When a new city law banning forced broker fees takes effect this June, landlords and brokers who charge tenants a fee could face fines starting at $750. As first reported by Crain’s, the Department of Consumer and Worker Protection (DCWP) on Monday proposed penalties for violating the Fairness in Apartment Rental Expenses (FARE) Act, which was passed by the City Council last year and shifts the payment of broker fees to the party who hired the real estate agent. The law is set to take effect June 14, unless a lawsuit by a real estate lobbying group blocks implementation.
Under the new law, brokers and landlords could be fined $750 for a first violation, $1,800 for a second, and $2,000 for third and subsequent offenses.
The law also prohibits landlords and brokers from requiring tenants to use a specific real estate agent, with violators subject to the same tiered fines. Those who advertise fees in rental listings, another violation of the FARE Act, would also face penalties starting at $750 and increasing for repeated offenses.
Under the FARE Act, landlords and brokers must disclose all potential tenant costs “in a clear and conspicuous manner,” with fees clearly itemized and provided in writing. Violations of this rule would result in smaller fines, ranging from $375 to $1,000.
While the law established the maximum fines, specific details—such as the starting amount for a first violation—were left to DCWP to determine through the city’s rulemaking process, according to Crain’s. The proposed fines will be subject to public comment and finalized after a May 14 hearing.
In November, the City Council voted 42-8 to approve the FARE Act. The new law disrupts a longstanding system in New York that requires tenants to pay one-time, up-front fees to brokers ranging from one month’s rent and 15 percent of the total annual rent, even if the agent is hired by the landlord or building management company.
According to the Council, the average city renter moving to a new apartment spent $10,454 in upfront costs in 2023, as 6sqft previously reported.
In December, the Real Estate Board of New York (REBNY) sued the city to stop the FARE Act, claiming that the law violates brokers’ rights to free commercial speech under the First Amendment and oversteps the “Contracts Clause in the Constitution by voiding contracts between brokers and landlords and preempts New York State law,” 6sqft reported. In January, the group filed a preliminary injunction to stop the law from taking effect.
Earlier this month, Gov. Kathy Hochul came out in support of the FARE Act. The governor’s public backing came after Attorney General Letitia James and the Department of State filed an amicus brief supporting the city against the lawsuit, concluding that the FARE Act does not infringe on state law.
REBNY previously won a suit against a brief ban on broker fees in 2020. Under the 2019 Housing Stability and Tenant Protection Act, landlords could not deregulate rent-stabilized apartments, and security deposits were capped at one month’s rent, as 6sqft previously reported. As part of the then guidance issued by the Department of State, brokers hired by landlords could not be paid by the prospective tenant. After lawsuits by REBNY and several brokerages, a judge struck down that part of the law in 2021.
The FARE Act is slated to take effect on June 14.
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