Before getting the keys to their new apartment, New York renters typically have to cough up thousands of dollars upfront to cover security deposits and broker fees. These broker fees can cost up to 15% of the yearly rent, putting a real dent in renter’s wallets. But as of this week, all of that is about to change.
The New York Department of State has effectively banned broker fees for renters, adding to the strict rent regulations that have taken effect in the last year.
Brokers can still collect a fee for representation. However, the catch is that these fees must now be paid by the landlord instead of the renter, which flips the current system on its head.
Brokers are arguing that the new rule won’t provide much relief to tenants because landlords may start raising rent prices to cover the cost of the broker fees. Although tenants will not pay an upfront fee, they may feel the cost throughout the year in their monthly rent.
While tenants may be praising the new unexpected rule, it certainly came as a shock to landlords and brokers across the state. Landlords will now have to face tough choices on whether to use a broker or not. Meanwhile, the Real Estate Board of New York is already seeking ways to challenge the rule.
Stay tuned for more analysis as the aftermath of the new ban unfolds.