New York Broker Fees After the FARE Act — Who Pays in 2024-2026

What Changed: The FARE Act’s Impact on Broker Fees

On June 18, 2024, New York City’s Fair Allocation of Rental Expenses (FARE) Act took effect, fundamentally rewriting who pays broker commissions in residential leases. For decades, New York landlords routinely collected broker fees from prospective tenants—sometimes $1,500 to $3,000 per apartment—before lease signing. The FARE Act ended that practice. Now, landlords (or building owners) must pay broker commissions directly, absorbing what was once tenant-side expense.

This shift affects approximately 800,000 residential leases in New York City annually. For self-managing landlords with 2–75 units, the change forces a real operational and financial decision: adjust rent to account for broker costs, negotiate lower commissions, or absorb the expense. Understanding the law’s scope, penalties, and enforcement mechanisms is non-negotiable to avoid costly litigation.

The FARE Act: Statutory Language and Scope

The FARE Act amended New York General Obligations Law §5-701 and Real Property Law §228 to prohibit residential lease agreements from requiring or permitting tenants to pay brokerage commissions. The specific language matters for compliance.

Who Must Comply with the FARE Act?

The law applies to:

• All residential leases in New York City for buildings with fewer than 30 units (or those seeking rent-regulated status)
• Market-rate apartments (not rent-stabilized, which had separate restrictions pre-FARE)
• Co-operatives and condominiums when used for residential occupancy
• Lease renewals and new leases executed on or after June 18, 2024

Limited exceptions exist: Commercial leases, office space, and mixed-use buildings where residential space is incidental do not fall under FARE. Additionally, leases signed before June 18, 2024, are grandfathered—you are not required to retroactively pay tenant-side broker fees on expired leases. However, any lease renewal signed after June 18, 2024, is subject to the law.

What the Law Prohibits

Under FARE, landlords and lease agreements cannot:

• Require tenants to pay any portion of brokerage commissions
• Deduct broker fees from tenant security deposits or rent credit
• Include clauses stating “tenant responsible for broker fees” or similar language
• Charge administrative, referral, or placement fees intended to circumvent broker fee rules
• Impose “application fees” that secretly compensate brokers
• Bundle broker costs into inflated lease amounts without clear disclosure

The law is strict: any mechanism that shifts broker payment to the tenant violates FARE. Courts and the New York Department of State have interpreted this broadly to catch sophisticated workarounds.

Who Actually Pays Broker Fees After FARE?

The Landlord’s Obligation

Under FARE, the landlord (or property owner) pays 100% of broker commissions. This applies whether:

• You hire a broker to list or market your apartment
• A broker brings a prospective tenant to your property
• A dual-agent arrangement exists (broker represents both landlord and tenant)
• You negotiate a co-brokerage commission split

The landlord cannot shift this cost forward. If a lease requires the tenant to pay a broker fee, it violates FARE, period. No exceptions for “market rates” or “standard practice”—those defenses fail in court.

Can Landlords Adjust Rent to Offset Broker Costs?

Technically, yes—but with important caveats:

FARE does not prohibit landlords from setting rent high enough to cover anticipated broker commissions. For example, if you budget $2,000 in broker fees for a lease, you can set monthly rent at $2,500 instead of $2,000 to recoup that cost. This is compliant, as long as the lease does not explicitly charge the tenant a “broker fee.”

However, this creates a secondary problem: rent-regulation concerns. If your building has rent-stabilized units or is located in areas with local rent-increase caps (e.g., parts of Westchester or Long Island where local laws exist), inflating rent to cover broker costs may trigger compliance issues. Consult local rent-control authority guidance or an attorney before using this strategy on stabilized portfolios.

What About Tenant-Paid Brokers?

Some tenants hire their own brokers to search for apartments. FARE does not address tenant-hired brokers directly—the law focuses on commission-splitting arrangements initiated by the landlord or lease. If a tenant independently hires a broker and pays that broker’s fees from their own pocket, that is generally outside FARE’s scope. However, if a lease agreement or landlord’s conduct suggests the landlord was implicitly paying the tenant’s broker (via inflated rent or fee rebates), courts may find FARE violation.

