New York Broker Fee Rules After the FARE Act — Who Pays in 2026

What the FARE Act Actually Changed

On February 3, 2024, New York's Fair Rental Practices Act (the "FARE Act") took effect, fundamentally shifting who bears the cost of real estate broker commissions in residential leases. For decades, New York's rental market operated under rules that allowed brokers and landlords to charge tenants broker fees—sometimes substantial amounts equal to one month's rent or more. The FARE Act eliminated this practice entirely.

The statute, codified in Real Property Law § 226-c, establishes a single, unambiguous rule: landlords (and managing brokers acting on landlords' behalf) must pay all broker commissions and fees. Tenants cannot be charged directly or indirectly for a broker's involvement in the lease transaction.

This is not a change in how commissions work—brokers still earn commissions for facilitating leases. What changed is who pays. The cost shifts entirely to the landlord's side of the transaction. If you're a self-managing landlord who hired a broker to fill a vacancy, you pay their fee. You cannot pass it to the tenant.

Defining "Broker Fees" Under the FARE Act

The FARE Act's definition of prohibited fees is intentionally broad to prevent workarounds. It includes:

Direct Broker Commissions

The traditional commission percentage (typically 10-15% of first year's rent split between landlord and tenant sides). Under the FARE Act, this entire amount—including what was historically the tenant's broker's share—is now the landlord's obligation.

Processing, Application, or Administrative Fees

Charges labeled as "broker processing fees," "lease preparation fees," "application review fees," or similar designations, if connected to broker involvement, are prohibited. A broker cannot rebrand a commission as an administrative charge to circumvent the law.

Finder's Fees or Placement Fees

Flat fees or percentage-based payments to brokers for "finding" a tenant or "placing" them in the unit are prohibited regardless of amount or framing.

Lead Generation or Marketing Fees

If a broker charged for promoting the listing as part of their service package, that cost cannot be passed to the tenant. Marketing is part of the broker's service cost, paid by the landlord.

Document Preparation or Closing Fees Tied to Broker Services

Brokers cannot charge tenants for preparing leases, reviewing applications, or other administrative tasks connected to their brokerage role. This is part of their fee structure.

The critical question for compliance: Did a broker touch this transaction? If yes, and a tenant is charged any fee related to that broker's involvement, the landlord is likely in violation.

Key Compliance Requirements for Self-Managing Landlords

Lease Language Must Comply

Your lease agreement cannot contain language requiring tenants to pay broker fees. This includes:

• Any clause stating "tenant shall pay broker commission"
• Language conditioning lease execution on tenant payment of fees to brokers
• Clauses making the tenant responsible for "half" of a broker's fee
• References to specific dollar amounts tenants must pay for brokerage services

If your lease templates contain this language, they must be revised immediately. Continuing to use old leases exposes you to liability even if tenants don't pay the illegal fees—the mere presence of such language violates the statute.

Application Materials Cannot Require Broker Fees

Your application materials, screening criteria, or move-in instructions cannot reference tenant broker fees as a required cost. Tenants must understand upfront that broker fees are the landlord's responsibility, not theirs.

Broker Agreements Must Specify Landlord Payment

If you hire a broker, your representation agreement or commission agreement with that broker must clearly state that you are responsible for all broker compensation. This protects you if the broker attempts to charge the tenant directly. Your agreement should explicitly require the broker to comply with Real Property Law § 226-c.

A sample clause to include in broker agreements:

"Broker acknowledges compliance with New York Real Property Law § 226-c. Landlord is responsible for all broker commissions and fees. Tenant shall not be charged any fees, direct or indirect, related to Broker's involvement in this lease transaction. Any violation of this provision makes Broker liable for statutory damages."

Records Must Document Landlord Payment

Keep records showing you paid broker commissions from your account, not the tenant's. This includes:

• Signed broker agreements specifying your payment obligation
• Commission statements showing landlord as payor
• Bank statements or wire confirmations showing you paid the broker
• Lease documents with no tenant fee language

If the Attorney General or a tenant sues, these records prove compliance.

