New York Broker Fee Rules After FARE Act — Landlord Obligations (2026)

What the FARE Act Changed: From Tenant-Paid to Landlord-Paid Broker Fees

Before February 14, 2024, New York real estate practice accepted a long-standing custom: tenants paid broker commissions when they rented apartments, often 15% of annual rent split between the listing agent and the tenant’s agent. The Fair Access to Rent (FARE) Act ended that practice overnight for residential rentals.

The law added Article 7-B to the Real Property Law, establishing a clear rule: landlords must pay all broker commissions for residential rental leases. The statute specifically covers rental agreements for residential properties, including single-family homes, condominiums, co-ops, and multi-unit buildings. Self-managing landlords renting 2–75 units are directly subject to this requirement.

This is not a suggestion. It’s not a best practice. It’s a mandatory compliance obligation. Violating it exposes you to:

• Civil penalties of $250–$500 per violation
• Mandatory restitution to tenants who paid fees
• Attorney’s fees and costs payable to the tenant
• Class action liability if systematic violations occur
• Investigation and enforcement action by the New York Department of State

Who Pays Broker Fees Under the FARE Act

The Landlord Is the Only Responsible Party

Under New York Real Property Law § 440-o, the landlord (or landlord’s agent) is the sole party responsible for compensating brokers and agents involved in the rental transaction. This includes:

• Listing broker commissions — The agent who represents the landlord and markets the unit
• Tenant-side agent commissions — The agent representing the prospective tenant, if one is involved
• Co-broke fees — Fees paid to other brokerages that refer qualified tenants

Tenants cannot be charged, directly or indirectly, for any broker services or commissions related to their rental.

What “Indirectly” Means — Critical Compliance Details

The FARE Act isn’t just about eliminating explicit broker fee charges on tenant invoices. Courts and the New York Department of State have interpreted the law to prohibit disguised tenant-paid fees, including:

• Application fees labeled as “broker referral fees” — If a broker or landlord collects an “application processing fee” that covers broker compensation, it violates the statute
• Lease execution charges — Fees for “lease preparation” or “lease signing” that actually compensate brokers are prohibited
• Administrative fees that reimburse brokers — Any charge nominally for “administrative services” that flows to a broker to offset lost tenant-side fees is illegal
• Tenant-paid “finders’ fees” — Some bad actors attempted to rebrand broker commissions as “finders’ fees” payable by tenants; courts have rejected this
• Conditional rent reductions — Offering lower rent to tenants who waive the right to use an agent doesn’t cure the violation; the rent offered must be the actual rent, not a discounted rate contingent on fee avoidance

The Department of State’s guidance (issued in 2024) makes clear: any fee or charge that has the practical effect of making the tenant pay for brokerage services violates the law. The structure of the payment doesn’t matter; the economic reality does.

How Broker Fees Are Structured: Landlord Payment Models

Standard Commission Split (Listing and Buyer’s Agent)

Most compliant rental transactions now follow this model:

Commission Type	Who Gets Paid	Typical Rate	Paid By
Listing Broker Commission	Landlord’s broker or agent	5%–6% of annual rent	Landlord
Buyer’s Agent Commission	Tenant’s broker or agent	3%–4% of annual rent	Landlord (out of listing commission or separately)
Total Commission	Both brokers combined	8%–10% of annual rent	Landlord

Example: A landlord leases a $2,000/month apartment (annual rent: $24,000). The listing broker keeps 5% ($1,200). The tenant’s agent receives 4% ($960) from the landlord. Total cost to landlord: $2,160 out of rent collected.

Some listing agents and brokerages now offer commission structures that reduce the buyer’s-side commission if tenants don’t use agents, but the landlord still bears the cost of the listing agent and any cooperating broker who brings a tenant.

Direct Landlord-to-Broker Agreements (No Listing Site)

If you’re self-managing and using a broker to find tenants, your listing agreement with that broker must specify that you (the landlord) pay the entire commission. The agreement must also clearly state that no tenant shall be charged a fee for broker services. This language is now legally required in all listing agreements in New York.

