NYC considers ending broker fees for tenants, angering real estate industry (2024)

NEW YORK (AP) — It’s a familiar and agonizing experience for legions of New York City renters: before moving into a new apartment, a tenant must first shell out thousands of dollars in fees to a real estate broker, even if that person was hired by the landlord.

The hefty one-time payments, known as broker fees, are ubiquitous in New York but nearly unheard of anywhere else. In most other cities, landlords cover the commission of agents working on their behalf.

But legislation backed by a majority of the New York City Council would require landlords who hire brokers to pay their fees, marking a potential sea change in one of the country’s most expensive housing markets.

Renters, who make up more than two-thirds of city households, are hailing the latest attempt at reform. At a hearing Wednesday, many New Yorkers recalled paying exorbitant fees to brokers who appeared to do little more than open a door to an apartment or direct them to a lockbox.

“In most businesses, the person who hires the person pays the person,” said Agustina Velez, a house cleaner from Queens who said she recently paid $6,000 to switch apartments. “Enough with these injustices. Landlords have to pay for the services they use.”


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But the proposal has triggered fierce opposition from New York’s real estate industry.

Ahead of the hearing, hundreds of brokers gathered to voice their objections at a rally organized by the Real Estate Board of New York, the industry’s powerful lobbying group.

Through hours of testimony, they warned the legislation would sow chaos in the rental market and decimate the livelihoods of the city’s roughly 25,000 real estate agents. Many predicted landlords would pass on the costs of paying brokers to tenants through increased rents or keep apartments off the market altogether.

“This is the start of a top-down government-controlled housing system,” said Jordan Silver, a broker with the firm Brown Harris Stevens. “The language is so incredibly vague we actually have no idea what this would look like in the world.”

The bill’s sponsor, City Councilman Chi Ossé, has said he was moved to act following a recent apartment search that was “tiring, treacherous, and competitive.” Another local official, Brooklyn Borough President Antonio Reynoso, testified that he’d once paid a $2,500 fee to a broker he never met.

Their frustration was echoed at Wednesday’s hearing by dozens of ordinary renters, along with a mix of labor unions, housing policy groups and some prominent business leaders. Critics said paying brokers’ fees serves as a barrier to those who’d otherwise move to the city while preventing low-income New Yorkers from relocating to new homes.

Such broker fees were previously banned in 2020 under a package of renter protection laws passed by the state. But they were quickly reinstated following a lawsuit led by the Real Estate Board of New York.

Brokerage firms estimate that roughly half of the city’s apartments require a tenant-paid broker fee. The price of those fees can vary widely, though the standard amount is 15% of the annual rent. For the average apartment in Manhattan, where the median monthly rent recently hit $4,500, that would amount to a fee of $8,100.

Under the legislation, tenants would still pay brokers that they hired directly. The bill’s brief language — less than 200 words — only requires the party that hires the real estate agent pay their fee.

“How the market works is not as simple as a few sentences, which is what the bill is,” said Ryan Monell, a vice president at the Real Estate Board of New York. “It’s a misnomer to compare New York to other cities. This is really an exceptional market.”

Brokers are adamant that their jobs are far more intensive than merely opening the door to tenants. Many said they help put together listings, review applications, answer questions posed by tenants and arrange tours at all hours of the day. But some also acknowledged that the current system favors landlords.

“I think it’s not logical. The landlord should pay the listing agent who is working on their behalf,” said Maria Octavio, a real estate broker with the firm of Douglas Elliman. “Because it’s worked this way for many years, the owners are used to it.”

Anna Klenkar, a broker at Sotheby’s, said the industry group — known as REBNY — had contacted her employer after learning that she planned to testify Wednesday in support of the legislation. “It feels less like we’re protecting ourselves, and more like we’re protecting landlords, whom REBNY also represents,” she testified.

A spokesperson for REBNY did not respond to an emailed inquiry about whether they had reached out to the employer.

Mayor Eric Adams, a Democrat, warned the bill could have unintended consequences. He had strong real estate industry backing during his campaign and moonlighted decades ago as a real estate agent while working in the city’s police department.

