NYC defends broker fee law against 'unpersuasive' REBNY lawsuit in court
- NYC’s legal counsel responded to a suit challenging the FARE Act, which requires a landlord pay their broker
- In December, the Real Estate Board of New York sued to block the act from going into effect in mid-June
The New York City Council passed the Fairness in Apartment Rental Expenses (FARE) Act in November.
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New York City’s legal counsel pushed back against a lawsuit challenging the city’s new broker fee law in a court filing on Friday, calling for the suit to be thrown out.
The city argued that the law—which shifts the burden of paying broker fees from renters to landlords—reduces a “significant barrier” renters face when trying to rent an apartment. In December, the Real Estate Board of New York (REBNY) sued to block the law from going into effect in June, claiming it was unconstitutional.
“While the reasons for the legislation are substantial, they are also compelling, because the large upfront fees for tenants who did not retain a broker are a significant barrier to moving or entering the rental market,” the city’s court filing said.
The city’s response comes after Neighbors Together Corporation—a Brooklyn-based nonprofit that helps low-income New Yorkers find housing—moved to join the case in support of the FARE Act.
The organization argues that broker fees are an obstacle to low-income renters who struggle to afford housing. Renters should be given a choice as to whether to use a broker or not, said Even Henley, a staff attorney at the Legal Aid Society representing Neighborhoods Together.
Getting up to speed on the broker fee law
The Fairness in Apartment Rental Expenses (FARE) Act, introduced by City Council member Chi Ossé, requires a landlord who hires a broker to market their apartment pay for that broker's services, or face civil penalties of up to $2,000. Typically, a NYC renter will pay a 10 to 15 percent broker fee, even if they didn’t hire the broker themselves.
Ossé first introduced the legislation in 2023, and after a long campaign, the City Council passed it in November and the act entered into law on Dec. 14th. But two days later, REBNY filed a lawsuit to block the FARE Act from taking effect in mid-June this year.
In the suit, the trade association made three main arguments: that the FARE Act violates brokers’ first amendment rights, goes against the contract’s clause of the constitution, and that the state—not the city—should be the entity regulating brokers.
“This legislation will not only raise rents and make it harder for tenants to find housing but it also infringes upon constitutional guarantees of free speech and contract rights, as well as New York State law,” said Carl Hum, REBNY’s general counsel and senior vice president, in a December statement.
REBNY did not immediately respond to a request for comment. A spokesperson for the city’s law department declined to comment, and a spokesperson for Ossé declined to comment—citing the ongoing litigation.
How did the city respond?
REBNY claimed that the FARE Act violates a broker’s first amendment right to publish an open listing—where multiple agents advertise an apartment. (Platforms such as StreetEasy and Zillow prohibit these posts.)
But in court documents filed Friday, the city argued that the FARE Act regulates brokers’ behavior—not their speech—and that all it does is prohibit a broker from advertising an illegal transaction: one where the renter has to pay for a landlord’s broker.
In other words, the law doesn’t violate free speech; it prohibits “false advertising,” Roderick Hills, a law professor at New York University’s School of Law, told Brick Underground in January. After reviewing the city’s response on Monday, Hills said it “hits the basic comebacks, all of which are obvious and correct.”
The city also argued that brokers can still publish open listings. Those brokers will just have to negotiate their fee with the landlord—rather than trying to get the renter to pay.
“Landlords will still need to find tenants to rent their properties, so it is unlikely that open listings will disappear, whether landlords [choose] to retain and pay brokers or post listings themselves,” read the city’s filing.
Next, the city argued that REBNY and its co-plaintiffs—which include several NYC brokerage firms—haven’t adequately proven that their contracts with landlords would be impacted by the FARE Act. Plus, according to the city, it’s unreasonable to expect a renter to pay for a contract they didn’t sign on to.
“It was not a ‘reasonable expectation’ that landlords and brokers could contract amongst themselves to require the tenant to pay the fee arising out of that contract,” the filing read.
Lastly, the city argued that state law doesn’t prevent NYC from regulating brokers, because it says New York State’s Real Property Law doesn’t address the issue of who pays a broker’s fee. REBNY has argued that because state law covers advertising, licensing, and with whom brokers can split commissions, the state should be charged with regulating fees.
What does this all mean for renters?
REBNY’s lawsuit seeks to stop the FARE Act from being enforced in mid-June. That’s only four months away, putting some pressure on the court to move quickly, attorney Ben Flavin, a partner at Braverman Greenspun who represents condos and co-ops, told Brick Underground in January.
Hill said he was confident REBNY would lose its case, calling it, “little more than a Hail Mary nuisance suit,” in a text to Brick Underground on Friday. “This is an easy case for the city,” Hills added.
But if the case did drag on, Flavin expected REBNY to try to delay the enforcement of the FARE Act.
In the meantime, renters should still expect to be on the hook for a broker fee of around 10 to 15 percent of the annual rent. And renters should know that fees are always negotiable—though in practice, apartment hunters don’t always have a lot of leverage to secure a lower fee. That’s one of the reasons the city has argued the FARE Act should be enforced.
“Due to industry norms and the highly competitive nature of the rental market, even where brokers’ fees are ‘negotiable,’ the negotiating power of prospective tenants is severely limited,” the filing reads.
