New Yorkers no longer have to pay a broker’s fee when renting an apartment

New York state banned landlords from forcing renters to pay hefty broker’s fees in a legal decision that could upend real estate in America’s biggest city.

Broker’s fees are a familiar source of distress to anyone who has tried to rent an apartment in New York City. Prospective tenants are often required by the landlord to work with a broker, who helps negotiate and facilitate the deal — and charges an unavoidable fee.

That one-time fee can be anywhere from one-month’s rent to as high as 15% of the annual rent, which in New York translates to thousands of dollars. Renters also generally have to pay a security deposit, application fee, credit check fee and first month’s rent upfront, which all combine to make living in New York prohibitively expensive for many.

But that broker’s fee is no more. The change was buried in a legal guidance prepared by the New York Department of State that analyzed last year’s sweeping laws strengthening tenant protections.

“A resident could hire a broker to help them in their search, or the landlord can pay for broker’s fees, but the landlord can’t pass the broker fee on to the resident involuntarily,” explained Matthew Murphy, executive director of the NYU Furman Center, which focuses on housing, neighborhoods and urban policy.

Last year’s law represented a “monumental shift” in how New York regulates housing that is still being understood, Murphy said. The law also limited the cost of the application fee, the credit check fee and security deposits.

“So many people do not have the funds to make a down-payment on a home, yet you need to put out a lot of cash to move into an apartment (in New York),” Murphy said. “What the state legislature tried to do was mitigate a few things that required you to lay out that cash.”

Still, Murphy said, landlords may choose to raise rents to offset the loss of the middleman broker’s fee. That will take time for the million New Yorkers who live in rent-controlled or rent-stabilized apartments.

The ruling to end these broker’s fees was praised by renters who have felt its sting personally — and in a market that is two-thirds renters, that’s a lot of people.

“We all have our broker fee stories,” Murphy said.

“This is going to make it much easier for ordinary working people to find an affordable apartment,” said Michael McKee, treasurer of TenantsPAC, a tenants’ rights advocate group.

But New York real estate leaders slammed the legal change and said it will upend their jobs.

“We are aggressively pushing back on the Department of State’s misguided interpretation that will have a devastating impact on hard-working real estate agents, owners, and renters throughout New York State,” said Reggie Thomas, senior vice president for government affairs at The Real Estate Board of New York.

“If enforced, this guidance would result in higher prices for New Yorkers as building owners include commissions into rents and dramatically cut the incomes of tens of thousands of agents who provide a valued service in helping people find their new homes,” Thomas said.