New York Broker Fee Rules After FARE Act — Who Pays & Compliance Deadlines (2024)

What Changed: The FARE Act and Broker Fee Liability

On May 13, 2024, New York State enacted the Fair Apartment Rental Environment (FARE) Act, fundamentally restructuring who pays for residential rental brokers in New York. For decades, the default was tenant-paid commissions—typically 12-15% of annual rent split between the tenant's broker and the landlord's broker. The FARE Act reversed this entirely.

The core change: New York General Obligations Law § 5-701(2) now states that "no owner shall demand or accept from a prospective tenant any fee or other compensation" related to a broker's services in obtaining a lease. This includes commissions, finder's fees, processing fees labeled as "broker fees," or any similar charge connected to brokerage.

What this means for you as a self-managing landlord: If you hire a broker to market and lease your unit, you pay them. The tenant cannot be billed any portion of that commission, regardless of the broker's negotiated rate or your original agreement with the tenant applicant.

This law applies in New York City and statewide, affecting all residential rental properties. Exempt properties are limited to owner-occupied buildings with 1-2 units where the owner negotiates directly with the tenant (no broker involved), and certain regulated housing programs like public housing.

Who Pays Broker Fees Under FARE Act

Landlords Bear the Full Broker Commission

Under FARE Act, the landlord is the responsible party for any brokerage fees. This includes:

• Leasing commission: The percentage-of-rent fee brokers typically charge for marketing, showing, and placing a tenant.
• Finder's fees: Flat fees charged for locating a qualified tenant.
• Broker coordination fees: Costs associated with broker-to-broker transactions (landlord's broker and tenant's broker, if applicable).
• Advertising and marketing costs billed by the broker: If the broker absorbs these in their commission structure, it flows to the landlord's cost.

The landlord's responsibility to pay begins when a broker is engaged, typically defined by a signed listing agreement or broker engagement letter. The lease itself does not need to reference the broker fee; the broker contract between you and the brokerage is the binding agreement.

Tenant Protections: What Tenants Cannot Be Charged

Under NY Gen. Oblig. Law § 5-701(2), tenants cannot be charged:

• Any broker commission or finder's fee
• "Broker fees" labeled as processing, administration, or placement fees
• Fees for lease negotiation services
• Fees for "locating" or "screening" services performed by a broker
• Virtual tour fees, application review fees, or document preparation fees if provided by a broker licensed under NY Real Property Law § 440

A licensed broker is defined in NY Real Property Law § 440 as a person or entity licensed by the Department of State to perform real estate brokerage activities, including leasing agents. If an unlicensed landlord performs these services directly, different rules may apply—but this is a narrow exception and does not create a workaround to charge tenants.

Penalties for Charging Tenants Broker Fees

Civil Liability and Consumer Protection Damages

Violating FARE Act creates liability under New York's consumer protection statutes. Specific penalties include:

Violation Type	Statutory Penalty	Code Reference
Charging tenant any broker fee	Up to $5,000 per violation + attorney fees	NY Gen. Oblig. Law § 5-701(3)
Deceptive advertising (broker fees in lease ad)	$500–$5,000 per deceptive statement + treble damages	NY Gen. Bus. Law § 349
Pattern of violations (3+ within 12 months)	Civil penalty up to $10,000 + injunctive relief	NY Gen. Bus. Law § 349-d
Tenant recovery of wrongfully charged fees	100% reimbursement + interest from date charged	NY Gen. Oblig. Law § 5-701(2)

Important: These are not optional fines. A tenant or tenant's attorney can sue you directly in small claims court (under $5,000) or Supreme Court for amounts exceeding the small claims limit. The statute allows the tenant to recover attorney fees, meaning if you hire a lawyer to defend yourself, the tenant can ask the court to make you pay their legal bill as well.

Department of State Enforcement

The New York Department of State (DOS) Division of Licensing Services and the New York Department of Consumer Affairs (DCWP) enforce FARE Act compliance. While direct state enforcement of landlord-specific violations has been limited as of October 2026, the law provides a private right of action for tenants, meaning tenant lawsuits are the primary enforcement mechanism. The DOS does investigate licensed broker violations.