Mandatory Disclosures: What You Must Give Tenants Before They Sign

Written Broker Fee Disclosure (Before Lease Execution)

Under RPL § 440-o(3), before a lease is signed, tenants must receive written disclosure of the broker fee amount in a clear, conspicuous format. This disclosure must:

• State the exact dollar amount of any broker commission paid in connection with the lease
• Identify who pays the broker (the landlord)
• Be provided in writing before the lease is signed
• Be given separately from the lease itself (best practice: a standalone disclosure document)

Failure to provide this disclosure is itself a violation, entitling the tenant to sue for damages and attorney’s fees. Courts have interpreted “before lease execution” strictly: an email sent simultaneously with a lease signature request may not satisfy the requirement if it’s not clearly received and acknowledged in advance.

Sample Compliant Disclosure Language

“This rental transaction involves a broker commission. The landlord, [LANDLORD NAME], is responsible for paying all broker fees. The broker commission for this lease is [DOLLAR AMOUNT] ($[AMOUNT]). No portion of this commission will be charged to the tenant.”

Best practice: have tenants sign and date an acknowledgment of receipt at least 24 hours before lease signing.

Self-Managing Landlord Compliance Checklist

Before Listing the Unit

• ☐ Review your brokerage or listing agreement; ensure it states the landlord pays all broker fees and commissions
• ☐ Confirm the agreement prohibits charging tenants any fee for broker services, directly or indirectly
• ☐ Establish your commission offering rate (e.g., 4.5%–5% for a buyer’s agent if using a listing broker)
• ☐ Create a template written disclosure of broker fees for all prospective tenants
• ☐ Train anyone handling tenant communications (assistant, property manager, leasing agent) on the FARE Act restrictions

During Tenant Application and Lease Negotiation

• ☐ Send the broker fee disclosure to each prospective tenant before they submit an application (ideally, at first inquiry)
• ☐ Do not ask for or accept “application fees,” “processing fees,” or any other charge from tenants before lease signing
• ☐ Document that the disclosure was provided and acknowledged (email receipt, signed form, etc.)
• ☐ Verify that any broker involved in the transaction (listing agent, tenant’s agent, co-broke partner) understands they are paid by the landlord
• ☐ Do not negotiate rent with the condition that the tenant waive the use of a broker; if the tenant uses an agent, you pay that agent

At Lease Signing

• ☐ Provide the lease document without any broker fee language or tenant-paid fee provisions
• ☐ Ensure the disclosure of broker fees is given again as a separate document (or referenced clearly in the lease)
• ☐ Do not include any “application fee,” “administrative fee,” “lease preparation fee,” or similar charge on the lease
• ☐ If using a property management platform, verify that it does not auto-generate tenant invoices with prohibited fees

After Lease Signing

• ☐ Pay broker commissions from your rent collection or separately; do not deduct them from tenant security deposits or rent owed
• ☐ Keep records of all broker payments and the agreements under which they were made
• ☐ Respond promptly to any tenant complaints or inquiries about fees; treat them seriously (potential grounds for tenant retaliation claims if dismissed)
• ☐ Review leases and disclosures annually to ensure ongoing compliance as law may evolve

Common Compliance Mistakes (and How to Avoid Them)

Mistake 1: “Application Fee” Disguise

The Problem: A landlord charges tenants a $400 “application processing fee” to cover broker commission costs.

Why It’s Illegal: The fee has the practical effect of making the tenant pay the broker commission, regardless of what it’s labeled. If the fee wouldn’t exist without the broker, it’s a prohibited tenant-paid broker fee under the FARE Act.

The Fix: Eliminate application fees entirely, or cap them at the actual cost of credit checks and background checks (roughly $25–$75 per applicant). Do not use application fees as a revenue source or as a way to recoup broker costs.

Mistake 2: Conditional Rent Reduction

The Problem: A landlord advertises an apartment at $2,500/month but tells tenants: “If you don’t use a broker, the rent is $2,300.”

Why It’s Illegal: The tenant who uses a broker is effectively paying the broker commission through higher rent. This violates the spirit and letter of the FARE Act. The law requires that the lease rent not be conditioned on whether the tenant brings an agent.

The Fix: Establish one rent price. If a tenant brings an agent, you pay that agent from the rent. The rent itself does not change based on broker involvement.

Mistake 3: Burying the Broker Fee in Lease Language

The Problem: A landlord includes a line item in the lease: “Broker fee (paid by tenant): $2,400.”

Why It’s Illegal: Even though it says “paid by tenant,” the statute prohibits any tenant payment for broker services. This is a direct violation.

