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Real estate trade groups, brokerages and landlords in New York City are taking their case against a broker fee law to a higher court and the city is fighting back.
On June 24, the City of New York responded to a lawsuit filed by the Real Estate Board of New York (REBNY), the New York State Association of Realtors, and seven real estate companies against the Fairness in Apartment Rental Expenses (FARE) Act, which requires rental property owners to cover broker fees when they enlist a broker to help them lease a unit.
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The trade groups and companies allege the legislation violates the First Amendment and the New York State Constitution, and was pre-empted by state law. The suit also claims the FARE Act violates the Contracts Clause of the U.S. Constitution since brokers and landlords can’t execute existing listing agreements that require brokers to negotiate and receive compensation from tenants.
In its answer to the suit, the city denies the allegations.
“Defendants City of New York and Commissioner [Vilda Vera] Mayuga have not violated any rights, privileges or immunities under the Constitution or laws of the United States or the State of New York or any political subdivision thereof, nor have defendants violated any act of Congress providing for the protection of civil rights,” attorneys for the city wrote.
They also pointed out that three of the four claims in the suit were dismissed by the court on June 10. Regarding the remaining claim, that the FARE Act violates the Constitution’s contracts clause, the city alleged that the plaintiffs lack standing to bring the claim.
“The only Plaintiff who has pled facts alleging that it has exclusive contracts impacted by the FARE Act is Bond New York,” the filing states, later adding that the court may lack the jurisdiction “over REBNY and Bond New York’s Contract Clause claim due to lack of standing and/or mootness.”
Meanwhile, the plaintiffs appealed the dismissal of the aforementioned claims on June 12 to the U.S. Court of Appeals for the Second Circuit. In a June 26 filing, they asked the higher court to decide “[w]hether the District Court erred in concluding that Plaintiffs failed to demonstrate a likelihood of success on the merits of their free speech claims,” among other questions.
Neither party has submitted appellate briefs yet. But in granting the city’s motion to dismiss in regards to most of the RENBY suit’s claims, District Court Judge Ronnie Abrams suggested that the plaintiffs were looking for a judicial solution to a political problem.
“In enacting the FARE Act, the City Council made clear that it sought to address a specific harm: the detrimental impact on housing mobility caused by the practice of imposing brokers’ fees on tenants,” Abrams wrote.
“Although the Act is not primarily intended to target speech and has only a relatively minimal impact on existing contracts, Plaintiffs have sought to enjoin its enforcement on the basis that it violates the First Amendment and the Contracts Clause.
“In their telling, the Act will wreak havoc on the City’s residential rental market, cause rents to rise, put brokers out of work, and make it exponentially more difficult for New Yorkers to rent apartments.”
Abrams stressed she did not believe it was the court’s job to decide which of these contrasting views was correct.
“Plaintiffs’ discontentment with the Act, however, stems not from its effects on their constitutional rights, but from a fundamental disagreement with its underlying policy,” she continued.
“The law is clear, though, that ‘[w]hether the legislation is wise or unwise as a matter of policy is a question with which [the Court cannot be] concerned.’ Thus, although some of Plaintiffs’ prophecies may prove true, Plaintiffs remedy is through the political process, not in court.”
Read NYC’s answer to REBNY’s suit (reload page if document is not visible):
