Whether you’re refining your business model, mastering new technology, or finding a strategy to take advantage of the next market boom, Inman Connect New York prepares you to take a bold step. The next chapter is about to begin. Please join us. Join us and thousands of other real estate leaders from January 22-24, 2025.
Three days after New York City’s Fair Apartment Rental Expenses (FARE) Act was signed into law without Mayor Eric Adams’ signature, the Real Estate Board of New York (REBNY) filed a lawsuit to block the law from taking effect in June 2025. I woke you up.
New York State Association of Realtors, Bohemia Real Estate Group, Bond New York Real Estate Corp., Real New York, Rebel Group, Four Corners Realty, 21 West 74 Corp., 8 West 119th Street Housing Development Fund Corporation joined the lawsuit. According to court documents, co-plaintiffs.
The lawsuit argues that the FARE Act, which requires rental property owners to pay agent fees when renting property to agents, is “constitutionally flawed” and protects commercial free speech rights and has already caused harm. They argue that New York state law governing compensation is preempted. Real estate brokers and salespeople.
The lawsuit also claims that the FARE Act violates the Contracts Clause of the U.S. Constitution because brokers and landlords cannot enter into existing listing agreements that require brokers to negotiate and receive compensation from tenants.
Carl Ham |Credit: REBNY
“The FARE Act is bad policy and bad law,” REBNY General Counsel Carl Hamm said in an emailed statement. “This law not only raises rents and makes it harder for tenants to find housing, but also violates constitutional free speech and contract rights, as well as New York state law. I’m looking forward to the day.”
The lawsuit argues that the FARE Act disrupts New York City’s rental market, which has relied on a two-tier system of exclusive listings and public listings.
For exclusive listings, landlords hire agents to market and rent their units. A landlord can choose to compensate the broker who sells the property as “free” to the tenant, or the landlord can instruct the broker to negotiate and receive compensation from the tenant.
With open listings, homeowners submit listings to brokers for promotional purposes only. There is no need for landlords and agents to sign an exclusive listing agreement, as the agent’s only responsibility is to distribute the property on their own website or third-party sites such as StreetEasy. Interested renters can contact an agent to view the property and negotiate compensation if they decide to move forward with a lease.
The complaint goes on to say that about half of New York City’s rental inventory is already free. However, a free apartment is not automatically cheaper than a property with tenant fees.
“The same apartment may be advertised as a “paid” or “free” apartment. In fact, a ‘paid’ apartment (paid by the tenant) could be listed for $2,700 per month, while the same apartment advertised as ‘free’ to tenants could be listed for $3,000 per month. ,” court documents state. “A higher base rent means that tenants are more likely to pay over the course of their tenancy than if they had just paid the initial brokerage fee when they signed the apartment lease.”
“The Fare Act targets tenant-paying or fee-paying apartments, which make up the other half of the rental market,” it added. “Tenant-paid apartments are more likely to be owned by smaller landlords and have lower rents. The current system has evolved to accommodate the different needs of landlords and tenants.”
Chi Ose |Credit: X
New York City Councilman Chi Ose, who introduced the bill, said REBNY’s lawsuit is a final attempt to overturn the City Council’s decision (which passed FARE by a vote of 42-8) and the wishes of New Yorkers who have long complained. He said that. Exorbitant housing costs.
“This lawsuit is a last desperate attempt by the real estate lobby to undermine the voice of city residents and maintain unreasonable practices disapproved of by nearly every other large city in the country,” Osse said. he told Brick Underground on Tuesday.
REBNY’s lawsuit is the latest chapter in a nearly two-year battle over FARE. Osse originally introduced FARE in 2023, but was unable to gain enough legislative support to hold public hearings. But when Osse reintroduced the bill in February, he gained 31 co-sponsors and received support from tenant and housing advocates who say the fare law is needed to improve affordability. gained significant support.
When Inman dug deeper into FARE in June, New York City rents had hit a near-record median of $3,600. Renters who rent a median-priced unit in June will pay $7,200 upfront for the first month’s rent and security deposit. If you rent a room with a brokerage fee, you can expect to pay 10 to 15 percent of your annual rent, or the equivalent of one month’s rent, and upfront costs can easily climb into five figures.
“The cost should be borne by the party purchasing or contracting for the goods or services,” Osse, who represents the Borough of Brooklyn, told Gothamist in June. “This is true for every other transaction across our vast economy, and it should be just as true for rentals in New York City. The FARE Act would alleviate exorbitant upfront costs for workers and families looking for a new home.” It has the potential to.”
“If you need a broker, that’s the best option. Hire them. And if you don’t want that, my bill says you don’t have to pay,” he said. added.
REBNY led a rally of 1,500 people this summer to halt FARE’s momentum, arguing that the law would lead to increased costs for tenants over the life of their leases.
“That’s going to be a problem for people who decide to renew their leases every year,” REBNY told Inman. “If your base rent is higher for the first year of living in an apartment, it is effectively amortized over time, because typically in New York City, when you renew, your rent is increased by, say, 5 times. Because the price will go up” percent. “
“So if you already have a high base rent for the first year, for many people you will probably end up paying more annually rather than paying a one-off fee up front, especially if you are paying for an apartment for many years. If you continue your stay, you can benefit from it,” the association added.
James Whelan |Credit: LinkedIn
When the council passed the law in November, REBNY President James Whelan told Inman the association would fight its enforcement.
“Wednesday’s vote is yet another example of prioritizing ideology over economic and practical reality when it comes to the city’s rental housing stock,” Whelan said in an emailed statement. “The Fare Act will make it harder for tenants to find housing, increase rents, and make hard work harder for real estate agents.”
It added: “REBNY will continue to pursue all options to fight this harmful law on behalf of our members and the renters they serve.”
As the case progresses to New York District Court, REBNY may have a friend in Mayor Adams who opposes FARE.
“Once this impacts New Yorkers’ rent prices, it will determine whether my concerns were justified,” Adams said at a Dec. 3 news conference. “Not only am I a small property owner, I’ve also been a real estate agent, so I know what it’s like to pass costs on to building owners.”
Read the full lawsuit below.
Email Marian McPherson
