The Real Estate Board of New York (REBNY) has filed a lawsuit in federal court to challenge a new law slated to change the payment dynamics of broker fees in New York City's rental market. In action taken yesterday, the industry group, along with various brokerages and landlords, is aiming to halt a law that would make landlords, not tenants, responsible for broker fees. According to Gothamist, the law could shift a financial burden away from tenants, who are often required to pay fees amounting to a significant portion of their annual rent.

Filed six months before the law's expected implementation date, the lawsuit contends that the measure “infringes upon constitutional guarantees of free speech and contract rights” REBNY's general counsel Carl Hum stated that the legislation would prevent brokers from posting rental listings online unless they have an explicit contract with a landlord. Currently, platforms like StreetEasy prohibit such listings, known as "open listings," due to policies in place. Mayor Eric Adams, who did not sign or veto the bill, expressed concern that the law might lead to higher rent costs if landlords begin incorporating the fee into monthly rents, as reported by Gothamist.

The legal confrontation also cites potential issues with existing contracts between landlords and brokerage firms, which stipulate that brokers will charge fees to tenants. This follows REBNY's earlier legal victory in 2020 when it managed to overturn a state directive that aimed to eliminate broker fees. "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," Councilmember Chi Ossé, who sponsored the broker fee legislation, told Gothamist in a written statement.

REBNY has already made it clear that it anticipates a stiff legal battle ahead. “We look forward to our day in court,” Hum told Bloomberg in a statement. Advocates of the legislation believe freeing tenants from upfront broker fees, often equal to 15% of their annual rents, could greatly ease the financial strain of moving. Moreover, Nicholas Paolucci, a spokesman for the city’s Law Department, confirmed that the department will review the case once served and respond accordingly.