If it ain’t broker, don’t fix it.
A cohort of Big Apple real estate brokers are suing the city over a new law that shifts the burden of costly broker fees away from tenants – and the case could prevent the legislation from taking effect this summer as planned.
The Real Estate Board of New York (REBNY) and other groups representing brokers and landlords filed suit Monday in an attempt to block the controversial bill, dubbed the Fairness in Apartment Rentals Act (FARE), which passed in the City Council with a veto-proof majority of 42-8 on Nov. 13.
“While the FARE Act may have the ‘right intention,’ it will wreak havoc on the New York City rental markets and unleash a host of unintended consequences, causing immediate and irreparable harm to the consumers it purports to protect, as well as harm brokers and landlords around the city,” the suit charges.
The law mandates that the person hiring the broker pay the fee, instead of the prospective tenant.
Supporters hope it will ease the city’s housing affordability crisis, while opponents argue it could actually lead to rent spikes.
While it is slated to take effect next July – 180 days after City Council approval – the Manhattan federal court lawsuit could halt the law until further notice, experts said.
“Although the [real estate] industry has a high burden in court … they [brokers] have a shot because the merits are on the side of the industry,” New York City trial attorney and lobbyist David Schwartz told The Post, adding that a judge could potentially block the law from taking effect.
“The law is another attempt by our local government to micro-manage the freedom of parties to enter into a contract and this law violates the contracts clause and the first amendment of the US Constitution, and also is pre-empted by state law,” Schwartz added.
But attorney Altagracia Pierre-Outerbridge, whose practice focuses on landlord-tenant litigation, called the suit’s arguments “long shots” and an “uphill fight against City Hall.”
To block the law from taking effect, REBNY’s attorneys must prove that it would cause irreparable harm to brokers, she said.
“The First Amendment speech-restriction challenge has to overcome the fact that the law is not trying to suppress any viewpoint or idea, or force brokers to express an idea,” said Pierre-Outerbridge, “and there are other city regulations of real estate brokers, like the part of the City Human Rights Law that outlaws certain discrimination in real estate.”
“The last argument is that the government is not allowed to pass a law cancelling contracts,” Pierre-Outerbridge added, “but the government is allowed to pass laws that affect what contracts are allowed to say — especially going forward for contracts that haven’t been written yet.”
The city has roughly 20 days to respond to the lawsuit.
“The FARE Act is bad policy and bad law,” REBNY lawyer and Senior Vice President Carl Hum charged.
“This legislation will not only raise rents and make it harder for tenants to find housing, but it also infringes upon constitutional guarantees of free speech and contract rights” — by barring brokers from posting rental listings online without first being hired by the landlord, Hum told The Post.
Mayor Eric Adams – who did not veto or sign the bill by Friday’s deadline, automatically making it law – himself previously expressed skepticism surrounding the FARE Act, suggesting that property owners could merely pass the cost of hiring a broker to a tenant on the lease.
New York City is one of the only cities in which landlords can hire a broker and pass the hiring cost onto the tenant, part of a bevy of upfront costs that reached an all-time high average of $13,000 this year, per a recent analysis from rental website StreetEasy.
“This bill is common sense,” Brooklyn council member Chi Ossé, who sponsored the bill, previously said of the legislation. “It replicates how every other transaction exists in this country.”
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