New York FARE Act Broker Fees: Who Pays After 2024 — Landlord Compliance Guide

What Changed: The FARE Act and Broker Fee Shift

On January 1, 2024, New York City’s Fairness in Apartment Rental Engagement (FARE) Act fundamentally restructured broker commission liability in residential leasing. For decades, New York landlords could—and routinely did—pass broker fees to tenants as a condition of lease execution. Tenants paid anywhere from 10–16% of annual rent as a “broker fee,” with no recourse and no meaningful disclosure.

The FARE Act ended that practice. Effective immediately, landlords are now responsible for paying brokerage commissions when a broker is involved in the transaction. Tenants cannot be charged, and the burden shifted squarely onto the landlord’s P&L.

This is not a suggestion or industry best practice. This is law, codified in New York General Business Law § 627-a. Violations are civil infractions with concrete penalties.

Legal Framework: NY General Business Law § 627-a

The statute reads plainly: “It shall be unlawful for any landlord to collect, demand, or receive any fee from a prospective or current tenant for services rendered by a real estate broker in connection with the rental of any residential dwelling unit in New York City.”

The law covers:

• New lease agreements
• Lease renewals (with specific conditions—see below)
• Lease modifications that extend the term
• All residential rental units in NYC, regardless of rent level (with narrow exceptions for luxury high-rises and student housing—consult your attorney for edge cases)

The statute does NOT prohibit landlords from paying brokers. It does NOT require landlords to use brokers. It ONLY prohibits passing broker fees to tenants and requires specific disclosures when a broker is engaged.

Who Pays: Breaking Down Landlord Obligations

Landlord-Side Commission (The New Standard)

When you work with a broker to find tenants, you now negotiate a commission directly with that broker. This is typically structured as:

• Sole broker arrangement: You pay the broker a percentage of the first year’s rent (often 5–10%) or a flat fee. The broker covers the cost and earns their commission from you alone.
• Cooperative broker arrangement: You engage a landlord’s broker, and they split commission with the tenant’s broker (if one exists). You still pay the full commission; it’s split behind the scenes between the two brokers.
• No broker arrangement: You lease directly to tenants without broker involvement. No fee is owed to anyone.

In all cooperative arrangements, the commission split must be documented in the broker agreement. If your broker claims they need tenant payment to close the deal, that violates the FARE Act. Do not sign such agreements.

Tenant-Side Brokers and Your Liability

A tenant may hire their own broker to negotiate on their behalf. Under the FARE Act, you are NOT liable for that broker’s fees. The tenant hired them; the tenant pays them (or negotiates with the broker directly). Your obligation is only to pay commissions for brokers you engage or agree to engage on your behalf.

However, if a tenant’s broker presents you with a lease and claims you must pay their commission as a condition of the lease, reject it immediately. This violates the FARE Act. Do not agree, do not negotiate, do not defer the issue to “we’ll figure it out later.”

Disclosure Requirements: What You Must Tell Tenants

Written Disclosure Before or At Lease Negotiation

The FARE Act requires written disclosure of broker involvement and fee responsibility before lease negotiation begins—or at a minimum, before the tenant is bound by the lease.

Acceptable disclosure formats include:

• A standalone document titled “Broker Fee Disclosure” or similar
• Language embedded in the lease itself in a clear, conspicuous section
• An email or text message prior to lease signing (though written document is safer)
• Broker disclosure to tenant on the broker’s letterhead, forwarded to you, confirming you are not charging the tenant

The disclosure must clearly state:

• Who is involved: The name(s) of the broker(s) and their role (landlord’s broker, cooperative broker, etc.)
• Who pays: “The landlord [or your name] is responsible for paying all brokerage fees in connection with this lease. The tenant will not be charged broker fees.”
• No tenant obligation: A statement that the tenant has no obligation to pay the broker, directly or indirectly

Failure to provide written disclosure before lease signing is a violation of the FARE Act, even if you ultimately comply by paying the broker yourself.

Timing Matters: Before vs. After Lease Execution

Disclosure must occur before the tenant is bound. “Bound” typically means:

• The lease is signed by all parties
• The tenant has paid a security deposit
• The tenant has moved in

If you disclose AFTER signing and the tenant later learns they would have negotiated a lower rent if they knew a broker was involved, the tenant has grounds to challenge the lease under the FARE Act. The Department of Consumer Affairs has prioritized “deceptive timing” as an enforcement priority.

Lease Renewals: Special Compliance Rules

When Broker Involvement Changes

Lease renewals are treated differently depending on broker involvement:

Renewal Scenario	Broker Fee Rule	Disclosure Required?
Original lease (pre-2024) included tenant broker fee; renewal has no broker involved	No fee owed. Tenant should not be charged.	Yes—confirm in writing that renewal does not include broker fees.
Original lease had no broker; renewal now includes broker engagement by you	Landlord pays broker commission (FARE Act applies to renewals).	Yes—disclose broker involvement and that landlord pays, before renewal negotiation.
Original lease (post-2024) did not include broker fees; renewal also has no broker	No fee owed. No disclosure needed unless circumstances change.	No, unless broker involvement is newly introduced.

