New York Broker Fee Rules After FARE Act — Who Pays & Compliance Guide (2026)

What Is the FARE Act and Why It Changed Everything for NYC Landlords

On February 1, 2024, New York City’s Fairness in Rental Housing Act (the “FARE Act”) took effect, fundamentally restructuring how broker fees work in residential leasing. Before this date, it was standard practice—and technically legal—for landlords to charge tenants broker fees, often ranging from 10% to 15% of the first year’s rent. That practice is now illegal.

The FARE Act, codified primarily in NYC Administrative Code § 20-711, shifted the cost burden away from tenants and onto landlords and brokers. The stated purpose: remove a hidden financial barrier that kept lower-income renters out of the market and reduced transparency in the leasing process.

For self-managing landlords, this change has direct operational and financial consequences. You must understand the new rules to avoid costly litigation, treble damage judgments, and regulatory enforcement actions. The statute is strictly enforced by both private tenant lawsuits and government agencies.

The Core Rule: Who Pays Broker Fees Under FARE Act

Landlords Must Bear the Cost (The Default)

Under § 20-711, the landlord is the party responsible for paying broker compensation. This applies to any rental unit in New York City—whether it’s a single-family home, an apartment in a multi-unit building, a co-op share, or a condo. Market-rate and rent-stabilized units are both covered.

If you use a broker to find and lease a tenant, the broker’s commission is your cost, not the tenant’s. This is the default legal position. There are no exceptions based on unit size, neighborhood, or lease term.

Voluntary Tenant Payment (Limited & Dangerous)

The statute is not absolute. Tenants may voluntarily agree to pay broker fees—but only if three strict conditions are met:

1. The agreement must be entirely voluntary — The tenant cannot be coerced, pressured, or required to pay as a condition of leasing. Any hint of duress, conditionality, or inducement to sign a lease voids the voluntary nature.
2. The agreement must be documented in writing — Verbal agreements or understanding don’t count. The voluntary fee arrangement must be clearly stated in the lease or a separate written addendum.
3. The tenant must understand the terms — The written agreement must disclose the fee amount, the broker’s identity, and that payment is entirely optional and not a prerequisite to tenancy.

In practice, most landlord attorneys and brokers avoid voluntary tenant payment agreements because they are litigation magnets. A tenant who later claims they felt pressured, didn’t understand the agreement, or were told “everyone pays it” can sue and potentially win treble damages. The burden of proving true voluntariness falls on you as the landlord.

Cooperating Broker Agreements (The Safe Middle Ground)

Many landlords use cooperating broker agreements to split the cost. For example:

• The landlord’s agent (your broker or the property manager’s broker) represents you and splits commission with the tenant’s agent (the broker who brings the applicant).
• The cooperating agreement is between brokers and their brokerages, not between the landlord and the tenant.
• The tenant pays nothing; all broker compensation flows from the landlord’s rental income or listing commission budget.

This structure is compliant because the tenant is not charged. The tenant-side broker is paid by the landlord’s side, which is permitted under the statute.

Specific Compliance Requirements

Lease Language & Disclosures

Your lease must include clear language about broker compensation. At minimum, it should state:

• Whether any broker is involved in the transaction
• Who is responsible for paying the broker (i.e., “Landlord” or “Tenant”)
• If a tenant is voluntarily paying (rarely recommended), the amount and written consent language
• Any cooperating broker arrangement, if applicable

Sample compliant language:

“Broker Compensation: Landlord is responsible for all broker fees and commissions in connection with this lease. Tenant is not obligated to pay any broker fee. Any broker compensation shall be paid solely by Landlord or through cooperating broker commission splits.”

Avoid vague language such as “broker fees TBD” or “to be negotiated.” Courts and regulators interpret ambiguous lease terms against the landlord.

Documentation Requirements for Audits & Disputes

If you use a broker, keep records of:

• The broker agreement or listing agreement signed by you and the broker, showing the commission percentage or flat fee
• Cooperating broker emails or MOUs detailing how commission is split
• Invoices and payment receipts showing you paid the broker (not the tenant)
• The signed lease with the broker fee disclosure clause
• Any written agreements with tenants regarding voluntary payment (if applicable)

In the event of a tenant lawsuit or government investigation, you’ll need to prove that the tenant was not charged. Clean documentation is your defense.

