Federal judge clears way for NYC broker fee ban to begin

New York City renters may rejoice: A ban on most broker fees is really coming on Wednesday.

A federal judge on Tuesday allowed a new measure banning broker fees to take effect on June 11.

Judge Ronnie Abrams denied a request from the Real Estate Board of New York and a collection of brokerages and landlords to pause the law while a lawsuit played out, stating that the “remedy is through the political process, not in court.”

Abrams also dismissed all but one of the plaintiffs’ arguments against the law’s implementation, noting the City Council’s intent in enacting the law was to “address a specific harm” that broker fees impose on tenants.

Councilmembers approved the broker fee ban last year, with the new measure scheduled to take effect six months after becoming law. But the Real Estate Board of New York and a collection of brokerages and landlords promptly sued to block its implementation, and the case has been playing out in federal court over the ensuing months.

The judge’s ruling clears the final hurdle to implementation and is likely to mean large upfront cost-savings for renters moving into new apartments.

New York City tenants are often forced to pay a fee to a broker who was hired by the landlord — not the renter — to fill a vacant apartment. Typical fees range from the equivalent of one month’s rent to 15% of their annual rent — $6,300 on a $3,500-a-month apartment, for example, all of which is due in full when signing a lease.

An analysis last year by the listings site StreetEasy, which supported the legislation, found the average renter pays nearly $13,000 in upfront costs, including broker fees, moving expenses and a security deposit.

Opponents of the upcoming ban say it could lead to higher rents if landlords pay the broker and factor the fee into monthly rents.

But supporters counter that even if rents rise the elimination of the upfront fees will make moving easier, especially for low-income renters who might struggle to pay a broker fee in one lump sum.

“The Court does not doubt that the cost of brokers’ fees will impose a significant burden on landlords," Judge Abrams wrote in her decision. "But to the extent landlords are unable to pay those fees, they have a mechanism by which to pass the cost to tenants — namely, increased rent. Tenants, by contrast, cannot pass the cost of brokers’ fees to landlords."

New York law also prohibits landlords from raising the monthly price on roughly 1 million rent-stabilized apartments beyond an annual percentage set by a city panel.

Brokers and landlords who violate the new measure will face penalties from the city’s Department of Consumer and Worker Protection. In April, the agency released a list of fines for people and companies found violating the broker fee ban. The fines range from $750 for a broker caught charging a tenant who didn’t hire them to $2,000 for a third violation.

Agency spokesperson Stephany Vasquez Sanchez said renters can call 311 or visit the department's website to file a complaint if they think they have been charged a fee unlawfully.

“We are excited to expand consumer protections for millions of renters across the five boroughs,” Vasquez Sanchez said.

The Real Estate Board of New York has also prepared its landlord and broker members for the measure to take effect, in spite of its lawsuit.

A spokesperson referred Gothamist to an email and fact sheet the organization sent members earlier this month. They advise brokers and landlords to list all fees associated with an apartment to avoid penalties. They also recommend brokers “ensure they have the landlord’s permission and authority to publish a rental listing to avoid unnecessary disputes with the landlord.”