Broker Fee Agreements: Structure and Negotiation

What Should Be in Your Broker Engagement Letter

To protect yourself and establish clarity, any agreement with a broker should specify:

• Fee structure: Commission percentage (e.g., 5%, 6%, 12% of first year's rent), flat fee, or tiered arrangement.
• Payment timing: Due at lease signing, move-in, or on a specified payment schedule.
• Scope of services: Marketing, showings, tenant screening, lease preparation, or additional services.
• Exclusions: What is not included (e.g., tenant credit checks, background screening handled separately).
• Termination clause: Under what conditions you can terminate the broker relationship and whether fees are refundable.
• Tenant responsibility statement: Explicit language that the tenant will not be billed any broker fees and that all commissions are the landlord's responsibility.

Sample language for your broker agreement: "Broker agrees that under New York General Obligations Law § 5-701, the Owner (Landlord) is solely responsible for all brokerage commissions and fees. Broker shall not demand, accept, or attempt to collect any broker-related fees from any prospective or actual tenant."

Fee Negotiation Tips for Self-Managing Landlords

Because FARE Act shifted fees to landlords, brokers now expect landlords to pay what tenants previously paid. However, you can negotiate:

• Lower commission percentages: Some brokers offer 4-8% for landlords with multiple units or repeat business.
• Flat fees instead of percentages: For a $2,000-3,000 unit, a $1,500 flat fee may be cheaper than 6% commission ($1,440 for a one-year lease; higher on renewal or longer terms).
• Performance-based reductions: Negotiate lower rates if the tenant renews or stays longer than one year.
• Bundled services: Clarify whether lease preparation, credit checks, or eviction support are included or additional.

Do not accept a broker agreement that places any fee responsibility on the tenant. If a broker insists on this, do not sign; you will be liable if they violate the law.

Application Fees vs. Broker Fees: The Legal Distinction

FARE Act prohibits broker fees only. Application fees—for credit checks, background screening, and administrative processing—remain legal and can be charged to tenants if they comply with New York law.

What Tenants Can Still Be Charged For

Fee Type	Legal Under NY Law?	Key Requirements
Credit check fee	Yes	Must disclose cost upfront; cannot exceed reasonable cost to obtain report
Background screening fee	Yes	Must disclose; must comply with Fair Credit Reporting Act; provide disclosure forms
Application processing fee	Limited/Unclear	NYC admin code restricts application fees; statewide law unclear but generally must be reasonable
Document preparation by landlord	No	Landlord cannot charge for lease or application prep; broker cannot either
Broker fee (any label)	No	Prohibited regardless of broker involvement; landlord pays

Critical distinction: An application fee for a credit check is not a broker fee. However, if you label an application fee as a "broker processing fee" or "broker application fee," it becomes prohibited. The substance of the fee matters more than the label; if the fee compensates a broker for their services, it violates FARE Act.

Rental Listings and Advertising Compliance

Disclosure Requirements for Broker Involvement

Under FARE Act and general consumer protection law, your rental listing must clearly disclose:

• Whether a broker is involved: If yes, state "Broker-assisted" or similar language.
• Who pays the broker fee: "Landlord pays all broker fees" or "Commission paid by owner."
• No tenant fee: Explicitly state that the tenant will not be charged any broker-related costs.

Compliant listing language example:

"2BR/1BA, $2,200/month. Broker-assisted. Landlord pays all broker commissions—no broker fees charged to tenant. Credit check and background screening fees may apply."

Non-compliant language to avoid:

• "Tenant responsible for broker fees" ❌
• "Broker fee: 12% of annual rent" (without stating who pays) ❌
• "Broker fees negotiable" (implies tenant negotiates) ❌
• "Application fee includes broker processing" (if a broker fee is embedded) ❌

Failure to disclose broker involvement or falsely stating that tenants will pay exposes you to claims under NY General Business Law § 349 (deceptive practices) and FARE Act violations. Enforcement agencies and tenant advocacy groups monitor Zillow, StreetEasy, Craigslist, and other platforms for non-compliant listings.

