on things that we can all agree on, like building more housing.”