If you’ve found yourself here, you know NYC’s rental market is as competitive as a rental market can get. And in most competitive rental markets, tenants usually end up dealing with middlemen known as brokers. Apartments in New York have known the broker’s fee for a long time. The pandemic caused shifts in the rental market of 2020. And the consequences were felt by anyone dealing with renting in NYC.
What is the standard broker’s fee in NYC?
Brokers in NYC have near-absolute control over apartment listings, viewing appointments, and leases. In return for their services, broker’s fees in NYC can be as much as 15% on the annual lease. This is typically paid in one lump sum by tenants before they can move in.
With the pandemic changing things, CNBC reported that the prices to rent and buy property in NYC dropped so much that younger renters were found returning to the area.
However, low rent prices quickly turned into high broker fees. It’s also important to note that NYC is one of the few cities in the country with a broker industry. And it’s one of the few cities that has financial leverage over how people rent apartments.
Brokers used the new surge in renters to their advantage and started charging high fees. Earlier this year, charging a broker’s fee was banned in the city, but it was a temporary ban.
Is the broker’s fee in NYC legal?
In early February of 2020, the New York State effectively eliminated broker’s fees. NYC state regulators said renters can no longer be charged broker fees. With the elimination of broker fees in NYC, the state of New York holds an extreme potential to become one of the most favorable rent locations in all of the US.
This new rule, buried in legal guidance on last year’s rent laws, caught lawmakers, many landlords, and brokers off guard. But it’s safe to say that the tenant advocates cheered the new broker fee rule. Mostly because it helps tilt an uneven real estate playing field.
Why was the broker fee in NYC eliminated?
This new law was primarily aimed at protecting tenants and strengthening rent regulations. It mentions that tenants can be charged no more than $20 in fees when applying for an apartment, including background and credit checks. Previous rent laws have also capped security deposits at one month’s rent, further diminishing the lump sum amount renters typically must pay before being given keys to an apartment.
However, it’s important to note that the burden for broker fees in NYC falls directly on the landlords. Or they can choose to list, market, and lease their units on their own. The changes could effectively turn New York’s rental market into a no-fee market. That is if renters choose to hunt for an apartment without hiring a broker.
Where does the banning of broker’s fees in NYC stand today?
Much to our dismay, banning broker fees in NYC has proved to be a slow process, and experts believe it’s going to take much longer.
There’s a temporary restraining order that blocks the new guidance on renting in NYC from taking effect, so if you’re in the process of renting an apartment, you’ll still have to pay the broker’s fee. A tenant would also have to pay the fee if they, rather than the landlord, hired a broker to help them find an apartment.
Now that there’s a legal challenge to the ruling—do I have to pay the broker’s fee or not?
While the court process grinds along, the real estate market has changed significantly. And with rents dropping and working tenants harder to come by, broker fees — are at least for now — becoming scarce in areas like Manhattan. However, in other parts of the city, like Astoria, Queens, most of the listings are still asking for a fee.
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