Earlier this week, the New York City Council passed the Fairness in Apartment Rental Expenses Act (FARE Act), which prohibits residential landlords’ real estate brokers from collecting their fees from incoming tenants. Brokers will be prohibited from passing fees onto tenants where the broker is exclusively representing the landlord’s interests. Such prohibition also includes the publishing of residential listings with the landlord’s permission. The Act creates a rebuttable presumption that any agent who publishes a residential listing does so with the landlord’s permission, thereby subjecting landlords to violations committed by their third party agents. The Act does not apply, however, to: (1) commercial tenants; (2) the sale of cooperative apartments conveyed pursuant to a proprietary lease; or (3) residential tenants who have independently contracted with a broker to represent the tenant’s interests.
Residential landlords and their agents are further required to disclose, both in all listings and leases, all fees that the tenant is required to pay. The tenant shall sign the itemized fee disclosure prior to signing a lease. The landlord shall provide the tenant with a copy of the signed disclosure and shall also retain copies of the disclosures for a three-year period.
The New York City Department of Consumer and Worker Protection (Department) is charged with enforcement of the FARE Act, including the imposition of civil penalties for violations. Fines for violations of the fee mandates of the Act extend up to $1,000 for the first violation and up to $2,000 for each subsequent infraction within two years. Violations for landlords’ breach of the disclosure and record-keeping components of the Act will result in a $500 fine, then $1,000 for repeat offenses within two years. The Act further provides the Department with authority to impose orders requiring restitution of fees unlawfully charged to a tenant, and creates a private right of action for any court of competent jurisdiction to award a tenant compensatory, injunctive and/or declaratory relief.
Notably, the FARE Act was approved by the City Council with an overwhelming, veto-proof majority. This outcome would seemingly render moot whether Mayor Eric Adams decides to veto the bill, although it remains to be seen whether any changes to the Act will be implemented prior to enactment into law. The Mayor has expressed outward concern about how the Act might affect the real estate market and small property owners in particular.
The FARE Act will take effect 180 days after it is enacted in to law, likely sometime in the spring of 2025. Tenant advocates have argued that by eliminating this substantial upfront broker fee to tenants, typically between 8.3%-15% of the first year’s annual rent, tenants will receive additional leverage in lease renewal negotiations with their landlords. Landlord advocates have argued, on the other hand, that the shifting of such fees will only result in landlords increasing rents to absorb these costs, and will result in tenants paying even more rent over the lifetime of their tenancies. If you have any questions, please feel free to contact your trusted R&E attorney or Adam Lindenbaum, Member of the firm’s Litigation Department, who authored the above industry update.
