Photo: Yuki Iwamura/Bloomberg/Getty Images
In the months since the City Council passed a bill making it illegal for a broker hired by the landlord to charge the tenant a fee, everyone’s been watching to see if it will actually go into effect in June. (There’s a REBNY lawsuit trying to stop it.) But this week, we got a glimpse of what it might look like in practice when Crain’s reported what fines brokers who charge illegal fees would have to pay. Except they seem kind of low?
The broker’s fee, as anyone who’s recently moved in the city can tell you, always ends up being a kind of shockingly high amount. The standard is 12 to 15 percent of the annual rent, so a person signing a lease on a $3,049-a-month apartment in Clinton Hill — the median asking rent for a Brooklyn one-bedroom — will have to pony up somewhere in the neighborhood of $5,488. The heftiness of that expense likely went a long way to creating widespread support for the broker-fee bill among tenants in the first place. (And vocal opposition among brokers who didn’t want to lose their fees — no one seems to think landlords will pay anywhere near that.)
For tenants, it’s a welcome shift: The up-front cost of moving apartments will go down considerably, and they won’t have to pay thousands of dollars to a broker who’s actually working on behalf of their landlord. But $750 fines — $1,800 for a second offense, $2,000 for a third and each subsequent offense (a maximum set in the law itself) — are far less than any actual broker’s fee. And sure, brokers would, presumably, have to hand back the fees they illegally collected on top of the fine, but it’s not much of a deterrent.
There are also fees for landlords who require tenants to use a specific real-estate broker or for advertising fees in the rental listing, but they’re set at the same level. Not that brokers, or their advocates, are openly expressing any relief. A spokesperson for REBNY, which is suing on the grounds that the law violates brokers’ free-speech rights, among other things, told Crain’s that “consideration of penalties related to the FARE Act is premature when the constitutionality of the law is being reviewed in federal court.”