For those who haven’t had the fortune of trying to find a rental apartment in New York City, there has long been a system of “brokers’ fees”, where the *renter* is required to pay a broker a fee, often equal to one months’ rent, in order to obtain an apartment, which was negotiated by the landlord. Even for sophisticated renters, it remains totally unclear who a broker is working for, and the system presents opportunities for anti-consumer collusion.
In 2024, the City passed the Fairness in Apartment Rental Expenses (FARE) Act, which prohibits brokers from imposing a fee (colloquially known as a brokers’ fee) on tenants with respect to properties for which the broker has either (1) published a listing with the landlord’s permission or (2) agreed to work on behalf of the landlord. The Act also prohibits landlords from conditioning the rental of an apartment on a prospective tenant engaging an agent.
Unsurprisingly, brokers and landlords did not like this, and sued, arguing that it violated their first amendment rights, and the Contract Clause. The district court denied preliminary relief, and dismissed the claims. Today, in Real Estate Board of NY v. City of NY, the Second Circuit affirmed. The court concluded that, despite the City’s contrary argument, the FARE Act burdens commercial speech. Nonetheless, it held that intermediate scrutiny applied and that the law satisfied that standard under the Central Hudson framework. As to the Contracts Clause, the court found the law impaired existing contracts, but was constitutional because it furthered a legitimate public interest and was an appropriate and reasonable way to advance that interest.