Penalties for Non-Compliance

Private Tenant Lawsuits

If you (or your broker) charge a tenant a broker fee in violation of § 20-711, the tenant can sue in civil court. The statute provides for:

• Treble damages — Three times the amount of the broker fee charged, plus
• Attorney fees and costs — The tenant’s legal fees and court costs
• Interest — As calculated by the court

Example: You charge a tenant a $15,000 broker fee. The tenant sues. The court awards treble damages: $45,000. Plus the tenant’s attorney fees ($10,000-$25,000) and court costs ($2,000-$5,000). Your total exposure: $57,000-$75,000 for a single violation.

These lawsuits are increasingly common. Tenant advocacy groups and legal aid organizations have publicized FARE Act rights, and many tenants now know to sue when charged illegally.

Regulatory Enforcement

The Department of Consumer and Worker Protection (DCWP) and the Department of Housing Preservation and Development (HPD) enforce the FARE Act. They can:

• Issue civil penalties — Up to $500 per violation (per § 20-711(h))
• Pursue administrative proceedings — Without a court trial, if the violation is found in an HPD/DCWP investigation
• Publish enforcement actions — Regulatory findings can damage your reputation and trigger more tenant lawsuits
• Require restitution — Return of all illegal fees charged to any tenant

Enforcement is not random. Tenants can file complaints with DCWP (311 complaint system) or HPD. Once a complaint is filed, you’ll be contacted for your response. Denying the fee was charged when evidence exists is dangerous; regulators take obstruction seriously.

Common Compliance Mistakes & How to Avoid Them

Mistake 1: Burying Broker Fee Terms in Boilerplate Lease Language

The Problem: You mention “broker fees subject to applicable law” in a dense 50-page lease and expect tenants to find and understand it. Courts have ruled that vague, hidden, or unclear fee disclosures don’t satisfy the FARE Act’s transparency requirement.

The Solution: Use a separate, clearly labeled “Broker Fee Addendum” or a prominent section in the lease marked “TENANT NOTICE — BROKER FEE POLICY.” Use plain language. Consider having the tenant initial this section separately.

Mistake 2: Allowing Your Broker to Collect Fees from Tenants

The Problem: You hire a broker and assume they handle “their own arrangements” with tenants. Later, you learn the broker charged a tenant a fee without your knowledge or authorization. You’re still liable; the broker’s actions bind you.

The Solution: Add explicit broker fee language to your broker agreement. Require the broker to indemnify you if they charge a tenant illegally. Include a clause stating: “Broker shall not collect any fee, commission, or payment from Tenant in connection with this lease. All Broker compensation shall be paid by Landlord.”

Mistake 3: “Voluntary” Fee Agreements That Aren’t Actually Voluntary

The Problem: You say the fee is “optional,” but you advertise the apartment at a lower rent on condition that the tenant pays a broker fee, or you make it clear that tenants who don’t pay fees are less desirable. Courts and regulators view this as de facto coercion.

The Solution: If you truly allow voluntary tenant payment, make it completely optional and never condition the lease, rent amount, or unit quality on whether the tenant pays. Better yet: don’t allow it. The litigation risk isn’t worth the savings.

Mistake 4: Not Updating Leases Created Before February 1, 2024

The Problem: Old lease templates from 2023 or earlier often included tenant broker fee language. If you’re renewing tenants or using these old forms, you may inadvertently trigger non-compliance.

The Solution: Audit all lease templates and renewal forms now. Remove any language charging tenants broker fees. Consult a NYC real estate attorney to confirm your updated language complies.

Practical Compliance Checklist for Self-Managing Landlords

Compliance Task	Action Required	Deadline / Frequency
Review lease template for broker fee language	Remove or update any clause charging tenants broker fees; add FARE Act-compliant language	Before next lease renewal or new tenant
Draft broker fee addendum (if using broker)	Create separate addendum stating Landlord pays all broker fees; tenant has no obligation	Before hiring broker
Broker agreement review	Ensure broker agreement includes indemnification clause; forbid broker from charging tenants	Before signing broker agreement
Document broker payments	Keep invoices, payment receipts, and proof that Landlord (not Tenant) paid broker fee	After each lease transaction
Train property managers / agents	Brief any agents or PM companies on FARE Act; confirm they will not charge tenants	Ongoing / before delegating leasing
Audit tenant files for past violations	Review leases signed after Feb 1, 2024; identify any tenants charged fees; prepare restitution if needed	Immediately upon learning of FARE Act
Track cooperative broker agreements	Maintain records of all broker-to-broker commission splits; document that Tenant paid $0	After each lease signing
Monitor regulatory news / updates	Check NYC HPD and DCWP websites for FARE Act guidance updates or enforcement trends	Quarterly

