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The "New" NYC Broker Fee Law: What You Need to Know

Rob Whiting
Boom Team

Understanding your renter’s rights in New York City is one of the most important things you should do if you are planning to rent a unit. Knowing your rights and responsibilities as a tenant protects you from liability, and it can save you money when it comes to fees.

In particular, broker’s fees.

Using a broker in NYC is nothing new, and both tenants and landlords have been known to use brokers to help streamline apartment rental transactions. They can facilitate communication as well as help with getting any necessary paperwork such as legal and financial documents.

Typically, broker fees in NYC will amount to around 8% of the total annual rent, or around 1 month’s rent.

Currency, broker’s fees are being paid by the tenants, whether or not they were the ones who hired the brokers. This practice is seen as harmful to renters, and is decried by NYC renters and by tenant activist groups.

The Curious Case of NYC Broker’s Fees

Obviously, renters and tenant activist groups believe that brokers' fees should not be shouldered by the renters if they did not hire the brokers. If the broker was hired by the potential renter to help them find a suitable apartment, obviously they should be the ones to pay the fees.

However, this is not necessarily the case when it is the landlord who hires the broker to help them find suitable tenants.

Back in February 2020, state lawmakers in New York passed new rent laws to help protect NYC renters. One of the provisions stated that landlords were no longer allowed to charge broker’s fees to their tenants if the landlord was the one to hire the broker. Before the new renter’s rights laws were passed, it was common practice for landlords to pass the cost of hiring a broker to their tenants.

Then, a mere four days later, an Albany County judge ruled against the new “broker fees” regulation and temporarily blocked it, causing even more confusion in the apartment rental community.

In the confusion, some unscrupulous landlords took advantage of vulnerable tenants. According to the New York Times, there were reports of landlords charging beyond the $20 cap for application fees, as well as demanding a security deposit worth more than a single month’s rent.

Even during the brief window when the new ruling was in effect, brokers and landlords were said to employ arguably shady tactics, such as claiming that it was not a legal ruling or that the ruling did not apply to leases that are less than a year long.

The Current State of Broker’s Fees in NYC

After months of dispute, the New York Supreme Court finally handed down a verdict.

In a nutshell, the broker’s fee ruling ultimately retained the status quo: landlords are free to pass on the cost of hiring a broker to their tenants. In the decision, it was decided that under New York law, the ban on tenants paying additional fees only applied to fees that are required as negotiations for entry into a lease agreement, such as application fees, credit check fees, and background check fees. However, broker’s fees are not covered by this definition.

The Supreme Court’s decision was welcomed by the Real Estate Board of New York, but it has left tenants and tenant activist groups unhappy.

One such group is the Tenants Political Action Committee, whose members believe that excessive broker’s fees are “nothing short of extortion”, and that landlords who hire brokers should be the ones who shoulder their fees.

It is possible that this group or even the Department of State may appeal the decision.

What Should You Do?

Considering that this issue seems to be far from being resolved, there’s a possibility that it can go either way. The broker’s fee verdict can be overturned on appeal, or it can be upheld by the NY Supreme Court.

What can you do in the meantime?

As a renter, the best thing you can do in the meantime is simply to keep updated with the issue. As evidenced by the events during the first few months in 2020, regulations can turn on a dime.

If you’re comfortable with paying for broker’s fees, then you will probably have an easier time finding a rental in New York. However, you should keep in mind that paying broker’s fees can add a hefty amount to your costs, especially if you factor in your security deposit and your advanced payment.

Can you afford to pay the equivalent of at least three month’s rent in one go?

If you think that the amount is too big, then you probably want to avoid broker fees. This means that you need to look for no-fee apartments. 

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