It’s been a month since the law ending forced broker fees took effect, and the rental market these days feels, well, weird.
Photo-Illustration: Curbed; Photo: Getty
Alex, a freelancer who works in film and television, thought the no-fee one-bedroom in Sunnyside he found on StreetEasy seemed promising. But when he finally toured it in late June, he noticed all the windows looked at walls. He asked the broker showing him the place if he had anything else available, ideally with an actual view. Well, there was another apartment upstairs, the broker said. But if he wanted to see it, “you have to hire me.” Alex wasn’t sure what to say, so he just hired him. He ended up paying that broker around $4,000 to secure the lease on a $2,500-a-month rent-stabilized one-bedroom with better views. He likes the apartment, but left the experience with what seems to be the prevailing mood in the current market: Am I getting played right now?
It’s been a month since the law ending forced broker fees took effect, and trying to find an apartment has gotten a little … weird. Questions abound about the aftershock: Are rents higher than usual because of the FARE Act or high because, well, they are always high? (So far, it seems like there have been no major cost spikes from the new law.) Is this listing real or just a decoy? Even agents seem a little uncertain about what they can or can’t do. Everyone is a little on edge. “It’s more shady now,” one broker tells me.
As written, the FARE Act is straightforward: Agents representing landlords can’t pass their fees to the tenant. (And those fees were significant: After the first month’s rent and a security deposit and the broker’s fee, tenants were paying on average nearly $13,000 up front.) But there isn’t exactly a script for how this is all supposed to go down, which can make things confusing.
So people seem to be riffing. According to the broker who feels like the market has a scammier vibe right now, landlords have told her about vacancies they have coming up — except they don’t want to hire her to show the apartments. “I’m like, ‘Okay, like, are you paying broker fees for this?’” she explains. “And they’re like ‘no.’” So what are brokers left to do? Well, that’s up to them. Maybe they’ve already been hired by someone looking for an apartment and can just take that client to the listing if it fits their criteria. Or, maybe they meet someone like Alex and dangle the prospect of other listings during a showing as a way to entice them into paying them. “I’m like, ‘Well, I have some available off-market that I can’t advertise because of the FARE Act,’” the broker says, “‘so if you want me to show these units, I have to represent you.’”
Some apartment searchers have encountered listings with exorbitant first-month rents that are clearly just a repackaged broker’s fee. “This one is a bit ridiculous,” a user wrote about a listing asking for $5,040 for the first month’s rent on what is clearly an $1,800-a-month lease. Another real-estate agent tells me that he’s had some tenants offer to pay the broker’s fee in exchange for reduced rents, since some landlords jacked up their asking prices after the new law went into effect. (It may not surprise you to learn that in a number of cases, it’s the parents of these young renters doing the negotiating for them.) With a Flatiron three-bedroom, the rent was brought down from $10,700 to $9,500 after the tenants’ parents stepped in and offered to cover the fee. “And then the fee was reduced!” the broker tells me, explaining he only pocketed $7,500 off the deal. “I wanted to stay in favor with the owner,” he adds.
How much of this is legal? Well, it depends. Some complaints are more clear cut than others, like new multi-thousand-dollar “service” fees or even agents brazenly laying out in listings that tenants will have to pay the broker’s fee. But where things get murkier is the question of who hired whom and who knew what when. A broker who has been hired by someone looking for an apartment can talk to anyone they want to find listings — that’s what the tenant hired them to do. But if the broker is just fishing for clients, promising insider information from a landlord who didn’t hire them — well, that’s out of bounds, per Andrew Lieb, a real-estate lawyer. Put simply, a broker can’t use off-market listings shared by a landlord as a carrot to get a tenant to hire them. Michael Lanza, a spokesperson at the Department of Consumer and Worker Protection, tells me that as of July 7, the agency had received 562 complaints and questions about the new law, but no penalties have been issued yet.
And just as brokers and landlords are acting squirrelly, so are a lot of tenants. Erin Suh, a recent Cornell grad, described her apartment-search tactics as “guerrilla.” After the 21-year-old reached out about a RentHop listing for a $5,695 three-bedroom in Midtown East, the agent told her the apartment would, in fact, come with a broker’s fee — a blatant violation of the law. She said “no thanks,” then proceeded to reverse-image search the listing photo, which led her to the property owner’s name and, eventually, a phone number. After texting the landlord about the unit, she learned that no one had applied yet for the apartment, and was approved within a day of submitting an application directly. Suh moved in with two roommates at the beginning of July. “We’re happy,” she says. You don’t hear that often these days.