FARE Act Pushes NYC Rentals Into “Questionable” Territory

The implementation of the FARE Act in New York City spawned a paywall for prospective renters, some of whom now face exorbitant fees to access off-market listings.

That was the central finding in a Bloomberg report published last week, more than a year after the city implemented the Fairness in Apartment Rental Expenses (FARE) Act, which bars brokers hired by landlords from charging renters a fee for their services.

Renter Alexandra Dye told the outlet that she had to pay an agent $4,000 to see the listing for a Brooklyn apartment. She connected with the broker after reaching out about another listing on StreetEasy. The agent told her that one wasn’t available anymore but that a different unit was, if she agreed to pay a fee to see it.

Dye did, and then signed a lease for the two-bedroom, where her monthly rent is 60 percent below market rate. She told Bloomberg she considered it an “amazing deal,” but that she “still felt a little taken advantage of.”

The report circulated on social media, with some expressing outrage over the tactic while others claimed it, and other moves, were bound to happen as agents figure out how to make money under a new system.

Dye herself later commented on Bloomberg Business’s Instagram post about the article, saying she now planned to file a complaint with the city after she’d been informed that what happened to her could have violated the law.

“I’d say the problem here is not the FARE Act, but brokers continuing to grift despite it, and also me not fully realizing my rights here,” she wrote.

Dye’s situation highlights what some have described as gray areas in the law, particularly a provision in it that forbids brokers and landlords from “conditioning” the rental of an apartment on a prospective tenant hiring or paying a specific agent.

It’s a piece of the law previously flagged by the Real Estate Board of New York’s general counsel, Carl Hum, as potentially “ambiguous” and one that some in the industry say has led to a “convoluted, questionable situation,” said attorney Claudia Cannam, who expressed frustration over how lawmakers constructed the law.

Cannam said that since the law’s implementation last June, she’s seen agents and landlords resort to “workarounds,” such as labeling the broker fee as another charge like a “key access fee” as well as having tenants make “informal text agreements” to pay them before seeing a listing.

While officials and lawsuits have flagged some of these actions, Cannam said enforcement has been relatively minimal, meaning the industry and its legal advisors are still waiting to see “where the line gets drawn.”

“We’re still in this gray area where we’re seeing how it’s playing out, how it’s working in the real world,” Cannam said.

As of July, the city’s Department of Consumer and Worker Protection, the agency tasked with enforcing the law, said it has issued more than $36,000 in penalties for FARE Act violations and returned more than $15,000 to renters, according to Bloomberg.

Bohemia Realty Group co-owner Sarah Saltzberg said the law has put brokers in a tough spot. They can’t advertise apartments that the landlord isn’t paying them to list, as the law presumes that any broker publishing the listing has been hired by the landlord. Instead, they have to rely on a tenant enlisting them to help find an apartment in exchange for a fee.

But to attract those potential clients, they can’t advertise that they have access to certain listings that they know about through their relationships with landlords without risking running afoul of the “conditioning” provision, she said.

“It’s so much more complicated than it needs to be and so much more gray than it needs to be,” Saltzberg said.

In case you missed it…

Earlier this week, Marketproof published a report on “Participant Only” listings, a category of listings available to all participants on REBNY’s residential listing service but not the general public.

The analysis came after The Real Deal reported on a series of meetings held by Compass International Holdings executives advising top agents at Compass, Sotheby’s International and Corcoran to remove their listings from StreetEasy during the month of August and instead mark them as “Participant Only” on the RLS.

In the report, Marketproof found that new “Participant Only” listings tripled in July, up from 47 to 144, with 153 more added within the first 12 days of August. Of those listings, brands underneath the Compass International umbrella represented about 93 percent.

NYC Deal of the Week

The priciest deal to land in public records this week was for a co-op at 820 Fifth Avenue, one of the most exclusive buildings in Manhattan. An entity linked to former Yahoo! and Warner Brothers CEO Terry Semel sold the 7th-floor apartment to an anonymous trust for $45 million in an off-market deal.