Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
Three days after New York City’s Fairness in Apartment Rental Expenses (FARE) Act became law without the signature of Mayor Eric Adams, the Real Estate Board of New York (REBNY) has filed a lawsuit to stop the bill’s June 2025 enforcement.
The New York State Association of Realtors, Bohemia Real Estate Group, Bond New York Real Estate Corp, REAL New York, Level Group, Four Corners Realty, 21 West 74 Corp and the 8 West 119th Street housing development fund corporations have joined the lawsuit as co-plaintiffs, according to court documents.
The lawsuit claims the FARE Act, which requires rental property owners to cover broker fees when they enlist a broker to help them lease a unit, is “constitutionally defective” and preempted by New York state laws that protect commercial free speech and already regulate compensation for real estate brokers and salespeople.
The lawsuit also claims the FARE Act violates the Contracts Clause of the U.S. Constitution since brokers and landlords can’t execute existing listing agreements that require brokers to negotiate and receive compensation from tenants.
Carl Hum | Credit: REBNY
“The FARE Act is bad policy and bad law,” REBNY General Counsel Carl Hum said in an emailed statement. “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, as well as New York State law. We look forward to our day in court.”
The lawsuit claims the FARE Act will disrupt New York City’s rental market, which has relied on a two-tier system of exclusive and open listings.
With an exclusive listing, a landlord hires a broker to market and lease their unit. The landlord can opt to compensate the broker, which is marketed to renters as a “no-fee” listing, or the landlord can direct the broker to negotiate and receive compensation from the tenant.
With an open listing, landlords send their listings to brokers for advertising purposes only. They don’t require the landlord and broker to sign an exclusive listing agreement, as the broker’s only responsibility is to distribute the listing on their website or a third-party site like StreetEasy. Interested renters are then able to contact the broker, view the unit, and negotiate compensation if they decide to move forward with a lease agreement.
The suit goes on to say roughly half of New York City’s rental inventory is already no-fee; however, it doesn’t mean that no-fee apartments are automatically cheaper than tenant-fee listings.
“The same apartment may be advertised as a ‘fee’ or ‘no-fee’ apartment. Indeed, a ‘fee’ apartment (where the tenant pays) may list for $2,700 per month, while the same apartment advertised as ‘no fee’ to the tenant may list for $3,000 per month,” the court documents read. “The higher base rent means that over the course of the tenancy, the tenant will likely pay more than if they just paid the initial brokerage fee at the time they enter into the lease for the apartment.”
“The FARE Act will target the tenant pays or fee apartments, which make up the other half of the rental market,” it added. “Tenant pays apartments are more likely to be owned by small landlords and have lower rents. The current system evolved to accommodate landlords’ and tenants’ varying needs.”
Chi Ossé | Credit: X
New York City Councilmember Chi Ossé, who introduced the bill, said REBNY’s lawsuit is a last-ditch attempt to reverse the Council’s decision (they passed FARE with a vote of 42 to 8) and the wishes of New Yorkers who’ve long complained about exorbitant housing costs.
“This lawsuit is a last desperate attempt by the real estate lobby to undermine the voices of city residents and maintain an irrational practice that nearly every other big city in the country does not allow,” Ossé told Brick Underground on Tuesday.
REBNY’s lawsuit is the latest chapter in a nearly two-year battle over FARE. Ossé originally introduced FARE in 2023 but failed to get enough legislative support to garner a hearing. However, when Ossé reintroduced the bill in February, he’d gained 31 co-sponsors and a groundswell of support from tenants and housing advocates who said the FARE Act was necessary to improve affordability.
In Inman’s June deep-dive into FARE, NYC rents had reached a near-record median of $3,600. A renter renting a median-priced unit in June would’ve paid $7,200 upfront for their first month’s rent and a security deposit. If they rented a unit that came with a broker fee, they would’ve been expected to pay 10 to 15 percent of the annual rental costs or an amount equal to one month’s rent — easily pushing their upfront costs into five figures.
“A party that purchases or contracts a good or service should be responsible for the cost,” Ossé, who represents Brooklyn, told The Gothamist in June. “This is the case in every other transaction across our vast economy and should be true for New York City rentals as well. The FARE Act has the potential to alleviate prohibitive upfront costs for workers and growing families searching for a new home.”
“If you want a broker, great; hire them. And if you don’t want one, my bill says you don’t have to pay,” he added.
REBNY led a 1,500-person rally over the summer to stop the momentum behind FARE, arguing the Act would lead to higher costs for tenants during the life of their lease.
“For those who decide to renew the lease year over year, it’s going to be a problem,” REBNY told Inman. “When you’re looking at a higher base rent for the first year you’re in an apartment, it’s going to be effectively amortized over time because when you go to renew, generally in New York City, they raise your rent, say 5 percent.”
“So if you’re already at a higher base rent for year one, you’re going to ultimately end up paying more year over year as opposed to paying a one-time fee upfront that for many people is probably going to be to a benefit, particularly if you’re staying in your apartment for multiple years on end,” the association added.
James Whelan | Credit: LinkedIn
When the Council passed the Act in November, REBNY President James Whelan told Inman the association would fight against its enforcement.
“Wednesday’s vote is yet another instance of prioritizing ideology over economic and practical reality when it comes to the city’s rental housing stock,” Whelan said in an emailed statement. “The FARE Act will make it harder for tenants to find housing, raise rents, and make the hard work of real estate agents even more difficult.”
He added, “REBNY will continue to pursue all options to fight against this harmful legislation on behalf of our members and the renters they serve.”
As the lawsuit works its way through the New York district court, REBNY may have a friend in Mayor Adams, who opposes FARE.
“Life will determine if I was accurate in my concerns if this goes into the rent of New Yorkers as they pay the rent,” Adams said at a Dec. 3 press conference. “Not only was I a small property owner, but I was a real estate agent. So I know what it is to pass off cost to the owners of buildings.”
Read the full lawsuit below:
Email Marian McPherson
