By Pamela Roman, Managing Broker, Station Cities, New York and New Jersey

What is the FARE Act?

The Fairness in Apartment Rental Expenses (FARE) Act is a legislative measure recently passed by the New York City Council to address the issue of who pays real estate broker fees in the city’s rental market. The passage of this Act by the Council is a first step, and the Act is not yet in effect. Read on for more specifics and details on the steps required before the Act becomes law.

The FARE Act aims to shift the responsibility of paying broker listing and finder fees from tenants to the party who hires the broker, which is typically the landlord. This would apply to any instances where the landlord is paying for an agent they have hired, but not to the co-brokering fee of other agents showing the property. The law will additionally require disclosure of the obligations and expectations of each party – landlord, tenant, and agents – regarding payment of co-broker fees.

The law as approved by the City Council addresses the responsibility for paying brokers hired by landlords; it does not change the responsibility of tenants to pay for representation from agents they have hired to represent their interests. Tenant Representation is the service offered by Dwellworks and our brokerage, Station Cities, and is described in greater detail below.

Advocates and Opponents of the FARE Act

In most markets in the US, landlords pay real estate brokers to list and market their properties. In New York City, tenants, not landlords, have historically paid these fees, equal to up to 15% of the first year’s rent, in addition to paying first month’s rent and a deposit to secure their rental housing. In a desirable area of Manhattan like Chelsea or Greenwich Village, the rent for a one-bedroom unfurnished apartment as of November 2024 was approximately $5,000.

Supporters of the FARE Act believe it is not reasonable for renters to pay the additional cost of a landlord’s broker’s commission; while REBNY, the Real Estate Board of New York, representing many New York City landlords and brokers, has stated that shifting this cost to landlords will only increase the cost of monthly rent in the country’s most expensive market. REBNY opposes the FARE Act and has stated they will “continue to pursue all options to fight against this harmful legislation on behalf of our members and the renters they serve.”

What will change under the FARE Act and when?

The FARE Act stipulates that broker fees will be the responsibility of the party who hires the broker. Specifically, the fee for the broker who exclusively represents the landlord can no longer be charged to the tenant. If the law goes into effect in 2025 as currently written, landlords will be responsible for paying the fees of brokers they hire to represent their properties. However, tenants will still be responsible for paying the fees of any brokers they hire to represent their interests as they look for apartments and negotiate with landlords. (See below.)

The act passed by the New York City Council is currently under review by New York City Mayor Eric Adams, who has 30 days to sign, amend, or veto the legislation. While the FARE Act was passed with an essentially veto-proof City Council majority of 42-8, other organizations such as REBNY are likely to contest the Act. The changes proposed in the Act would not be effective for 180 days after the mayor’s action, or by mid-May 2025, and until then, all current rental terms and broker fee arrangements are legally enforceable.

What advice is Dwellworks and Station Cities giving renters relocating to New York City?

Dwellworks and Station Cities have assisted in the moves of thousands of renters relocating for work to New York City. We are subject matter experts in New York City neighborhoods, properties, and contract terms and conditions, including broker’s fees.

The service we offer to corporate employers, relocation management companies, and relocating employees is Tenant Representation. Our 70+ agents covering all five New York City boroughs exclusively represent the interest of the tenant and are not hired by landlords to represent their properties. Our tenant broker fee has always been charged directly to the renter to ensure they receive unbiased access to every rental on the market and can consider every apartment that meets their preferences and budget. Our service and our fee structure will not be changed by the FARE Act, which applies to the payment of fees charged by real estate brokers who represent the landlord’s interests.

“We will continue to keep our customers proactively updated on any new developments and market impacts” says Andrew Horvath, Vice President, Dwellworks/Station Cities, “including potential changes to the Act and the fact that it may not be implemented as currently contemplated. We will share a detailed FAQ document to prepare our clients and their relocating employees, our rental customers, if the Act is signed into law.”

What are the likely impacts to the New York City rental market?

Apartment vacancy rates in New York City have trended below 2% for the last two years and the scarcity of inventory has kept the cost of rentals high. The city is also expected to see thousands of new apartments under development become available in the next two years, according to New York Governor Kathy Hochul.

Between increased moves into New York City, an uncertain outcome for the FARE Act, and the staged introduction of new units over the next year, we know that market conditions will be unpredictable in 2025, but the safest bet right now is to assume New York City will remain a market where demand continues to exceed supply and the need for assistance from a qualified Tenant Broker will be greater than ever.

For more information on our Rental Services and Tenant Representation in New York City, contact us at [email protected].

The information provided herein does not, and is not intended to, constitute legal advice; and is provided “as is” with no representations made that the information is error-free. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

About Dwellworks:

Dwellworks is the world’s largest provider of destination-related services and temporary living solutions for the globally mobile workforce and business travelers. We provide business-to-business solutions for Fortune 1000 and emerging companies directly and through their relocation management partners. Whether a company needs to relocate its employees across the country or around the world, we provide a range of support services to help employees and their families transition successfully from their home location to a new destination.

Dwellworks supports the diversity of our clients’ globally mobile workforce with personalized destination solutions in 16 countries, covering hundreds of major relocation markets. Dwellworks Living, our global furnished temporary living solution, offers corporate housing accommodations for relocation and business travel customers in 125 countries. Our full-service real estate brokerage, Station Cities, supports home rentals, sales, and purchases in the Tri-State New York area and Chicago. Visit our homepage, learn about our services, and read our blogs to learn how we can help with your relocation and business travel needs.

About Station Cities:

Station Cities is a full-service real estate brokerage specializing in complex markets and has helped thousands of professionals and executives successfully buy, sell, and lease in the markets of the New York Tri-State Area and Chicago. Our team of dedicated real estate professionals is fully committed to service excellence, unyielding integrity, and delivering results through hard work and innovation. We know the ins and outs of complicated real estate markets, and we know what it takes to find a home. Learn more about Station Cities by clicking here.