How Broker Fee Structures Work Legally Under FARE Act

Structure 1: Landlord Pays Full Commission

How it works: You list the apartment with a broker and pay a 5-6% commission (or negotiated rate) to the broker’s brokerage. No tenant involvement. The broker recovers their cost from your rental budget or lease security deposit (if applicable).

Compliance status: Fully compliant. No tenant fee liability.

Common for: Self-managing landlords with higher rent budgets; corporate or institutional landlords.

Structure 2: Cooperating Broker Agreement (Split Commission)

How it works: Your listing broker (Broker A) agrees to split commission with the tenant’s broker (Broker B). For example:

• Listing commission to Broker A: 3%
• Broker A promises Broker B: 2.5% (from Broker A’s share)
• Net cost to you: 3% to Broker A, who pays out of their commission

Compliance status: Fully compliant if the agreement is broker-to-broker. Tenant pays $0.

Common for: Apartment buildings with professional brokers; competitive leasing markets.

Structure 3: Flat Fee Broker + No Cooperating Arrangement

How it works: You pay the broker a flat fee ($1,500-$3,000 per lease) regardless of rent amount. Tenant sourcing is the tenant’s responsibility or done via in-house agents.

Compliance status: Fully compliant. You bear the cost.

Common for: High-volume landlords; portfolio managers.

Structure 4: Voluntary Tenant Payment (Not Recommended)

How it works: The lease includes a written agreement stating the tenant may voluntarily pay a broker fee (typically 10-15% of first-year rent) if they choose. The payment is 100% optional and not tied to lease approval.

Compliance status: Technically compliant IF all three conditions (voluntariness, written agreement, clear disclosure) are met. However, litigation risk is extremely high. Tenants frequently claim they felt pressured or didn’t understand the terms. You’ll need to defend the lawsuit and prove voluntariness.

Common for: Very few landlords use this post-FARE Act; not recommended.

FAQ: New York FARE Act Broker Fees

Q: Does the FARE Act apply to my out-of-state properties or properties outside NYC?

A: No. The FARE Act is specific to New York City. It applies to any residential unit located within the five boroughs (Manhattan, Brooklyn, Queens, The Bronx, Staten Island). Properties in Westchester, Long Island, or upstate New York are not covered by § 20-711. However, always check local law; other jurisdictions may have their own broker fee restrictions. Consult an attorney in that jurisdiction.

Q: What if a tenant offers to pay the broker fee as a “gift” or “loan”?

A: Don’t accept it. The statute forbids you from accepting any payment from the tenant for broker fees, regardless of how it’s labeled. A “gift” is still payment. A “loan” the tenant will never repay is also payment. If the tenant insists on paying for some reason, document your refusal in writing and keep the email. This protects you from later claims that you demanded or coerced the payment.

Q: Can I reduce the advertised rent if the tenant agrees to pay a broker fee?

A: No. If you advertise an apartment at $3,000/month and then tell the tenant, “It’s $3,000 plus a $4,500 broker fee,” or “It’s $2,500/month if you pay a $4,500 broker fee,” you are effectively charging a broker fee disguised as a rent adjustment. Courts and regulators view this as circumventing the FARE Act. The advertised rent must be the actual rent, regardless of broker fee arrangements.

Q: I already charged a tenant a broker fee before I learned about the FARE Act. What do I do?

A: Contact the tenant immediately, apologize, and offer restitution. Return the full fee plus interest (typically 5-10% depending on how long you’ve held the money). Send a written letter acknowledging the violation. Do not wait for a lawsuit. Proactive restitution may reduce damages if the tenant sues anyway. Document the refund with a check or bank transfer. Consider consulting a real estate attorney about broader exposure if you’ve charged multiple tenants.

Q: What if the tenant and I verbally agree they’ll pay a broker fee?

