What is the FARE Act NYC? A Comprehensive Guide for Renters
A major shift is coming to New York City’s rental landscape with the passage of the Fairness in Apartment Rental Expenses (FARE) Act. Let’s break down the FARE Act, it’s impact on landlords and tenants, the controversy around the legislation, and how this law might shape the NYC rental market.
What is the FARE Act in NYC?
The Fairness in Apartment Rental Expenses (FARE) Act is a groundbreaking piece of legislation in New York City aimed at addressing the financial burden of broker fees on tenants in New York City. It mandates that whoever hires the broker pays the broker. So If a landlord hires a broker to list and show their apartment, then the landlord will pay the fee, not the renter.
Other important definitions:
Broker Fees: Broker fees are the payments made to real estate agents for their involvement in a rental transaction. Brokers can be hired by either the landlord or the tenant - but in New York City, they are mostly hired by landlords to advertise properties, perform showings and screen tenants. The fees associated with these services are typically 12-15% of the annual rent, and have historically been paid for by the renter.
What Does the FARE Act NYC Change?
No Broker Fees for Tenants (When Hired by Landlords): This law prohibits landlord’s from passing on their broker’s fees to tenants. Broker fees have typically been the responsibility of the renter — even if the landlord was the one who hired the real estate agent to list the apartment. According to Section 20-699.21 of the Act, landlord’s agents cannot charge tenants any fees associated with renting the property.
These fees could add up to thousands of dollars of additional upfront costs when moving into a new rental, creating a major financial hurdle for many. If a landlord engages a broker to market their property, for instance, the landlord must cover the broker’s fee.
Transparency on All Fees: The law also introduces a fee disclosure requirement. Landlords must provide a clear, itemized list of any additional fees tenants may owe before they sign a lease. Agents are required to hold onto this signed disclosure for three years for accountability.
Restrictions on “Dual Agents”: The Act prohibits landlords from requiring tenants to use a specific agent, such as a dual agent who may represent both parties. This provision aims to give tenants more freedom in agent choice, removing potential conflicts of interest.
Penalties for Non-Compliance: Landlords and agents who violate these rules could face penalties starting at $1,000, with higher fines for repeat violations. Additionally, tenants can pursue civil action if they believe they were wrongly charged fees.
Timeline to go into effect
This law will take effect 180 days after the mayor either signs it into law or allows it to pass without signature. The NYC real estate industry, represented by the Real Estate Board of New York (REBNY), has hinted at possible legal challenges, stating that the law prioritizes ideology over practical economic considerations. REBNY has argued that the Act might make it harder for tenants to find housing if landlords adjust their rental terms.
To ease the transition, the NYC Council has outlined an educational campaign to help both renters and landlords understand the new requirements. For tenants, the Act may create a more accessible, straightforward path to renting in NYC. However, the potential for increased rents and economic pressures on landlords and brokers suggests a need to monitor the long-term effects.
The Significance of the FARE Act NYC
The act represents a significant shift in NYC's rental policies, reflecting broader efforts to make housing more accessible and equitable while reducing financial barriers for tenants. It is designed to ensure greater equity and transparency in the rental market. Its central focus is on redefining how broker fees are handled, shifting the financial responsibility from tenants to landlords in most rental transactions.
Controversy around the law
This act passed by a decisive 42-8 vote in the NYC Council on November 13th, 2024. However, as with any major policy change, it has sparked debate over its potential implications for landlords, brokers, and the overall housing market in the city. This legislation has garnered strong opinions on both sides, with renters’ advocates and real estate industry leaders debating its potential impacts.
Those who Support the Law Say…
Fewer Financial Barriers for Renters: By shifting the burden of broker fees to landlords, renters may save thousands of dollars upfront, making NYC’s already costly rental market more accessible. For tenants, especially in lower-income brackets, this can provide much-needed relief.
More Landlord/Broker Accountability and Transparency: The law’s requirement for fee transparency will make it harder for landlords to impose hidden charges. The itemized disclosure helps renters understand all costs associated with a lease upfront, reducing surprises and increasing trust in the rental process.
New York City’s Rental Procedures will be more Similar to Rentals in Other States: NYC has long stood out for requiring tenants to cover broker fees, even though brokers are typically hired by landlords. Supporters argue that this legislation aligns NYC’s rental market with national practices, as most other cities do not pass these fees onto tenants.
Rent-Stabilized Units will be More Accessible: Nearly half of NYC rental units are rent-stabilized, where landlords cannot simply increase rents as they please. In these cases, the Act ensures tenants won’t face unexpected broker fees that are inconsistent with the affordability objectives of rent stabilized units.
Those who Support the Act Say.
Rents will Increase: Critics argue that landlords might offset the cost of broker fees by raising monthly rents, turning a one-time fee into a recurring cost. While this would be restricted for rent-stabilized units, opponents worry that in market-rate apartments, landlords may bake these fees into rent, leading to overall higher housing costs in the city.
Small Landlords will Face Financial-Burden: Small landlords who rely on brokers to fill vacancies may feel the squeeze from added financial responsibilities. For those operating on tight margins, the law could make it more challenging to cover expenses, potentially affecting the long-term availability of affordable rental units.
It will be Harder for Renters to Find Apartments: The significant cost of advertising a rental unit has traditionally been borne by the rental agents and their brokerages. With the passage of this bill, many landlords, especially smaller ones, may opt not to hire a broker to save on costs. With no one to lay out the upfront advertising money, tenants may find many listings disappear from large listing services like StreetEasy. Likely this will lead to an increase in the number of tenant’s agents hired - as they will be the only ones aware of what is currently on the market.
Less Work will be Available for Real Estate Agents: Real estate groups and brokers have expressed concern about income stability under the new law. If landlords, who now bear the costs, negotiate lower fees with brokers, it may reduce broker income. This could potentially lead to decreased services or fewer resources allocated to rental listings.
Negative Impact on the Housing Market: The NYC market is complex and highly competitive. While the law aims to protect renters, some argue that it could have unintended economic impacts. Mayor Eric Adams voiced concerns that adding costs for landlords might discourage property investment, potentially impacting NYC’s already tight housing supply.
Know Your Rights and Responsibilities
The FARE Act NYC is a landmark change with potential benefits for renters, but it’s not without controversy. The law’s success in achieving greater affordability and transparency will depend on how landlords and brokers adapt to these new rules and whether unintended consequences arise.
As always, staying informed and understanding your rights and obligations as a renter will be key in navigating the NYC rental market. Whether you’re an existing tenant or preparing to move, keep an eye on this legislation and its impact on rent, fees, and overall affordability.
Don’t Pay more than you have to
If you’re on your journey to renting a unit in New York, I’d love to help guide you through the process. My name is Kristen Shaker, and I’m a licensed Real Estate Salesperson in New York City. Whether you’re just starting your search or ready to make a move, you can contact me to get started here. Let’s find your dream apartment! And don’t forget to download my FREE Guide on how to save money on your next rental — it’s packed with valuable insights and tips to help you make the best decision for your future.
