This week, the long-simmering battle over broker fees in New York City boiled over.
The FARE Act — short for Fairness in Apartment Rental Expenses — officially went into effect Wednesday, flipping the long-standing practice of tenants footing the bill for brokers hired by landlords. The law mandates that if a landlord engages a broker to rent out an apartment, that landlord must pay the fee. Tenants, the city argues, were being saddled with costs they never agreed to—and in a market where housing mobility is already low, that was untenable.
The real estate industry isn’t going quietly. REBNY sued to block the law a month after the City Council approved it, calling it unconstitutional and a threat to contractual freedom. But a federal judge declined to grant an injunction (REBNY is appealing that decision), letting the law stand while parts of the suit continue through the courts.
For now, the market is in a reactive phase.
StreetEasy saw more than 1,000 listings vanish the day the law went live. Some brokers chalk that up to natural fluctuations. Others say landlords are pulling listings while they figure out how to comply — or circumvent — the new rules.
Landlords are already raising rents to cover the broker fees they’re now expected to pay. Some units in Manhattan have jumped $300 to $400 per month almost overnight. It’s a swift response in a city where median rent just hit a record $4,571 — and where demand shows no signs of cooling as we head into the peak summer season.
Some landlords are experimenting with new pricing structures or pulling listings to reassess. Others are looking for workarounds, like vague listings, word-of-mouth marketing or trying to get tenants to “voluntarily” agree to pay broker fees.
Enforcement could also be an issue. The law assumes that if a broker advertises a unit, they’ve been hired by the landlord, but proving who’s paying who might get murky. Critics warn that a “black market” of unofficial listings could flourish, particularly in rent-stabilized buildings, where landlords have no ability to raise rents and little incentive to take on new marketing costs.
StreetEasy estimates the law could reduce upfront rental costs by over 40 percent for many tenants. Advocates argue it’s a long-overdue shift in a market where tenants often pay thousands in fees just to get the keys. But brokers say it risks pushing more inventory underground and further constraining supply in an already tight market.
Whether this law leads to a more transparent, tenant-friendly system — or a shadowy patchwork of workaround deals — depends on how brokers, landlords and the courts respond in the months ahead.
There was plenty of other news to get into this week. The Alexander brothers are now facing a tenth federal charge, Steve Ross landed the largest condo construction financing of the year in South Florida and a new firm joined Los Angeles’ indie brokerage scene.
Alexander brothers face 10 counts in federal sex trafficking case
The Alexander brothers are now facing a tenth federal charge in a widening sex trafficking case, according to a new indictment unsealed Tuesday. Oren and Alon Alexander are charged with aggravated sex abuse by force or threat or intoxicant involving an alleged 2012 assault aboard a cruise ship, where prosecutors say they “administering a drug, intoxicant, or other substance” to a woman before forcing her into a sexual act.
Steve Ross lands $600M financing for South Flagler House condos
Steve Ross, CEO and chairman of Related Ross, secured the largest condo construction financing in South Florida so far this year. The billionaire snagged a massive $600 million construction loan for South Flagler House, a luxury condo development in West Palm Beach.
Jon Grauman, Adam Rosenfeld split from The Agency to start boutique brokerage Resident
Two top agents from “Buying Beverly Hills” have officially broken away from The Agency to launch their own boutique brokerage, Resident. Jon Grauman and Adam Rosenfeld, along with Grauman’s wife and now Resident CEO Lauren Grauman, left to launch the brokerage, backed by real estate platform provider Side.
“Poor guys”: Tides principals’ Starwood tab tops $50M as insiders question solvency
Starwood has notched another judgment against Tides Equities’ troubled principals, pushing their personal liabilities to new heights and sparking bankruptcy rumors among insiders familiar with — and now sympathetic to — their plight. The latest ruling — the third in Starwood’s favor — brings Sean Kia and Ryan Andrade’s lender IOUs to a whopping $50.5 million.
Nir Meir’s mysterious Rikers return revealed… sort of
Nir Meir could soon be freed once again from Rikers as the mystery of his most recent incarceration begins to unravel. Following an order to return to jail, Manhattan Judge Ann Thompson brought back Meir’s bond to $1 million on June 9. The former HFZ executive was detained on Rikers for over a year after the Manhattan District Attorney’s office accused Meir of being the mastermind of a $86 million fraud scheme.
Real estate mentor sues single-family investor student for fraud
A prominent Chicago real estate mentor is suing one of his own students, alleging a multimillion-dollar “Ponzi-like scheme” that’s left dozens of South Side rental homes teetering on foreclosure. Andrew Holmes and longtime business partner Mary Desloover claim Chris and Aneta Urban misused more than $10 million in individual loans — including from fellow members of Holmes’ real estate program — to cover debts rather than renovate homes, as promised.
Joe Moinian loses Midtown Hilton Garden Inn to mezz lender
Developer Joe Moinian lost his Midtown Hilton Garden Inn, in a UCC auction, after making a last-minute attempt to stop the sale. Hotel investment firm MCM, which doled out $25 million in mezzanine debt on the 401-key hotel that’s also the largest Hilton Garden Inn in North America, took over the property after making a $10 million credit bid.