T
he impending broker fee law in New York City has sparked concerns that landlords and brokers may find ways to circumvent the regulation. "If landlords don't want to pay broker fees, they won't allow themselves to be forced to do so," says Jesse Rhinier, a Compass broker who opposed the bill. The FARE Act, championed by City Council member Chi Ossé, aims to make the landlord responsible for paying broker fees. However, enforcement may be complicated, particularly if brokers advertise apartments without identifying them.

    A mock listing posted by the Real Estate Board of New York on Instagram illustrates this issue. The intentionally vague ad described an apartment between Central Park West and the Hudson River, with rent between $1,000 and $8,000. This type of listing could make it difficult for tenants to find available units without contacting a broker, then agreeing to pay a fee at lease-signing.

    Landlords may resist paying broker fees by hiding available units or using secret arrangements with brokers. "Given the deep pockets and considerable political power of the New York City real estate industry, it's always a concern that they'll search for ways to maintain the current system," says Jeremiah Schlotman of Legal Services NYC. In theory, landlords could fetch higher rents if units are advertised, but in practice, they may resist paying broker fees rather than vying for hypothetical higher rents.

    Rent-stabilized units will be particularly problematic for the FARE Act, as landlords cannot reap higher rents by marketing them to increase demand. These units will likely be rented exclusively through word-of-mouth, allowing brokers to charge high fees. "Under the FARE Act, such apartments would never be advertised," Rhinier notes. "They would still all be broker-fee apartments, and would all be part of the underground, black market that the FARE Act would create."