NYC considers ending broker fees for tenants, angering real estate industry (2024)


Do renters have to pay broker fee in NYC? ›

New York is one of the only U.S. cities where tenants have to pay for a broker they did not hire. Those fees can range from one month's rent up to 20% of the annual rent depending on the market. And in a rental market with a 1.4% vacancy rate, many people see broker fees as a barrier preventing people from moving.

How do I get out of brokers fee in NYC? ›

Do I Have to Pay a Broker Fee in NYC? No! If you find an apartment offered directly by the landlord or property manager, and submit your application through their leasing office, you will avoid a broker fee. After all, you're not working with a you don't have to pay one.

Can you negotiate brokers fee in New York? ›

There are a couple ways you can easily negotiate down your broker commission. Interviewing multiple agents gives you options and leverage. You'll also hear different pitches so you can compare each agent's valuation of your apartment and the terms of their listing agreement.

What is the maximum fee that a mortgage broker can charge for services rendered? ›

The maximum fee a mortgage broker can charge is set by federal law at 3%. Borrowers usually have the option of adding the cost of the commission payment into their loan amount or paying the broker directly upfront.

Are broker fees capped in NYC? ›

The Real Estate Board of New York challenged the restriction in a lawsuit, resulting in a state court overturning the ban in 2021. There was also a bill proposed in the City Council in 2019 to cap broker fees to no more than one month of rent, but that measure never made it out of committee.

Does section 8 pay broker fee in NYC? ›

Section 8 tenants pay 30% of their income or their Public Assistance shelter allowance towards rent. Section 8 does not pay a security deposit, broker's fee, or any rent upfront.

What is a good broker fee? ›

The standard commission for full-service brokers today is between 1% to 2% of a client's managed assets. For example, Tim wants to purchase 100 shares of Company A at $40 per share.

How do you negotiate with a broker? ›

Negotiating with brokers is not only about numbers and terms, but also about relationships and trust. You should try to build rapport with your broker by being respectful, courteous, and professional, and by showing interest in their background, experience, and opinions.

What is the commission for a broker in New York State? ›

The 6% Realtor commission in New York is equally divided between the listing agent's brokerage and the buyer agent's brokerage. Once operational expenses are accounted for, this 3% commission is further split between the agent and the broker.

What are two things RESPA prohibits? ›

RESPA prohibits loan servicers from demanding excessively large escrow accounts and restricts sellers from mandating title insurance companies. A plaintiff has up to one year to bring a lawsuit to enforce violations where kickbacks or other improper behavior occurred during the settlement process.

How is the broker's commission usually paid out? ›

A common arrangement is a 50-50 split between the buyer's agent and the seller's agent. In sale transactions, the distribution of commissions is managed by escrow. The brokerage sends escrow a commission distribution agreement, providing instructions on how the check will be made out and distributed.

Is brokerage fee the same as commission? ›

Brokerage fees are any commissions or fees that your broker charges you. Also called broker fees, they are generally charged if you buy or sell shares and other investments, or complete any negotiations or delivery orders. Some brokerages also charge fees for consultations.

Are rental application fees illegal in NYC? ›

2) Application fee: Rent laws limit this to $20...

This is the only fee a landlord can charge a tenant, and that this is also the maximum brokers can charge for an application fee. If you provide current copies of a background or credit check, the law states this fee must be waived.

Do you have to pay a realtor in NY? ›

The Seller Usually Pays Realtor Fees In New York

So they have the ability to build that cost into the final sales price, which means the buyer can also contribute to paying the listing agent's and buyer's agent's realtor fees.

Are broker fees tax deductible? ›

Any fees you pay to buy, sell, or hold an asset or to collect interest or dividends are not eligible for income tax deduction. This would include brokerage or transaction fees, management and advisor fees, custodial fees, accounting costs, and fund operating expenses.

Do tenants pay a broker fee in NJ? ›

In New Jersey, tenants do not pay realtor fees UNLESS they hired a realtor and signed a brokerage agreement with them directly. You cannot hire a realtor to help YOU and then make the tenant pay your commission fee. You should have hired an attorney to draft a new lease, not a realtor.

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