The fight over broker fees rages on as a lawsuit seeks to block the FARE Act.
As expected, the Real Estate Board of New York has filed a lawsuit seeking to stop the Fairness in Apartment Rental Expenses Act. The measure just became law, though it doesn’t go into effect until June.
The law seeks to end “forced broker fees” by stipulating that whoever hires a rental broker must pay for that broker’s services. REBNY has argued that landlords will pass those costs onto tenants by raising rents and that brokers will stop listing specific apartments.
The measure’s sponsor, Chi Ossé, has framed the FARE Act as a way to curb the burdensome costs tenants pay every time they move, while giving them more leverage in lease renewal negotiations.
REBNY’s suit attacks the FARE Act on several grounds:
1) That it violates the First Amendment. The lawsuit argues that rental listings are commercial speech protected by the U.S. Constitution.
The FARE Act states that a broker who publishes a listing cannot seek a commission from a tenant because the listing means the broker was hired by the landlord. This provision will wipe open listings — non-exclusive arrangements where a landlord provides listing information to brokers with the expectation that a tenant will pay the broker fee.
This discourages brokers from posting listings unless they have explicitly entered an agreement with a landlord, and has a chilling effect on landlords providing listings to brokers because they don’t want to be on hook for commissions, according to the lawsuit.
2) It wrongfully interferes with private contracts. Specifically, it voids “tenant pays” contracts between brokers and landlords that say the broker must seek compensation from the renter.
3) The lawsuit points to New York state’s “comprehensive regime of laws and regulations governing the conduct, compensation, and procedures of real estate brokers, including the ability to file complaints and investigate potential unlawful conduct.”
In other words, the city lacks authority to override state laws on this subject.
Other plaintiffs include the New York State Association of Realtors, Bohemia Real Estate Group, Bond New York, other brokerages, and a few Housing Development Fund Corporation co-op boards.
I asked Ossé last month about a potential legal challenge by REBNY.
“This is something we already factored into pushing this bill,” he said. “We worked extensively with the Law Department in putting this bill together, and I believe we do have a strong argument for this bill if it does go into court.”
What we’re thinking about: Do you think REBNY will get the FARE Act nullified? Send a note to kathryn@therealdeal.com.
A thing we’ve learned: Scientists do not know why orcas have been spotted with dead salmon on their heads. The strongest theory appears to be that they are saving food for later or to share with other whales, according to the Washington Post. How nice.
Elsewhere in New York…
Ingrid Lewis-Martin, who abruptly stepped down as the mayor’s chief advisor on Sunday, says she expects to be indicted soon, Gothamist reports. “I’m being falsely accused of something,” Lewis-Martin said at a press conference at her attorney’s Midtown office. “I don’t know exactly what it is, but I know that I was told that it’s something that’s illegal, and I have never done anything illegal in my capacity in government.”
— President-elect Donald Trump is open to pardoning Mayor Eric Adams, FOX 5 New York reports. Trump told reporters he would “consider” pardoning Adams if the mayor is convicted on bribery or other charges.
The city’s Campaign Finance Board ruled on Monday that Adams is not eligible for public matching funds this month, as there is “reason to believe the Adams campaign has engaged in conduct detrimental to the matching funds program in violation of law, including the Campaign Finance Act,” City & State reports. The mayor can appeal. His campaign attorney called the decision “disappointing.”
Closing Time
Residential: The priciest residential sale Monday was $22.3 million for a 5,600-square-foot condo unit at One High Line’s 500 West 18th Street. Corcoran Sunshine Marketing Group’s Deborah Kern sold the newly built unit.
Commercial: The largest commercial sale of the day was $15.5 million at 554-558 Metropolitan Avenue. The transaction was for part of a development site. Sellers’ representatives included Dan Marks, Andrew Manasia and Daniel Lebor of Terra CRG, per Traded.
New to the Market: The highest price for a residential property hitting the market was $18 million for a condo unit at 56 Leonard Street. The new unit is 3,600 square feet and listed by Sotheby’s International Realty.
Breaking Ground: The largest new building application filed was for a 120,401-square-foot, five-story school at 445 Ovington Avenue in Brooklyn. The building will have an auditorium and indoor sports area. John Mueller of NYC School Construction Authority is the applicant.
— Joseph Jungermann