Best practice: do not offer to reimburse or cover tenant-hired broker fees in any agreement or conversation. Document that fees are the tenant’s sole responsibility if they choose broker representation.

Penalties for FARE Violations: What Non-Compliance Costs

Civil Penalties

FARE violations carry automatic penalties:

• Statutory penalty: $1,000 per violation
• Treble damages: 3x the amount of broker fees collected from the tenant
• Attorney fees and court costs (prevailing tenant recovers legal fees)

Example: You collect a $2,000 broker fee from a tenant in violation of FARE. The tenant sues. Damages = $2,000 × 3 = $6,000, plus $1,000 statutory penalty, plus the tenant’s attorney fees (potentially $3,000–$8,000 for a straightforward FARE case). Total exposure: $10,000–$15,000.

NYDOS Enforcement and Administrative Action

The New York Department of State (NYDOS) oversees broker licensing and FARE compliance. If NYDOS receives complaints, it can:

• Initiate investigation into your leasing practices
• Issue cease-and-desist orders
• Revoke or suspend broker licenses (if you hold one)
• Fine the landlord independently of tenant lawsuits
• Issue public enforcement actions (reputational damage)

NYDOS has published guidance on FARE stating that violations are “priority enforcement” issues. Expect agency follow-up if tenants file complaints.

Tenant Class Action Risk

Several FARE class actions have been filed since June 2024 against large landlords and property management companies. While most leasehold portfolios under 75 units are lower-profile targets, small-landlord violations can still attract plaintiff-side attorneys if patterns emerge. One tenant suing opens the door to discovery that may reveal similar violations across your portfolio.

FARE Compliance Checklist for Self-Managing Landlords

Use this checklist to ensure your leases and broker agreements comply with FARE:

Compliance Task	Action Required	Deadline / Timeline
Audit all active leases dated 6/18/2024 or later	Search for language like “tenant pays broker,” “finder’s fee,” “placement fee,” “tenant broker commission”	Complete by October 2026
Remove non-compliant clauses from lease templates	Delete or revise any broker fee language; have attorney confirm new template	Before next lease execution
Update broker engagement letters	Ensure letters state landlord (not tenant) is responsible for all commissions and fees	Immediately; use going forward
Review rent-setting methodology	If adjusting rent to cover broker costs, document assumptions; ensure consistency and lack of tenant-specific targeting	Before renewal / new lease
Create clear broker payment documentation	Maintain signed broker agreements showing landlord pays commission; keep invoices and payment records	Ongoing; save for 7 years
Communicate with brokers about FARE compliance	Confirm with brokers that tenant-side fees are prohibited; confirm commission structure in writing	Before each brokerage engagement
Train property managers or leasing staff	Ensure anyone discussing leases with tenants knows FARE applies; no broker fee collection from tenants	Annually; new hire onboarding

Lease Language: What Complies and What Doesn’t

Non-Compliant Lease Language (Avoid These)

Example 1: “Tenant shall be responsible for payment of all broker commissions and finder’s fees incurred in connection with this lease.”

Why it fails: Directly violates FARE by requiring tenant to pay broker fees. Illegal.

Example 2: “Tenant acknowledges that landlord has engaged a broker and tenant agrees to reimburse landlord for brokerage costs within 30 days of lease execution.”

Why it fails: Indirect mechanism for tenant payment. Courts view this as circumventing FARE.

Example 3: “Tenant application fee: $150. (This fee covers broker referral and administrative costs.)”

Why it fails: Application fees cannot be used to disguise broker fee collection. NYDOS has stated this explicitly in guidance.

Compliant Lease Language (Use These)

Example 1: “Landlord shall pay all brokerage commissions and fees associated with this lease in accordance with applicable law, including the Fair Allocation of Rental Expenses Act.”

