A bill in New York City that prevents renters from being forced to pay broker fees became law over the weekend despite not earning a signature from Mayor Eric Adams.
The bill, known as the FARE Act, passed in November with a veto-proof majority from the City Council. It became law on Friday after Adams neglected to sign or veto it within a 30-day period.
The FARE Act will reform New York City's rental real estate system, which currently requires tenants to pay broker fees---commissions of a real estate agent---before moving into an apartment landlord. The rule applies even if the broker was not hired by the tenant.
The fees are quite steep and can amount to as much as 15% of the annual rent. To put things into perspective, the average annual rent is $46,308, per data from Apartments.com. A 15% broker fee would equate to $6,946.
What Are the Key Provisions of the Fare Act?
The legislation passed by the City Council will take effect beginning June 14, 2025. Under the new law, landlords will be responsible for paying broker fees if agents are hired to represent their interests in the transaction. In addition, landlords will be required to disclose all fees clearly and cannot require tenants to engage specific agents or brokers.
Landlords or brokers who violate the FARE Act may be fined up to $1,000 for the first violation and $2,000 for subsequent violations within two years.
The law will only apply to residential rental transactions but excludes residential sales, commercial leases, and cooperative corporation leases to shareholders.
How Did the Real Estate Industry React?
Following the bill becoming law, leaders of the Real Estate Board of New York filed a lawsuit in the Federal District Court to argue that the provisions were unconstitutional and would only lead to higher rents rather than giving tenants relief.
"It will wreak havoc on the New York City rental markets and unleash a host of unintended consequences, causing immediate and irreparable harm to the consumers it purports to protect, as well as harm brokers and landlords around the city," the lawsuit read, according to The New York Times.