Penalties and Enforcement

Statutory Penalty Amounts

Real Property Law § 226-c establishes the following penalties:

Violation Type	Penalty
Charging tenant any broker fee	Up to $1,000 per violation; Attorney General can seek civil penalties
Pattern of violations	Treble damages (3x the amount overcharged) + legal fees
Individual tenant lawsuit for overcharged fees	Return of illegal fees + damages + legal fees
Broker violation (charging tenant directly)	Broker license suspension/revocation possible; separate fines

Who Enforces the FARE Act

New York Attorney General's Office: The AG can investigate complaints, issue cease-and-desist letters, and pursue civil actions against landlords charging illegal fees. The AG's housing unit has made FARE Act enforcement a priority since 2024.

Individual Tenants: Tenants can sue directly for recovery of broker fees charged to them. Many tenant advocacy organizations have filed class actions against landlords with patterns of FARE Act violations.

Real Estate Commission: The New York Department of State (which oversees real estate brokers and agents) can discipline brokers who violate the law, including license suspension or revocation.

Local Housing Courts: Tenants can file counterclaims in housing court if a landlord attempts to evict for non-payment while the tenant claims they were overcharged illegal broker fees.

Treble Damages Explained

If a pattern of violations is established—meaning you've charged multiple tenants broker fees—courts can award three times the amount illegally charged. Example: If you charged five tenants $2,000 each in broker fees ($10,000 total), treble damages would be $30,000, plus legal fees.

This makes FARE Act violations exceptionally expensive. A single violation might cost $1,000-$2,000 in penalties plus refunds. A pattern across your portfolio could cost $20,000-$50,000+ in damages, plus attorney's fees and court costs.

Practical Compliance Checklist

Before You Hire a Broker

• Review the broker's commission request. Confirm you are responsible for 100% of the fee.
• Add FARE Act compliance language to your broker agreement or representation contract.
• Require the broker to sign an acknowledgment that they will not charge the tenant any broker-related fees.
• Document in writing which party pays (you, not the tenant).

During the Lease Transaction

• Provide the tenant with a lease that contains zero language about tenant broker fee obligations.
• Ensure your application materials do not reference broker fees as a tenant cost.
• Do not condition lease execution on the tenant signing anything agreeing to pay broker fees.
• If a tenant asks about broker fees, clearly state they are your responsibility.
• Include a written statement in move-in instructions clarifying that no broker fees were charged to the tenant.

After the Lease is Signed

• Pay the broker from your account using a check, wire, or credit card (not the tenant's money).
• Keep the broker's invoice and your payment confirmation.
• File the broker agreement with your lease documentation for this property.
• File the payment receipt showing landlord as payor.
• If you manage multiple properties, track which leases involved brokers and who paid (for audit purposes).

Common Compliance Mistakes Self-Managing Landlords Make

Mistake #1: Using Old Lease Templates with Broker Fee Language

Many landlords still use leases from before the FARE Act that explicitly state "Tenant pays broker fees" or allocate a percentage to the tenant's share. Even if you never enforce this clause, its presence violates the statute.

Solution: Update your lease template immediately. Remove all broker fee language. If you're unsure whether your lease complies, have an attorney review it before using it again.

Mistake #2: Indirect Fee Collection (Disguised Broker Fees)

Some landlords attempt to circumvent the FARE Act by creating separate charges with different names: "lease preparation fee," "application review fee," "move-in coordination fee," etc. If these charges are tied to a broker's involvement, they're illegal.

Solution: Any fee you charge a tenant must be for a service you (not a broker) directly provide, and it must be unrelated to brokerage. Even then, local regulations may cap application fees—in many parts of New York, application fees are capped at $20-$30.

Mistake #3: Not Addressing Broker Fee Language in Renewal Leases

When a tenant renews their lease, you cannot retroactively impose broker fees if a broker assisted in the renewal process. The FARE Act applies to renewal negotiations the same way it applies to initial leases.

