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Who Should Pay Broker’s Fees?

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The New York City skyline shimmers under the morning sky in late October at left, while at right, 27-year-old real estate agent Deja Junior is pictured.

(New York, NY) – The New York City Council has passed a bill that forces landlords to pay for broker’s fees when renting apartments.

Traditionally, apartment renters will fork over a month’s rent or more as commission when signing a new lease. The amount sometimes varies based on the length of the lease. Some say the burden is unfair on renters because they also need to provide the first-month’s rent and a security deposit at the same time. All told it can make moving into a new place very expensive, in terms of having the needed cash on hand.

There’s no limit on broker’s fees, and some renters pay 15% of their annual rent in commission.

Given that reality, some New York City lawmakers have been pursuing the Fairness in Apartment Rentals Act. It would ensure that a broker who lists a property for rent has their commission paid by a landlord. All fees tenants must pay up front would also be covered by landlords under the act. Furthermore, anyone caught in violation of the proposed order would face a $1,000 fine.

For landlords, the move could prove devastating. Many smaller property owners struggle to make ends meet because rent is “stabilized” or capped every two years and limited to percentage increases. Other, larger landlords have been disincentivized from maintaining or repairing properties because of the way rents are kept below market level. In effect, the “middle” portion of the rental market has arguably been wiped away by growth on the high end, and regulated caps on the lower end.

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