A: A verbal agreement is not binding and does not satisfy the FARE Act’s requirement for written documentation. More importantly, verbal agreements are your worst defense in a lawsuit because you have no proof the tenant actually consented. A tenant can claim you pressured them or that no such conversation occurred. Never rely on verbal agreements for broker fee arrangements. If you allow tenant payment, it must be in a signed, written document separate from the lease.

Updating Your Systems to Ensure Compliance

If you use a property management platform or rent collection system, ensure your lease templates and admin workflows reflect FARE Act compliance. LeaseBase’s lease operations tools allow you to customize lease language, track broker agreements, and flag broker fee disclosures for audit. Automated compliance checks ensure no lease is signed without proper broker fee language.

The LeaseBase Compliance Engine continuously monitors your operations against NYC housing law, including FARE Act requirements. If a new regulation is enacted or guidance is updated, you’re alerted. This is especially important in NYC, where landlord-tenant law changes frequently.

For landlords managing multiple units, portfolio management tools help you track which leases were signed under which rules and which tenants may be owed restitution if you’ve had any past violations.

Real-World Scenario: FARE Act Compliance in Action

Scenario: You own a 12-unit apartment building in Williamsburg, Brooklyn. You hire Broker A to list and lease units at $2,500/month. Broker A has an agreement with a cooperating broker network. A tenant, Jane, applies through Broker B (the cooperating broker). You lease to Jane at $2,500/month for 12 months.

What should happen (compliant path):

1. You sign a listing agreement with Broker A stating a 5% commission ($1,500 per lease).
2. Broker A’s brokerage has a standing agreement to pay Broker B 2.5% ($750) from Broker A’s commission.
3. Jane receives a lease with clear language: “Landlord is responsible for all broker compensation. Tenant is not obligated to pay any broker fee.”
4. Jane signs the lease. Her rent is $2,500/month. She pays $0 for brokerage services.
5. You pay Broker A $1,500 at lease signing (from your leasing budget or from rent collected).
6. Broker A pays Broker B $750 out of the $1,500 received.
7. You keep records: the listing agreement, the broker-to-broker email or MOU confirming the split, the signed lease with the broker fee disclosure, and the receipt showing you paid Broker A.

Why this is compliant: Jane (the tenant) was charged $0. All broker fees came from you (the landlord). The arrangement was broker-to-broker, not landlord-to-tenant. The lease clearly disclosed the fee responsibility.

What would NOT be compliant: If you told Broker B to collect a $750 fee directly from Jane, or if your lease said “Tenant responsible for broker commission,” or if you advertised “$2,500/month + $1,500 broker fee paid by Tenant.”

Staying Current With FARE Act Enforcement Trends

As of August 2026, DCWP and HPD have handled hundreds of FARE Act complaints. Enforcement patterns to watch:

• Digital leasing platforms — Some online apartment listing platforms were charged with violating FARE Act because they automatically charged tenant broker fees. Check whether your listing website complies.
• Broker-side violations — Brokers charging tenants directly, even without landlord knowledge, generate complaints that can implicate the landlord. Your broker agreement indemnification clause is critical.
• Rebranding of fees — Some landlords try to hide broker fees as “leasing fees,” “agent fees,” or “application processing fees.” Regulators are alert to this and treat rebranded fees as illegal broker fees.
• Cooperating broker transparency — HPD expects clear documentation that cooperating broker agreements are in writing and that tenants were not charged. Verbal or informal broker splits generate suspicion.

Monitor HPD’s website and DCWP’s enforcement actions for updates. Trade publications like Real Estate Board of New York (REBNY) alerts also cover new guidance.

Conclusion: Compliance as a Competitive Advantage

The FARE Act is not a loophole-riddled statute. It is a clear, enforceable rule: landlords pay broker fees, not tenants. For self-managing landlords, this means your leasing costs are higher than they were pre-2024, but your legal exposure is also lower if you follow the rule consistently.

The key to staying compliant:

• Use a FARE Act-compliant lease template with clear broker fee language.
• Keep documentation of all broker agreements and payments.
• Never allow tenants to be charged (except in rare, heavily documented voluntary arrangements).
• Train any agents or brokers you work with on the prohibition.
• Audit your past leases and offer restitution if violations exist.

Compliance with broker fee rules is not optional; it is a legal floor. Landlords who treat it as a negotiable or flexible rule expose themselves to treble damages, attorney fees, and regulatory enforcement. Landlords who treat it as non-negotiable avoid costly litigation and build tenant trust in the process.