Solution: Ensure renewal lease templates also have zero broker fee language.

Mistake #4: Not Specifying Landlord Payment in Broker Agreements

If your agreement with a broker doesn't explicitly state that you pay all commissions and the broker cannot charge the tenant, the broker may attempt to collect from the tenant directly. You could face a claim that you were complicit.

Solution: Every broker agreement should include explicit FARE Act compliance language stating the landlord pays all fees and the tenant will not be charged.

Mistake #5: Requiring Tenants to Sign Broker Fee Acknowledgments

Some landlords ask tenants to sign a form saying "I understand I may be responsible for broker fees" or similar language. This is a red flag. It suggests you're trying to get the tenant's "agreement" to an illegal fee, which doesn't make it legal.

Solution: Do not ask tenants to acknowledge broker fees as their responsibility. If anything, provide a written statement clarifying that broker fees (if any) are the landlord's obligation.

Real Property Law § 226-c: The Full Text You Need to Know

The statute is concise but powerful. Here's what it requires:

"No lessor or agent of a lessor shall require, demand, or receive from a lessee or prospective lessee, or collect on behalf of a broker, any fee, commission or other charge of any kind in connection with the lease or rental of any residential dwelling unit or the negotiation, execution or renewal of any lease or rental agreement for a residential dwelling. No broker shall require, demand, or receive from a lessee or prospective lessee any fee, commission or other charge of any kind in connection with the lease or rental of any residential dwelling unit..." — Real Property Law § 226-c(1)

The law applies statewide—not just New York City, not just condos or co-ops, not just rent-regulated apartments. It applies to all residential dwellings where a broker is involved.

How This Affects Your Leasing Strategy

Cost Impact on Landlords

If you previously used brokers and split commissions with tenant-paid fees, your leasing costs have increased. A broker costing $3,000 (where the tenant previously paid $1,500) is now a $3,000 landlord expense entirely.

This has led many small landlords to:

• Lean toward direct leasing — using online platforms, social media, and direct advertising rather than hiring brokers
• Renegotiate broker fees — negotiating lower commissions with brokers now that the landlord bears the full cost
• Use tenant-screening platforms — managing applications and showings independently to reduce middleman costs

LeaseBase's lease operations tools allow self-managing landlords to handle leasing, applications, and document preparation without hiring brokers, reducing costs while maintaining compliance.

Renewal Lease Considerations

When a tenant renews, even if no broker is involved, do not attempt to charge any "renewal fees" or "extension fees" to the tenant that are tied to broker involvement. If you use a broker to negotiate a renewal, that broker's cost is yours.

State-Level vs. Local Variations

The FARE Act is statewide, so the rules are consistent across New York. However:

• New York City: NYC has additional housing regulations. The NYC Housing Preservation and Development (HPD) agency enforces FARE Act compliance in the city. No additional broker fee rules exist beyond the state law, but NYC's Tenant Advocates are actively pursuing violations.
• Rent-Stabilized Apartments: If your property is rent-stabilized (primarily in NYC), the FARE Act still applies. You cannot charge broker fees even to stabilized tenants.
• Market-Rate Properties: The FARE Act applies equally to market-rate and regulated units.

Documentation Best Practices for Your Records

To defend against a FARE Act complaint, maintain a file for each lease transaction including:

1. Lease Document: A copy showing no broker fee language
2. Broker Agreement (if applicable): Signed agreement between you and the broker specifying landlord payment of all commissions
3. Commission Invoice: From the broker detailing the fee amount and services rendered
4. Payment Receipt: Proof you (the landlord) paid the broker, with date and amount
5. Tenant Application Confirmation: A copy of what the tenant saw in the application process (should have no broker fee references)
6. Move-In Documentation: Any written communication to the tenant clarifying broker fees are not their responsibility

These documents collectively prove compliance. If challenged, you can demonstrate the landlord paid all broker costs and the tenant was never charged.