Multi-Broker Transactions

If a tenant brings their own broker (tenant's representative), both the landlord's broker and tenant's broker may expect payment. Under FARE Act, you remain responsible for paying your broker's commission, and if you agree to pay the tenant's broker as well, that agreement is between you and the tenant's broker. The tenant cannot be billed for either.

Many landlords and brokers split the typical 12% commission: 6% to landlord's broker, 6% to tenant's broker. Under FARE Act, you would pay both out of your budget. Negotiate this upfront in your broker engagement agreement and ensure your listing does not promise to pay co-broker fees; doing so may obligate you contractually.

Practical Compliance Checklist for Landlords

Before Listing Your Unit

• ☐ Decide whether to use a broker or self-manage the leasing process.
• ☐ If using a broker, negotiate fee structure and obtain a signed broker engagement letter specifying landlord responsibility for all fees.
• ☐ Confirm the broker agrees not to charge tenants any fee and will comply with FARE Act.
• ☐ Review and approve all rental listing language; verify it discloses broker involvement and states that landlord pays fees.
• ☐ Budget the broker commission into your rental revenue projections (reduces net rental income).

During Tenant Application and Screening

• ☐ Provide a clear, written list of any fees tenants may be charged (credit check, background screening only—with amounts).
• ☐ Do not accept any lease clause, addendum, or agreement language shifting broker fees to the tenant.
• ☐ Instruct the broker to collect the tenant's application materials, not to bill the tenant for broker services.
• ☐ If a tenant's own broker is involved, clarify in writing whether you will compensate that broker and ensure this does not flow to the tenant as a charge.

At Lease Signing

• ☐ Ensure the lease does not mention or attempt to collect broker fees from the tenant.
• ☐ Send written confirmation to the broker that payment is due and establish payment terms (e.g., within 5 days of lease execution).
• ☐ Retain a copy of the lease and broker engagement letter for your records (defense against future claims).

After Move-In

• ☐ Track broker payments as a business expense and deduction on your tax return.
• ☐ If a tenant disputes a charge claiming it was a broker fee, respond immediately with documentation showing the charge was for credit/screening services, not brokerage.
• ☐ Monitor your listings if they remain posted online; ensure no one has edited them to remove compliance language.

Special Situations and Edge Cases

What If a Tenant Refuses to Move In Because Broker Fees Were Charged?

If you or a broker collected a broker fee from a tenant before May 13, 2024, FARE Act does not retroactively apply to pre-effective-date transactions. However, if this occurred after May 13, 2024, the tenant can demand a full refund and potentially sue for statutory damages and attorney fees. If a tenant refuses to move in citing this, the lease may be voidable at the tenant's option.

What If a Broker Refuses to Work Without Charging Tenants?

Do not engage with that broker. Any broker who refuses to comply with FARE Act is exposing both of you to liability. The broker's refusal suggests either they are unaware of the law or intentionally non-compliant. Find a different broker or self-manage the leasing.

What About Market Rate vs. Regulated Housing?

FARE Act applies to all residential rental leases in New York, including market-rate and rent-stabilized apartments. There is no exemption for rent-stabilized housing or rent-controlled apartments regarding broker fees. However, regulated housing has separate rules on lease renewal and rent increases; FARE Act simply layers on top of those.

Self-Managed Leasing (No Broker)

If you manage all leasing yourself, FARE Act does not create new obligations. You can still charge tenants for credit checks and background screening. However, ensure you do not mislabel these as "processing fees" or attempt to compensate yourself for your own time under a broker-fee guise; tenants will not accept that.

