What the Broker Fee Changes Mean For You

New York City’s City Council recently passed the FARE Act, meaning tenants are no longer responsible for paying broker fees. Instead, that cost will now be passed on to landlords or management companies and most tenants will no longer have to foot the bill. Let’s take a closer look at what that means for you.

What Was the Broker Fee Anyway?

Since brokers don’t work for free, someone must cover the costs of listing and marketing a property – but, while passage of the FARE Act means big changes to the rental status quo here, New York City and Boston were previously the only places most renters would ever encounter it. Of course, this often led to confusion and frustration as potential tenants realized they would have to fork over up to 15% of the annual rent, no small change in a city as expensive as this one. And while negotiation was always an option, let’s be real – most brokers would just move on to the next person willing to pay the fee. But now the balance of power has shifted.

What the Passage of the FARE Act Means for Renters

On one hand, you might be thinking, Great, that’s thousands of dollars I don’t have to pay. And it’s true that you won’t have to pay that fee upfront. But, as Mayor Adams pointed out, “If you pass the cost onto the small property owners, nothing in that law stops them from building that into their rent.”

True enough, argued Council Member Chi Ossé to PIX11, but countered that, “The average cost of first-time fees for moving into an apartment is over $10,000. Eliminating that cost and splitting it up over 12 or 24 months allows people to move into new apartments.”

While the news that broker fees may just come back in a different form is dispiriting, this change does offer tenants more flexibility. If you’ve felt locked into your apartment for fear of the huge outlay of money on the broker’s fee, this change does remove that barrier (even if it just effectively puts the burden on layaway). And while the way you search for apartments may not change (scour online as much as you like), you’ll want to pay attention to the role the apartment’s agent will play in the transaction to ensure you’re not on the hook. Be sure to explicitly ask who will be responsible for paying the fee to avoid incurring surprise charges.

What the Passage of the FARE Act Means for Landlords

Big changes are on the horizon for landlords – especially small landlords who only own a few properties. While management companies can soften the blow across various revenue streams, smaller landlords may lack that kind of flexibility. Landlords found in violation of the FARE Act could be hit with fines of up to $2,000.

Landlords should also know that if the building is rent-stabilized, the burden of the broker’s fee cannot legally be “baked in” to the rent. Despite the big changes and excitement (among renters, at least) around this news, there is still a small possibility Mayor Adams will choose not to sign the bill into law. Pundits might suggest he doesn’t have a lot of political capital to burn right now, but the choice will ultimately be his and he has publicly expressed some concern over how this affects smaller landlords.

Mayor Adams has 30 days to sign the bill into law, but even if he chooses to abstain, the bill will still become law, taking effect 180 days after that.

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