Landlords in New York City are no longer allowed to force their tenants to shoulder thousands of dollars in real estate broker fees in a new legislation passed Wednesday.
The New York City Council approved the Fairness in Apartment Rentals Act (FARE), a bill that would put an end to tenant-paid rental broker fees and shift the cost to landlords or the management firm that hired the professional. This is only applicable in transactions where brokers are exclusively representing landlords.
The bill passed with a veto-proof majority of 42-8, according to Realtor.com.
Tenants Paid Hundreds to Thousands of Dollars in Fees
Prior to the passing of the bill, tenants moving into an apartment in New York City spent hundreds to thousands of dollars more on upfront costs, which included a security deposit, the first month's rent, and a fee paid to the broker.
The fees are quite steep. Typically, it totals as much as 15% of the annual rent or roughly $7,000 for an average-priced apartment, per AP News.
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For perspective, landlords cover the fees of brokers in virtually every other city in the United States.
"The Council is proud to pass this historic bill to protect our city's renters, ensuring that tenants aren't on the hook for fees for services they did not request," New York City Council Speaker Adrienne Adams said.
The legislation will take effect in six months.
How Did the Real Estate Industry Respond?
The real estate industry in NYC has largely opposed the bill. The Real Estate Board of New York argued that if landlords are forced to cover the broker fees, they could also raise rents to pass the cost back to tenants. The group even proposed its own bill, which would increase the disclosures made to tenants.
The New York State Association of Realtors also voiced concerns about the bill, adding that it will threaten the livelihood of brokers and possibly limit access to housing.
Mayor Eric Adams, D-NY, had also raised concerns about the bill, adding that it has a "right intention" but would possibly not be able to give the results it is aiming for. He further warned of "permanent" rent increases when the bill goes into effect.
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