Newark landlords will soon have to pay their own real-estate broker fees instead of passing the cost onto renters, under an ordinance the city's Municipal Council approved unanimously. The measure, proposed by Mayor Ras J. Baraka, also blocks landlords from clawing back those costs through higher rent, hidden surcharges or reduced tenant concessions, and is set to take effect October 13.
The council adopted the ordinance unanimously on September 23, according to NJ.com, after Baraka introduced it earlier in the month and presented it directly to the council. As The Newark Times reports, landlords, property owners and developers who use real-estate brokers will have to cover all associated fees themselves rather than requiring renters to pay commissions at signing.
Baraka framed the change as relief for a city where renters already juggle steep upfront costs. “They too often must pay a large brokers fee or commission in addition to the security deposit of one or two months' rent and the high expense of moving,” the mayor said, according to the same Newark Times report. He added that the ordinance shifts the financial burden of brokerage fees onto landlords, owners, developers and their agents instead.
How the Rules Work
Beyond simply banning tenant-paid commissions, the ordinance closes off workaround tactics. Landlords will be barred from recovering broker fees by raising base rent, tacking on administrative surcharges or asking tenants to reimburse them after the fact, per the Newark Times account. It will also be illegal to condition an apartment lease on a tenant using a specific brokerage firm or agent, and landlords can still hire brokers to market their units — they just have to pay for it themselves.
The ordinance will require landlords or agents to hand over an itemized written disclosure of all required fees before a lease is signed, and every rental application in the city will have to include a landlord-signed statement confirming that no broker fees are being charged to the prospective tenant. Violations will carry fines of up to $1,250 per instance, with each improper fee charged to a tenant counted as its own separate violation, the outlet reports. The rules will apply across both market-rate and affordable housing units.
A First Vote for a New Council Member
Among those voting yes was Donna Jackson, an at-large council member elected in May who cast one of her first votes on a tenant-focused initiative in favor of the broker-fee prohibition. Newark's tenant base gives such measures outsized stakes: the city has the lowest homeownership rate among New Jersey's ten largest municipalities, with roughly three-quarters of its population living in rental housing and less than a quarter in owner-occupied homes.
That renter-heavy makeup comes as Newark sees construction of new and increasingly expensive apartments, with housing demand spreading west from the Hudson River waterfront along PATH and NJ Transit rail lines. The city separately requires that 20% of newly constructed apartments be set aside for people with low and moderate incomes.
Industry Reaction Still Taking Shape
Real-estate industry groups have not settled on how the change will land. Colleen King Oliver, a spokesperson for New Jersey Realtors — the state's main real-estate industry group — said in an email that the organization had not yet determined the ordinance's potential impact on brokers and was still reviewing it and assessing its effects on the real-estate community. She noted that New Jersey Realtors provides critical services for clients in Newark and around the state. The New Jersey Apartment Association declined to comment on the law.
How Newark's Move Compares to New York
Newark's approach echoes a fight that has already played out in New York City. State regulators there ruled in February 2020 that renters could no longer be charged brokers' fees by agents representing property owners, though brokers could still collect fees from the landlord instead, according to the New York Times. Tenants who independently hired their own broker to help find an apartment could still be charged for that service — one New York renter at the time described a $2,700 fee, equal to 12% of his annual lease.
New York City later codified similar protections through its Fairness in Apartment Rental Expenses Act, which bars brokers from charging tenants fees on listings the broker published with a landlord's permission or agreed to handle on the landlord's behalf, and also stops landlords from conditioning a rental on a tenant hiring a particular agent, according to a U.S. Court of Appeals for the Second Circuit ruling posted on Justia. That same court opinion notes broker fees in the city typically run between roughly 8% and 15% of a lease's annual value. The Second Circuit affirmed a lower court judgment upholding the FARE Act against constitutional challenges in July.