FAQ: New York Broker Fee Rules After the FARE Act

Q1: Can I charge a tenant a "lease preparation fee" instead of a broker fee?

A: Not if the fee is connected to a broker's involvement. If you (the landlord) are preparing the lease and the tenant is charged for that service directly by you (not through a broker), a very small administrative fee might be defensible—but most of New York caps application and administrative fees at $20-$30 per the Department of Financial Services guidance and local housing code. A "$500 lease preparation fee" would almost certainly violate the FARE Act and local fee caps.

Q2: What if the tenant insists on paying the broker fee?

A: It doesn't matter. Consent doesn't make an illegal fee legal. The FARE Act is a mandatory rule, not a negotiable guideline. Even if a tenant agrees in writing to pay a broker fee, the statute prohibits it. You cannot enforce that agreement, and the tenant can sue for recovery.

Q3: Does the FARE Act apply if I found the tenant myself without a broker?

A: No. If no broker was involved in the transaction, there are no broker fees to charge. You can charge application fees (within legal limits) or other legitimate landlord costs, but those are not "broker fees" under the FARE Act. However, application fees are capped in most New York jurisdictions at $20-$35, so don't assume you have unlimited room to charge processing costs.

Q4: Can I charge a broker fee to a commercial tenant?

A: The FARE Act specifically covers "residential dwelling units." Commercial leases are not covered by this statute. However, commercial lease law may have its own restrictions depending on the context. Consult an attorney for commercial properties.

Q5: What if my broker refuses to sign a FARE Act compliance agreement?

A: Do not use that broker. A broker who refuses to acknowledge compliance with New York law is a liability. They may attempt to charge tenants directly, exposing you to tenant lawsuits and AG enforcement. Use a broker who understands and complies with the FARE Act. Many brokers now factor the full commission cost into their standard rates with landlords, expecting landlord payment.

Q6: If a tenant paid an illegal broker fee under the old rules before the FARE Act, can they still sue?

A: Possibly. While the FARE Act took effect February 3, 2024, tenants who were charged illegal fees before that date may have claims under other statutes (like General Business Law § 349 for deceptive practices) or under common law fraud/unjust enrichment. If you charged broker fees before February 2024, consult an attorney about potential liability. The safer path: refund any broker fees you collected from tenants since the FARE Act's effective date and document the refund.

Staying Current with New York Landlord-Tenant Law

The FARE Act is one of several major landlord-tenant law changes in New York over the past few years. Staying compliant requires tracking updates from:

• New York Attorney General's Office (housing enforcement division)
• NYC Housing Preservation and Development (for NYC properties)
• New York State Department of State (for broker licensing and regulations)
• Your county or city housing authority

LeaseBase's compliance engine automatically tracks state and local law changes for your properties, flagging updates that affect your leases and processes. This removes the burden of manual compliance monitoring across multiple jurisdictions.

Bottom Line for Self-Managing Landlords

The FARE Act shifted broker fee costs entirely to landlords. This is now a mandatory rule in New York with real teeth: statutory penalties up to $1,000 per violation, treble damages for patterns, and enforcement by the Attorney General, tenant advocates, and individual tenants.

For self-managing landlords with 2-75 units, the practical steps are simple:

1. Update your lease templates to remove all broker fee language
2. If you hire a broker, include FARE Act compliance language in your broker agreement
3. Pay all broker commissions from your account, not the tenant's
4. Keep documentation proving landlord payment
5. Educate yourself and any staff about the FARE Act before engaging brokers or leasing units

Compliance is cheaper than litigation. A single FARE Act violation can cost $1,000-$3,000 in penalties and refunds. A pattern across your portfolio could cost $30,000+. Preventing violations through clear lease language and broker agreements is the only strategy that makes economic sense.

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Disclaimer

This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance specific to your situation. Real estate and landlord-tenant law varies by jurisdiction and changes frequently. The information in this article reflects New York law as of October 2026 but should be verified against current statutes and regulations.