Why it works: Clear, unambiguous, references FARE by name.

Example 2: “There are no broker fees, referral fees, or placement fees charged to Tenant. If a broker brought Tenant to this property, Landlord shall pay such broker’s commission directly.”

Why it works: Explicitly states tenant pays nothing; shifts burden to landlord.

Example 3: [Lease contains no mention of broker fees whatsoever]

Why it works: FARE-compliant leases often omit broker fee language entirely. Silence is safe; explicit tenant-pay clauses are not.

Broker Engagement Letters and Commission Structure

What Your Broker Agreement Must Say

Your engagement letter or listing agreement with a broker should clearly state:

• Landlord liability: “Landlord [your name/entity] shall pay all commissions due under this agreement. Tenant has no obligation to pay broker fees.”
• Commission rate: e.g., “5% of first month’s rent” or “specific dollar amount”
• Payment timing: e.g., “Due upon lease execution” or “Due within 5 days of lease commencement”
• Co-brokerage or split commissions: If another broker is involved, clearly define each party’s payment (e.g., “Landlord pays 2.5% to listing broker and 2.5% to co-broker”)
• No tenant involvement: Explicit language that broker will not collect fees from tenant

Example broker engagement language:

“Landlord engages [Broker Name] to lease the property located at [Address]. Landlord shall pay Broker a commission of [5%] of the first month’s rent upon lease execution. Broker confirms that Tenant shall not be charged any broker fees, referral fees, or finder’s fees in connection with this lease, in accordance with New York General Obligations Law §5-701 (Fair Allocation of Rental Expenses Act). Any attempt by Broker to collect fees from Tenant shall be a material breach of this agreement.”

Co-Brokerage and Dual Agency

When a lease involves multiple brokers (e.g., listing broker and tenant’s broker), clarify upfront who pays what:

• Scenario A: Landlord pays both brokers. Engagement letter states: “If Broker brings its own client (tenant), Landlord shall pay [X%] to Landlord’s broker and [X%] to Tenant’s broker.”
• Scenario B: Landlord pays one broker, tenant’s broker waives fees. Engagement letter confirms tenant’s broker receives no compensation from tenant or lease.
• Scenario C: Dual agent (one broker represents both parties). Letter should clarify: “Broker is dual agent. Landlord pays full agreed commission. Tenant pays no fees.”

Ambiguity in multi-broker scenarios invites FARE liability. Spell out payment flows in writing.

FARE and Lease Renewals: Key Timing Issues

When Does FARE Apply?

FARE applies to all residential leases executed on or after June 18, 2024. This includes:

• New leases (first occupancy)
• Lease renewals (existing tenant renewing)
• Lease extensions or amendments (if signed after 6/18/2024)

Leases signed before June 18, 2024, are not retroactively subject to FARE. If you collected a broker fee from a tenant in March 2024, that is not a FARE violation (though it may have been prohibited under older rent-regulation rules). However, when that tenant renews in August 2026, the new lease is subject to FARE.

Renewal Lease Compliance Trap

Many landlords renew leases using a simple “renewal rider” or amendment that cross-references the original lease. If the original lease (pre-FARE) contained a tenant broker fee clause, do not simply renew it without deletion or revision. Courts may treat the renewal as a new lease subject to FARE, and a broker fee clause in the renewal rider would violate the law.

Action: When renewing any lease post–6/18/2024, create a fresh lease or renewal addendum that explicitly removes any tenant-broker fee language, even if the old lease had it.

Compliance Documentation: What to Keep and How Long

Audit-proof your broker fee practices by maintaining organized records:

Essential Documents

• Broker engagement letters / listing agreements (signed, showing landlord pays commission)
• Broker fee invoices and payment receipts (proof you paid, not tenant)
• Executed lease agreements (showing FARE-compliant or no broker fee language)
• Lease renewals and amendments (confirming removal of tenant-pay clauses)
• Email communications with brokers (confirming fee payment responsibility)
• Tenant communications or applications (showing no broker fee was requested)

Retention Period

Keep these records for at least 7 years from lease execution. Why? New York law (and FARE enforcement) typically allows claims within 6 years of discovery, and you want evidence to defend yourself if a tenant or agency challenges your practices years later.

