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New York City is preparing to enforce a sweeping new law that aims to eliminate most residential broker fees and is proposing fines as high as $2,000 per violation.
The city’s Department of Consumer and Worker Protection (DCWP) last week released proposed penalties to back the Fairness in Apartment Rental Expenses Act, the Gothamist reported Monday. The provisions are set to take effect June 11.
The law, passed last year by the New York City Council, prohibits landlords and real estate brokers from charging prospective tenants for broker services unless the tenant explicitly hired the broker.
Under the proposal, landlords or brokers who charge a tenant without a prior agreement would face a $750 fine for a first offense, $1,800 for a second offense and $2,000 for each subsequent violation. Additional penalties include $750 for failing to clearly disclose all tenant fees in listings and $375 for not providing an itemized list of charges.
Cutting down on broker reliance
City Councilmember Chi Ossé of Brooklyn, who sponsored the law, called the penalties fair and emphasized that rulebreakers must also return any improperly collected fees.
“The fines imposed by the law are reasonable and can be easily avoided by never charging a tenant for a broker they did not hire,” Ossé said in a written statement to the Gothamist.
The growth of housing websites and apps has reduced renters’ reliance on brokers as apartment listings are now easily accessible with just a few clicks. For many, it feels unreasonable to pay a steep fee — sometimes as high as 15% of the annual rent, or $4,500 on a $2,500 unit — to someone who is ultimately working in the landlord’s interest, the The New York Times reported.
The Times also pointed out that few locations outside New York City have this kind of broker fee structure, which can contribute to total costs of more than $10,000 when seeking a new apartment.
The DCWP will host a public hearing on the proposed rules on May 14, after which the penalties may be finalized.
Legal pushback
Rollout of the law could be delayed as it faces a legal challenge in federal court from the city’s real estate lobby.
The Real Estate Board of New York (REBNY) and several brokerage firms filed a lawsuit in December that seeks to block the measure, just days after it passed with overwhelming support. REBNY previously led a successful 2020 legal fight against a similar broker fee ban.
REBNY spokesperson Christopher Santarelli declined to weigh in on the proposed fines, saying it would be “premature when the constitutionality of the law is being reviewed in federal court.”
Mayor Eric Adams allowed the measure to become law without his signature and expressed skepticism, although city attorneys are defending it in court, the Gothamist added.
Support from governor
New York Gov. Kathy Hochul has voiced her support for a broker fee ban.
“The courts should rule in favor of the city. And these broker fees? They should end forever,” Hochul said in a recent social media post.
In January, Hochul announced a settlement with City Wide Apartments Inc., a Manhattan-based brokerage, after a state probe revealed that the firm charged exorbitant broker fees, including one case in which tenants were billed more than $20,000 in additional charges.
“With our state staring down a housing crisis, excessive broker fees are not just unfair — they’re a threat to hard-working families looking to call New York home,” Hochul said after the announcement.
“This settlement doubles down on my administration’s crackdown on deceptive business practices and starts the process of making dozens of families whole, and I will continue fighting to protect New York consumers and make our state more affordable and more livable.”
As part of the agreement, City Wide Apartments agreed to pay $260,000 in penalties and restitution. That includes a $50,000 civil fine and $210,000 in repayments to affected renters.
