 NYC Real Estate Industry Asks Judge to Block New Broker FeeLaw |
Source |
American Shipper |
Post Date |
05/13/2025 |
|
?A federal judge is being asked to block a New York City law that requires landlords to pay fees for the brokers they hire, which is set to take effect next month.
?
?
?
?The law would force property owners to pay for their brokers instead of passing those costs to their tenants, a practice that has been in place for decades.
?
?
?
?The Real Estate Board of New York and other industry groups argue that the law will increase rents and make it more difficult for lower-income tenants to find housing, while the city claims it will make apartments more affordable and easier for renters to move to better properties.
?
?
?
A key real estate organization and otherindustry groups asked a federal judge to block a New York City law thatrequires landlords to pay fees for the brokers they hire, saying the rule thatgoes into effect next month will increase rents and make it more difficult forlower-income tenants to find housing.
The Real Estate Board of New York and others,including the New York State Association of Realtors, sued the city in December over the rule, which forcesproperty owners to pay for their brokers instead of passing those costs totheir tenants, a longstanding practice that has perturbed renters for decades.
During a court hearing Friday, lawyers for thegroups urged US District Judge Ronnie Abrams to halt to enforcementof the rule while the lawsuit proceeds. The ban, which was passed bythe city council in November, is scheduled to take effect on June 11. The judgedidn? say when she?l reach a decision.
Because landlords often sign exclusivecontracts with brokers to list their properties and find tenants, the law?everely and permanently impinges on listing agreements between brokers andlandlords,?in violation of the Constitution? bar against state laws impairingprivate contracts, Claude Szyfer, a lawyer for REBNY, told the judge.
The law also would violate the free-speechrights of landlords and brokers who publish real estate listings and then seekto receive compensation from tenants for the cost of the listing service,Szyfer said.
Two lawyers for the city defed the law. Theysaid it will help address the city? housing crisis by making apartments moreaffordable and easier for renters to move to better properties without havingto pay thousands of dollars to brokers they didn? choose.
The current rule is ?ausing low andmiddle-income people ?especially people of color ?it is causing them to leaveNew York,?one of the city? lawyers told the judge.
$13,000
New York City renters who settle on apartmentsthat have broker fees pay an average of nearly $13,000 to secure the keys to aproperty, which frequently includes thousands of dollars in fees for brokershired by landlords to secure tenants, according to an analysis byStreetEasy released last year. Roughly half of the listings on StreetEasy comewith broker fees, which can range from one months?rent to as much as 15% ofannual rent.
Lawyers for the city argue that the broker feesadd a substantial cost to families who already are shelling out thousands ofdollars upfront and a substantial portion of their income on housing. New YorkUniversity? Furman Center, which studies housing, neighborhoods and urbanpolicy, has found thatmore than than half of all city households sp 30% or more on rent.
New York and Boston are the only major Americancities where rental broker fees are commonly passed to tenants even if theydidn? hire them.
But the industry conts the law will makerent-stabilized apartments too costly to operate and force landlords to raiserents to cover the cost of broker fees. They argue tenants usually pay lessover the life of a lease when commissions are paid separately. Landlords claimsome tenants already are refusing to pay broker fees even though the law hasn?taken effect yet.
The suit alleges the city is simplyvillainizing brokers and the act violates their constitutional right to freespeech by not allowing them to publish listings, and that the statealready regulates brokers. It also conts the law violates the contractsclause of the US Constitution by interfering with agreements between landlordsand brokers.
?ew York City? brokers have built theirbusinesses around the reasonable expectation that they can collect fees fromtenants under conditions prohibited by the act,?the groups said in a courtfiling. ?f the act is permitted to go into effect, brokers will need to retooltheir businesses to ?without publishing an listing ?attract tenantswilling to engage them as tenants-side brokers. Or they must compete for alimited number of landlord-side exclusive listing agreements. Some will failand be driven from the market; all will need to sp potentially unrecoverablesums to adapt to the new regime.?
A state-approved broker fee ban was briefly inplace in February 2020 just before the first Covid lockdown brought the rentalmarket to a near halt. By the time renter demand began rising the next year, acourt had struck down the state law and brokers were eager tocapitalize on what quickly became a very competitive market where prices havecontinued to rise.
The law could dramatically change the dynamicsof the city? highly competitive rental market, where prices have soared sincepandemic restrictions began easing in 2021. The median Manhattan rent was $4,495 in March, just $5 shortof the record reached the previous month, according to appraiser Miller SamuelInc. and Douglas Elliman. Prices have also set records in the outer boroughs.
Tenant advocates argue that the large upfrontcosts are an unnecessary impediment for many renters who want or need to move.While low-income New Yorkers are more likely to face that struggle, no-feeunits t to be in pricier modern buildings. The city? residential brokerscounter that eliminating the fees will be much more expensive for tenants inthe long run, with landlords adding their marketing costs to rents.
In March, 57.3% of StreetEasy? listings wereno fee, up from roughly 54.2% from last year.
The case is Real Estate Board of New York vCity of New York, 24-cv-9678, US District Court, Southern District of NewYork (Manhattan).
|
|
|
|