For leases executed in 2024–2026, plan to retain documentation through at least 2033.

State vs. City: Does FARE Apply Outside NYC?

The FARE Act is specific to New York City. It does not apply to leases in Westchester County, Long Island, upstate New York, or outside NYC boundaries. However:

• Westchester and surrounding areas may have local rent-control laws that restrict broker fee practices (consult local codes).
• Federal Fair Housing Act (FHA) and state Human Rights Law may restrict fees if they have disparate impact on protected classes—a separate compliance concern.
• If you manage properties in both NYC and non-NYC markets, apply FARE only to NYC leases; maintain separate lease templates for each market.

Do not assume FARE applies outside the five NYC boroughs.

Frequently Asked Questions About FARE and Broker Fees

Q: Can I collect a broker fee if the tenant hired the broker, not me?

A: If the tenant independently hired and paid a broker from their own pocket, that is generally outside FARE’s scope. However, if you implicitly encouraged or facilitated the arrangement (e.g., “I’ll cover half your broker fee”), you may be liable. Best practice: inform prospective tenants upfront that if they use a broker, that broker’s fee is their responsibility. Do not offer to reimburse or split costs.

Q: I signed a lease before June 18, 2024, that included a tenant broker fee. Now the tenant is renewing. Can I keep the broker fee clause?

A: No. Even though the original lease is grandfathered, the renewal lease is new and subject to FARE. You must remove the tenant broker fee clause from the renewal addendum or lease. Not doing so is a FARE violation on the renewal.

Q: What if a broker pressures me to have the tenant pay their commission?

A: Do not agree. Document the pressure (email confirmation to broker: “We confirm that Landlord, not Tenant, is responsible for your commission per FARE Act”). If the broker insists on tenant payment or includes tenant-pay language in listing agreements, report this to NYDOS and consider ending the relationship. Brokers violating FARE can lose their licenses.

Q: Can I set rent higher and advertise it as “no broker fees”?

A: Yes, this is compliant. If you set rent at $2,500/month (instead of $2,000) to absorb broker costs, and the lease clearly states “no tenant broker fees,” this is legal. You are not hiding the cost—it is baked into rent. The lease must not mention broker fees at all, or must explicitly state the landlord pays any broker fees.

Q: What happens if I discover I violated FARE on a past lease?

A: The best course is proactive remediation. Contact the tenant, offer to refund the broker fee, and execute a release confirming full settlement. While this is not a guarantee of immunity from suit, it demonstrates good faith and reduces liability exposure. Document the refund in writing. Then audit your current practices and correct going forward. If the tenant sues anyway, you have evidence of remedial action, which may persuade a court to reduce damages.

Using Compliance Technology to Avoid FARE Violations

Self-managing landlords with 2–75 units often use spreadsheets, email, or disparate tools to track leases, commissions, and fees. This fragmentation creates compliance blind spots—you miss language in old lease templates, lose broker fee documentation, or accidentally renew a non-compliant lease.

Lease operations platforms designed for small portfolios can centralize lease documents, flag non-compliant language, and ensure broker fee clarity across all leases. Using compliance automation to audit lease templates against FARE requirements before signing helps catch violations before they happen.

Portfolio management tools also help you track lease renewal dates, ensuring you do not accidentally renew a pre-FARE lease without removing non-compliant clauses.

For landlords managing compliance across multiple properties and markets, an integrated platform reduces the operational burden and documentation risk compared to ad-hoc email or spreadsheet tracking.

Practical Example: FARE Compliance Walkthrough

Scenario: You manage a 12-unit building in Manhattan. Tenant Smith is renewing his lease in September 2026. His original lease was signed in January 2024 (pre-FARE) and included this language:

“Tenant shall be responsible for payment of broker commissions and referral fees in connection with his tenancy, including those paid to any broker who facilitated his lease.”

