Landlords and brokers who charge tenants illegal broker fees could face fines starting at $750 once a landmark law restricting the payments takes effect in June, according to documents published by the city this week.
The city’s Department of Consumer and Worker Protection is taking steps to implement the Fairness in Apartment Rental Expenses Act, which passed the City Council in November and is scheduled to take effect around June 14 unless the Real Estate Board of New York prevails in its attempt to block it in court. The law requires whoever hires a broker — typically a landlord — to pay any fees the broker charges for listing an apartment, upending a system that has left tenants on the hook for costs that often approach 15% of a year’s rent.
On Monday the department published its proposed penalties for violations of the law. If a tenant is charged a fee for an apartment where the broker is representing the landlord, both the broker and the landlord would face fines starting at $750 for a first violation. That number would escalate to $1,800 for second offenses, and $2,000 for third and all subsequent violations.
The law also bars landlords and brokers from requiring tenants to use a specific real estate agent; violations would result in a $750 initial fine, escalating to $2,000 for third and subsequent offenses. Identical fines would apply for landlords or brokers who advertise fees in a rental listing in violation of the new law.
The FARE Act also requires landlords and brokers to disclose any other potential tenant costs “in a clear and conspicuous manner,” and states that those fees must be itemized and disclosed in writing by the landlord or broker. Violations would result in slightly smaller fines — starting at $375 and maxing out at $1,000.
Although the text of the FARE Act already set those maximum fines into law, some of the specifics, such as the starting dollar amount for a first violation, had been left up to Consumer and Worker Protection to set through the city’s rulemaking process. The proposed penalties will be subject to public comment and finalized after a May 14 hearing.
REBNY spokesman Chris Santarelli said in a statement: “Consideration of penalties related to the FARE Act is premature when the constitutionality of the law is being reviewed in federal court.”
That lawsuit, filed in December in Manhattan federal court by REBNY and several brokerage firms, makes three main arguments against the FARE Act: first, that the law violates brokers’ First Amendment free speech rights by deterring them from posting “open listings” — properties where they were not exclusively hired by the landlord; and second, that it violates the Constitution’s Contract Clause by voiding existing agreements in which landlords expect brokers to collect fees from tenants.
Finally, the suit claims the city is exceeding its authority by regulating broker fees, because brokers are typically governed by state rules. But that argument was undermined last month when Gov. Kathy Hochul and state Attorney General Letitia James filed court papers rejecting REBNY’s claims, stating instead that the city had every right to change how broker fees are paid.
