A victory for New York City renters — and a REBNY must answer - by Joseph Aquino

A federal appeals court has handed the Real Estate Board of New York another defeat in its effort to overturn New York City’s FARE Act.

In my opinion, this is a victory for New York City renters and for the licensed real estate brokers. It is also a victory for common sense.

For many years, New York City renters were often required to pay a real estate broker’s commission when renting an apartment. That commission could be as much as 15 percent of the annual rent. For someone already struggling with the high cost of living in New York, that could mean thousands of additional dollars just to get the keys to an apartment.

Consider a renter taking a $4,000-a-month apartment. A 15 percent commission on the annual rent would be $7,200. Add the first month’s rent and a security deposit, and that renter could need more than $15,000 just to move in.

How many working New Yorkers have that kind of money available?

The FARE Act changes that. When a rental transaction is concluded, the property owner is responsible for paying the broker’s commission rather than placing that expense on the renter.

That makes renting an apartment more affordable. The renter no longer has to bear the large upfront expense of a broker’s commission.

This does not mean brokers should work for free. Quite the opposite.

Brokers should be paid for their work.

I have been in the New York City real estate business for more than 40 years. I know firsthand how much work goes into completing a transaction. Brokers advertise properties, answer inquiries, show apartments, negotiate deals, solve problems and help bring transactions to a conclusion.

A good broker provides a valuable professional service and deserves to be paid.

The FARE Act does not eliminate the broker’s commission. The broker still earns a commission when the transaction is completed. The difference is that the property owner bears that expense instead of the renter.

And that brings us to REBNY.

REBNY reportedly spent approximately $1 million in legal fees fighting the FARE Act. I also understand that approximately 70 percent of REBNY’s membership consists of brokers.

That raises a serious question every broker who pays dues to REBNY should be asking:

Whose money paid for this legal fight?

If REBNY’s resources come in significant part from dues paid by real estate brokers, then it appears that brokers may have helped finance a million-dollar legal battle that largely benefited the landlord side of the industry.

Think about the irony.

Brokers pay dues to belong to the industry’s leading trade organization. Yet that organization spent substantial resources fighting a law that places the responsibility for the broker’s commission on the property owner rather than the renter.

Some brokers may call that a conflict of interest. Others may call it a betrayal. And some may simply call it backstabbing.

Those are strong words. But if approximately 70% of REBNY’s members are brokers, they deserve a clear explanation of why so much money was spent fighting this law — and whether the dues paid by brokers helped finance that fight.

Did New York City’s brokers help pay for a million-dollar legal battle to protect property owners from paying broker commissions?

That is a question REBNY should answer.

This issue is personal to me. Earlier this year, I sent an open letter to REBNY’s Board of Governors explaining why I would not renew my membership. My principal reason was REBNY’s decision to fight the FARE Act. I also questioned the high cost of participating in the organization, including its annual real estate dinner, where the cost could reach approximately $3,000 per plate.

After more than 40 years in New York City real estate, I did not make that decision lightly. But I could not continue paying dues to an organization while questioning whether those resources were being used to support a legal battle I fundamentally opposed.

If brokers are helping fund the organization, brokers have every right to ask how their money is being spent — and whose interests are being protected.

REBNY represents many different parts of the real estate industry, including powerful property owners. There is nothing wrong with representing landlords. They are an essential part of the real estate industry.

But when one organization represents both property owners and the brokers whose commissions those owners are now responsible for paying, there is an obvious tension.

Whose interests come first?

The City Council passed the FARE Act to reduce the enormous upfront costs facing renters. New York City is already one of the most expensive places in America to live. Renters face high monthly rents, security deposits, moving expenses and many other costs.

Removing a broker’s commission of several thousand dollars from that upfront burden can make the difference between being able to afford an apartment and having to walk away.

The law is not anti-broker.

The apartment is rented. The deal is concluded. The broker earns a commission. The property owner pays it. The renter is relieved of a major upfront expense.

That is a simple system.

The federal appeals court has now rejected key parts of REBNY’s challenge. Perhaps it is time for the industry to stop spending money fighting the law and start making the new system work.

And perhaps it is also time for REBNY’s broker members to ask more questions about how their organization makes decisions and spends its resources.

For decades, New York City has depended on real estate brokers to keep its housing market moving. Their work has value. They deserve to be paid fairly and promptly when a transaction is completed.

At the same time, renters should be able to find a home without having to produce thousands of additional dollars for a broker’s commission.

The FARE Act makes renting an apartment more affordable while preserving the broker’s right to be paid.

That is a victory for renters and brokers.

It is also a moment of vindication for those of us who questioned why REBNY was fighting this law in the first place.

And for the brokers who may have helped pay for the fight against it, one question remains:

Who was REBNY really fighting for?

I will end with the same message I gave REBNY in my open letter:

“Stop looking at your checkbooks and start looking at people.”

Joseph Aquino is president of JAACRES, Manhattan, N.Y.