NYC outlines fines for violating broker fee ban amid legal fight

New York City is getting ready to implement a broad new regulation designed to eliminate most residential broker fees, with proposed fines reaching up to $2,000 per violation. The Department of Consumer and Worker Protection (DCWP) of the city recently unveiled suggested penalties to support the Fairness in Apartment Rental Expenses Act, as reported by Gothamist on Monday. These regulations are expected to take effect on June 11.

The law, which was passed by the New York City Council last year, prohibits landlords and real estate agents from charging potential tenants for broker services unless the tenant has specifically hired the broker. According to the proposal, landlords or brokers who charge a tenant without a prior agreement may face fines of $750 for a first offense, $1,800 for a second offense, and $2,000 for subsequent violations. Additional penalties include a $750 fine for not clearly disclosing all tenant fees in listings and a $375 fine for failing to provide an itemized list of charges.

City Councilmember Chi Ossé of Brooklyn, the sponsor of the law, stated that the penalties are fair and stressed that violators must refund any improperly collected fees. Ossé mentioned that the fines set by the law are reasonable and can be easily avoided by refraining from charging a tenant for a broker they did not hire.

The usage of housing websites and apps has led to a reduction in renters relying on brokers, as apartment listings are now easily accessible with a few clicks. Many find it unreasonable to pay a high fee, sometimes up to 15% of the annual rent, or $4,500 for a $2,500 unit, to someone who ultimately serves the landlord’s interests, as reported by The New York Times. The article also notes that few places outside New York City have a similar broker fee structure, which can add up to total costs exceeding $10,000 when searching for a new apartment.

The DCWP is planning to hold a public hearing on the proposed regulations on May 14, following which the penalties could be confirmed. However, the rollout of the law might be postponed due to a legal challenge in federal court from the city’s real estate lobby. The Real Estate Board of New York (REBNY) and several brokerage firms filed a lawsuit in December seeking to prevent the law, shortly after it was passed with strong support.

New York Governor Kathy Hochul has expressed her backing for a ban on broker fees, stating that the courts should rule in favor of the city and that broker fees should be permanently abolished. In January, Hochul announced a settlement with City Wide Apartments Inc., a Manhattan-based brokerage, after a state investigation revealed that the firm had charged excessive broker fees, including one case where tenants were billed over $20,000 in additional charges. As part of the settlement, City Wide Apartments agreed to pay $260,000 in penalties and restitution, which includes a $50,000 civil fine and $210,000 in repayments to affected renters.