New York City Landlords Now Pay 12-15% Broker Fees

In a significant shift for the New York City rental market, landlords are now prohibited from requiring tenants to pay broker fees. This change, implemented through the FARE Act, mandates that landlords, rather than tenants, cover the costs associated with broker services. Typically, these fees amount to 12–15% of the annual rent, which translates to substantial savings for renters, averaging around $5,400 upfront.

Before the FARE Act, landlords could hire brokers for their properties and pass on the cost to future tenants. This practice was common in New York City, with broker fees averaging around 12% to 15% of the annual rent of the listing. This meant that with the first month’s rent, security deposit, and broker fees, the amount due at signing in New York City averaged $13,000. With the new legislation, this average drops to about $7,500 without broker fees.

The FARE Act specifically targets the practice where property managers or landlords would previously pass on broker fees to tenants. This new legislation ensures that brokers representing landlords can no longer charge tenants for their services. The shift in financial responsibility is expected to have a ripple effect on the rental market. Landlords, now bearing the cost of broker fees, may adjust their rental prices to recoup these expenses. This adjustment could lead to higher rents, as landlords factor in the additional costs when setting their rental rates.

The impact of this change is multifaceted. For tenants, the immediate benefit is clear: they no longer face the burden of paying hefty broker fees upfront. This financial relief can be particularly significant for those on tighter budgets, making the rental market more accessible. However, the long-term effects on rental prices remain to be seen. Landlords, who must now absorb the cost of broker fees, may increase rents to maintain their profit margins. This could potentially offset some of the initial savings for tenants, depending on how landlords adjust their pricing strategies.

The FARE Act represents a significant victory for tenant rights advocates, who have long argued that the practice of passing broker fees to tenants was unfair and financially burdensome. By shifting the cost to landlords, the legislation aims to create a more equitable rental market. However, the full extent of its impact will only become apparent over time, as landlords and tenants navigate the new financial landscape. The change underscores the ongoing efforts to reform the rental market and ensure that tenants are not unduly burdened by additional costs.