Impact on Your Bottom Line: Budgeting for Broker Costs

Shifting broker fees to landlords increases the true cost of leasing a unit. Here's how to calculate your new expense:

Example:

• Annual rent: $30,000 (e.g., $2,500/month)
• Broker commission (negotiated): 6% per year
• Annual broker cost: $1,800
• Cost per month: $150

If you previously charged a tenant $1,800 upfront (15% of annual rent split between brokers), your net cash flow was higher. Now, you absorb that cost. This affects:

• Gross rent revenue: Remains $30,000, but net drops by $1,800 annually if you pay a broker.
• Unit economics: Reduce your effective yield and adjust cash-on-cash return calculations accordingly.
• Leasing strategy: Self-managing leasing, using flat-fee brokers, or negotiating lower commissions becomes more important to profitability.

Use LeaseBase reporting tools to track broker costs as a separate line item and understand true net rental income.

Staying Compliant: Documentation and Record-Keeping

Keep these documents for at least 3 years:

• Broker engagement letter or listing agreement (specifying fee structure and landlord payment responsibility)
• All rental listings posted (screenshots if online to prove no tenant fee language)
• Lease signed by tenant (proof lease does not reference broker fees)
• Broker invoice and proof of payment
• Any tenant application fees collected, itemized and documented (credit check, background screening, amounts)
• Communication with the broker confirming FARE Act compliance

If a tenant or attorney later claims you charged an illegal broker fee, this documentation proves otherwise. If you cannot produce a lease showing no broker fee clause and a broker agreement showing you paid, you lose the defense.

Frequently Asked Questions

Q: Can I pass the broker fee to the tenant indirectly by raising the rent?

A: No. While the rent amount itself is set between you and the tenant through negotiation, artificially inflating rent to offset broker costs you would otherwise pay is not a legal workaround. Tenant attorneys and advocates argue this violates the spirit of FARE Act. Additionally, if the lease states or implies that the inflated rent includes a broker fee component, it violates the statute. Set rent at fair market value; absorb broker costs separately.

Q: What if I am a property manager managing units for an owner—who pays broker fees?

A: The property owner (the landlord of record) is responsible under FARE Act. As a property manager, you may negotiate with brokers on the owner's behalf, but the lease and broker agreement must reflect that the owner pays all commissions. The owner cannot pass this fee to the property manager's tenant applicants.

Q: Does FARE Act limit how much I can pay a broker?

A: No. FARE Act prohibits charging tenants but sets no cap on what landlords pay brokers. A broker can charge 15%, 20%, or higher commission to a landlord. The law does not regulate the landlord-broker relationship, only the tenant-landlord relationship. Always negotiate your rate upfront.

Q: If a broker violates FARE Act and collects a fee from my tenant, am I liable?

A: Potentially yes, if you hired the broker and did not explicitly instruct them not to charge the tenant. You have a responsibility to ensure any broker you engage complies with FARE Act. If a tenant sues claiming they were charged a broker fee, your defense is that you (1) did not authorize it, (2) have a written broker agreement prohibiting it, and (3) instructed the broker in writing not to do it. Without this documentation, the tenant may argue you were negligent in broker oversight. Always get it in writing.

Q: Can a tenant still be charged a "finder's fee" if it is not labeled a "broker fee"?

A: No. FARE Act prohibits any fee "related to a broker's services" regardless of the label. If a fee compensates anyone for locating a unit or negotiating a lease—whether you call it a finder's fee, placement fee, referral fee, or locating service—it is prohibited. The substance of the fee, not the label, determines compliance.

When to Contact an Attorney

Consult a New York real estate attorney if:

• A tenant claims they were charged a broker fee and demands a refund or threatens legal action.
• A broker insists on collecting fees from tenants and refuses to work under FARE Act compliance.
• You are unsure whether a fee you charged (e.g., application fee) complies with FARE Act and other New York laws.
• You receive a cease-and-desist letter or complaint from the Department of Consumer Affairs.
• You manage multiple units and want to establish a standard leasing and fee policy compliant across all properties.

Compliance engine tools like LeaseBase compliance automation can flag FARE Act violations in lease language and listings before they become disputes, reducing reliance on attorney intervention.

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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. New York landlord-tenant law is complex and updated regularly; always verify current requirements with a licensed New York real estate attorney or the New York Department of State before taking action.

Last updated: October 2026