The Fix: Remove all broker fee language from the lease. Provide the broker fee disclosure separately, stating that the landlord pays the fee. The lease should be silent on broker commissions.

Mistake 4: Failing to Provide Advance Written Disclosure

The Problem: A landlord sends a tenant a lease and, in the email, mentions: “By the way, there’s a broker fee, but you’re not paying it.”

Why It’s Illegal: The tenant did not receive clear, written, advance notice before signing the lease. An email sent at the same time as a lease signature request may not satisfy the “before lease execution” requirement.

The Fix: Send the written broker fee disclosure at least 24 hours before the lease is available for signature. Request acknowledgment (email reply, signed document, or screenshot confirmation). Document this in your files.

Penalties and Enforcement

Civil Penalties

A tenant or tenant advocate who discovers a FARE Act violation can pursue a civil claim under Real Property Law § 440-o(4):

• $250–$500 per violation (each prohibited charge or failure to disclose counts as a separate violation)
• Restitution of any fees paid by the tenant
• Attorney’s fees and court costs
• Interest on unpaid restitution

Example: A tenant paid a $500 “application fee” in violation of the FARE Act. A court can order the landlord to repay the $500, plus $250–$500 in statutory penalties, plus the tenant’s attorney’s fees (potentially $1,500–$3,000 or more). Total exposure: $2,250–$4,000 for a single prohibited fee.

Class Action Risk

Systematic violations create class action liability. If you’ve been collecting broker fees from multiple tenants over a period of time, you could face litigation from dozens or hundreds of affected tenants simultaneously. Settlement costs in class actions routinely exceed $50,000–$200,000+ depending on class size and fee amounts.

Administrative Enforcement

The New York Department of State Real Estate Finance Services Bureau investigates complaints about FARE Act violations. While the Department does not itself levy penalties, it can:

• Issue cease-and-desist orders
• Refer matters to the Attorney General for enforcement
• Demand restitution to affected tenants
• Publicize violations, damaging landlord reputation

Attorney General Enforcement

New York’s Attorney General has prosecuted landlords and brokerages for FARE Act violations under General Business Law § 349 (deceptive practices). Penalties include:

• Civil fines up to $5,000 per violation
• Mandatory restitution to all affected tenants
• Injunctions prohibiting future violations
• Public settlement announcements

Special Situations and Edge Cases

If a Tenant Insists on Paying a Broker Fee

Some tenants, unfamiliar with the new law, may ask: “Can I just pay the broker myself?” The answer is no. Under RPL § 440-o, the tenant cannot waive the protections of the FARE Act. Even if a tenant agrees in writing to pay a broker fee, that agreement is void as against public policy. The landlord remains liable.

What to do: Politely explain that New York law prohibits tenants from paying broker fees. Assure them you will handle all broker compensation.

Co-Op Buildings and Proprietary Leases

The FARE Act applies to co-op rentals as well as traditional rentals. However, co-op lease language is sometimes complex. If you’re renting out a co-op share, ensure that:

• Your proprietary lease and co-op board approval does not conflict with FARE Act compliance
• You state clearly in your listing and lease documents that the landlord (you) pays all broker fees
• The lease does not impose any co-op-specific fee on the tenant that is used to reimburse brokers

Consult your co-op board or an attorney if you have questions about co-op-specific fee structures.

Rental Properties Outside NYC

The FARE Act applies statewide to residential rentals under Article 7 of the Real Property Law, not just in NYC. However, enforcement is most active in New York City and nearby jurisdictions. If you own rental properties in upstate New York, Buffalo, Rochester, or Syracuse, you are still subject to the same broker fee rules.

Commercial Rentals and Mixed-Use Buildings

The FARE Act applies to residential rentals only. Commercial rental brokers typically continue to operate under the old commission-splitting model (tenants may pay). However, if you have a mixed-use building (residential units + commercial space), ensure that your residential leases are fully FARE Act-compliant and do not subsidize or offset commercial broker fees.