What you must do:

1. Remove the broker fee language from the renewal lease. Do not carry it forward. The new lease (September 2026) must not contain this clause.
2. Confirm with your broker (if using one for the renewal) that landlord pays all commissions. Engage a new listing agreement stating: “Landlord pays all broker fees; Tenant pays none.”
3. Include FARE-compliant language in the renewal: “There are no broker fees, finder’s fees, or placement fees charged to Tenant. Landlord shall pay any broker commissions.”
4. Obtain Tenant Smith’s signature on the FARE-compliant renewal lease.
5. If you used a broker, collect an invoice showing landlord (you) paid the commission. File it with the lease renewal documentation.
6. Retain all documents for 7 years.

Result: FARE-compliant renewal. Tenant Smith owes no broker fees. You pay the commission. Documentation is audit-proof.

What not to do: Do not use a simple “renewal rider” that references the original lease verbatim, hoping the pre-FARE language “doesn’t count.” Courts may interpret the renewal as a new lease containing a FARE violation. Always use a fresh renewal addendum or lease that explicitly removes pre-FARE broker fee language.

Recent Enforcement Trends and Lessons from Cases

Since FARE took effect in June 2024, tenant rights organizations and plaintiff attorneys have filed complaints and suits targeting landlords and property managers who collected or attempted to collect tenant broker fees. While appellate case law is still developing, patterns are emerging:

• Lease language is interpreted strictly against landlords. Courts do not excuse “standard market practice” or claims that tenants “understood” they had to pay. FARE is unambiguous.
• Hidden or bundled fees are not safe. If a lease mentions an “administrative fee” or “processing fee” and that money goes to a broker, courts treat it as a broker fee and find FARE violation.
• NYDOS has prioritized FARE complaints in its enforcement agenda. Broker licensing complaints about FARE violations are tracked and acted on. Repeated violations can result in license suspension.
• Treble damages incentivize tenant suits. Because tenants recover 3x damages plus attorney fees, low-cost FARE violations ($500–$2,000) are attracting solo plaintiffs and small group suits.

The takeaway for self-managing landlords: FARE is not a gray area, and “we didn’t know” is not a defense. Compliance requires clear lease language, written broker agreements, and documentation of payment flows.

Next Steps: Your FARE Compliance Action Plan

1. Audit all leases executed 6/18/2024 or later. Search for “broker fee,” “finder’s fee,” “referral fee,” “tenant pays,” “placement.”
2. Revise lease template to remove all tenant-broker-fee language. Have an attorney confirm compliance.
3. Update any broker engagement letters to state landlord (not tenant) pays commission.
4. If you collected broker fees from tenants post-6/18/2024, consider voluntary refund and settlement.
5. Document and retain all broker fee invoices, payment receipts, and broker agreements for 7+ years.
6. Train anyone involved in leasing (yourself, assistants, agents) on FARE compliance.
7. Going forward, ensure all new leases and renewals comply with FARE before execution.

Conclusion: FARE Compliance is Non-Negotiable

The FARE Act represents a significant shift in how New York City residential leases operate. Unlike older regulations that often had gray areas or industry workarounds, FARE is straightforward: landlords pay broker fees; tenants do not. Non-compliance carries steep penalties—treble damages, statutory fines, and attorney fees—making this a high-stakes compliance issue.

For self-managing landlords, FARE requires updated lease templates, clear broker agreements, and organized documentation. The good news: compliance is achievable with straightforward steps. Remove tenant-broker-fee language, ensure brokers understand they are paid by the landlord, and maintain clear records. Done right, you avoid litigation and operate with confidence that your leasing practices meet the law.

If your portfolio spans multiple markets or you manage numerous renewals, consider platforms that automate compliance tracking and lease audit workflows, reducing the administrative burden of staying current with evolving tenant-protection laws.

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