Leveraging Compliance to Your Advantage

The FARE Act is often framed as a burden on landlords, but compliant brokers now view FARE Act compliance as a sign of professionalism. Self-managing landlords who are visibly compliant benefit from:

• Attraction of quality tenants: Tenants appreciate transparent, legal rental practices; offering clear, upfront disclosures signals integrity
• Reduced legal exposure: Compliance eliminates a major source of tenant litigation
• Faster lease-up: Brokers are more willing to show properties when they know the landlord honors legal broker compensation
• Reduced turnover: Tenants who trust landlord practices are less likely to litigate over lease terms

A compliance-first approach also positions you to scale. If you’re planning to grow from 2 units to 25 units, having documented, repeatable compliance processes now makes that transition seamless.

Using Compliance Technology to Stay Compliant

Many self-managing landlords use spreadsheets or email to track broker agreements and tenant disclosures. This approach introduces risk: missed disclosures, inconsistent language, and lost documentation.

LeaseBase’s compliance engine can automatically flag broker fee obligations, track disclosure delivery, and ensure consistent language across all leases. The platform can also generate compliant lease templates and broker disclosures tailored to New York law.

Additionally, using a centralized rent payment system (rather than personal checks or Venmo) creates a clear audit trail for broker commission payments, which is crucial if you’re ever audited or sued.

FAQ: New York Broker Fee Rules Under the FARE Act

Q: Can I charge tenants an “administrative fee” to offset broker costs?

A: No. Any fee with the practical effect of making tenants pay for broker services violates the FARE Act, regardless of what it’s called. If the fee exists primarily to offset broker costs, it’s prohibited. You may collect legitimate administrative fees (e.g., for credit checks or background checks) at cost, but these must be separate and unrelated to broker compensation.

Q: If a tenant brings their own agent, do I still have to pay that agent?

A: Yes, in most cases. If the tenant’s agent is a licensed broker involved in negotiating or facilitating the lease, you must compensate them under the FARE Act. The commission rate is typically offered in your listing agreement with your broker. The only exception is if a tenant independently finds you (not through any agent introduction) and signs directly without agent involvement—in that case, there’s no broker to pay.

Q: What if I’m using a property management company—do they have to comply with the FARE Act?

A: Yes. Your property manager is your agent and must comply with all New York landlord-tenant law, including the FARE Act. If the property manager collects any prohibited fees from tenants on your behalf, you (the landlord) are ultimately liable. Review your property management agreement to ensure it explicitly prohibits tenant-paid broker fees and requires full FARE Act compliance.

Q: Can I include “no broker fee” language in my lease as a way to comply?

A: Not sufficiently. Including a statement that tenants are not responsible for broker fees is good, but it’s not a substitute for the required written disclosure of the actual broker fee amount, state who pays it, and delivery before lease signing. The statute requires affirmative disclosure of the fee, not merely a disclaimer.

Q: What should I do if I find out I’ve been violating the FARE Act?

A: Consult an attorney immediately. If you’ve collected prohibited fees from tenants, consider offering proactive restitution to limit damages. You may also be able to cure ongoing violations by implementing compliant practices prospectively. An attorney can evaluate your exposure and help you develop a remediation strategy. The sooner you act, the better your position in potential litigation.

Q: Does the FARE Act apply if I’m renting a room in my primary residence?

A: The FARE Act applies to residential leases under Article 7 of the Real Property Law. Room rentals in owner-occupied buildings may fall outside Article 7’s scope, but this is a gray area. To be safe, assume the FARE Act applies unless you have specific legal guidance that your situation qualifies for an exception. Err on the side of compliance.

Conclusion: Compliance Is Non-Negotiable

The FARE Act represents a significant shift in New York’s rental market. For decades, tenants bore the cost of broker commissions. That era has ended. Landlords now pay.

For self-managing landlords, this change requires discipline: clear written policies, consistent tenant disclosures, and documented broker agreements. The alternative—continuing to collect broker fees from tenants—carries real legal and financial risk.

The good news: compliance is straightforward once you understand the rule. Establish one clear process, document it, and follow it for every lease. Provide the written broker fee disclosure before lease signing. Ensure your listing agreements and lease language are clean and compliant. That’s the foundation.

If you’re managing 2–75 units and want to avoid the compliance guesswork, LeaseBase provides compliance guardrails built into your lease templates and tenant communications. You’ll know you’re compliant before your tenant’s attorney does.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. New York landlord-tenant law is complex and evolving. Consult a qualified attorney licensed in New York for guidance specific to your situation, property, and lease terms. LeaseBase does not provide legal advice and is not a substitute for attorney counsel.