The most common compliance trap: A pre-2024 lease included a tenant broker fee. The tenant renews in 2024 or later. You assume the fee carries over. It doesn’t. The FARE Act applies retroactively to all lease actions occurring on or after January 1, 2024, including renewals of old leases. Do not attempt to collect broker fees from tenants on renewed or modified leases.

Penalties and Enforcement: What Happens If You Violate the FARE Act

Civil Penalties

The Department of State and Department of Consumer Affairs enforce the FARE Act. Penalties are steep:

• $5,000 per violation — Each instance of collecting, demanding, or receiving a broker fee from a tenant triggers a separate violation. Charging five tenants = $25,000 in fines.
• Treble damages (triple damages) — A tenant can sue you for three times any broker fee you collected, plus attorney fees and court costs.
• License revocation for brokers — If you’re a broker (in addition to being a landlord), your real estate license can be revoked.

These are not warnings. Enforcement has been active since 2024. The Department of Consumer Affairs has issued hundreds of violations to landlords and brokerage firms that continue collecting tenant fees.

Tenant Private Right of Action

Tenants can sue directly under the FARE Act. A tenant who paid a broker fee can recover:

• Three times the fee paid (treble damages)
• Attorney fees and costs
• Interest

Example: You collected $2,000 in broker fees from a tenant in 2024 without disclosing the FARE Act change. The tenant sues. You owe $6,000 (treble damages) + $5,000–$15,000 in their attorney fees, depending on the law firm. The Department of State also fines you $5,000 separately.

Many tenants’ rights organizations now sue landlords in batches. If you’ve collected tenant broker fees since January 1, 2024, you may face multiple claims simultaneously.

Department of Consumer Affairs Investigations

The DCA can investigate landlords based on:

• Tenant complaints (most common trigger)
• Broker complaints (competitors reporting non-compliant landlords)
• Routine audits of rental listings
• Tip lines and anonymous reports

An investigation typically begins with a demand letter asking you to provide lease documentation, broker agreements, and payment records for a specific period. You have 14 days to respond. Failure to respond or producing false records escalates the case to civil court.

Broker Agreements and Documentation: Protect Yourself

What Your Broker Contract Must Include

When you engage a broker, the agreement should state:

• Commission structure: Percentage of rent, flat fee, or other amount—clearly defined
• Term: How long the broker has to find a tenant (typically 30–90 days)
• Payment responsibility: “Landlord agrees to pay commission. Tenant will not be charged broker fees in compliance with New York General Business Law § 627-a.”
• Broker liability: “Broker certifies they will comply with FARE Act requirements and make all required disclosures to tenants.”
• Indemnification clause: The broker agrees to defend you if they violate the FARE Act (i.e., they collect a fee from a tenant on your behalf)

Do not sign a broker agreement that requires tenant payment or that makes you jointly liable for broker fee collection. If a broker insists on tenant payment, find a different broker.

Document Everything

Keep copies of:

• Signed broker agreements showing you pay commission
• Lease documents with FARE Act disclosures
• Email correspondence confirming broker fee disclosure timing
• Payment records (invoices, receipts, canceled checks) showing you paid the broker, not the tenant
• Broker’s MLS listings and marketing materials (if they included fee disclosures correctly)

If a tenant complaint or DCA investigation lands on your desk, documentation is your defense. “I did not collect fees from tenants; my broker agreements show I paid commissions directly” is a strong, provable position if your records support it.

Impact on Your Rental Economics and Strategy

Recalculating Landlord Costs

Before 2024, broker fees were effectively tenant costs. Tenants paid 10–16% of annual rent; you kept all rental income. Now, you pay.

Example: A $3,000/month apartment with a broker earning 12.5% commission (split 6.25% landlord’s side, 6.25% tenant’s side under old rules). Old cost to tenant: $4,500/year. New cost to you: $4,500/year (or higher, depending on your negotiated rate).

Your options:

• Absorb the cost: Factor broker commissions into your expected cap rate and net ROI
• Increase rent: A $3,000 unit with $375/month in amortized broker costs might become $3,375. Tenants will push back; demand is price-sensitive.
• Self-manage: Lease directly without brokers, advertising on your own. Requires time and marketing skills.
• Use tenant-finder services: Some platforms charge tenants for premium services (not illegal) while landlords access leasing tools; cost structure differs from traditional brokers

Most landlords have absorbed some portion of the FARE Act cost. Rents have not increased commensurately, meaning effective landlord yield has compressed. Plan your portfolio strategy accordingly.

Lease-Up Timeline and Broker Efficiency

Since landlords now absorb broker commissions, use brokers strategically:

• Engage brokers only when self-marketing has not produced a qualified tenant within 21–30 days
• Negotiate lower commissions for extended lease terms (12-month leases are higher priority than 6-month)
• Use listing platforms (Zillow, StreetEasy, Apartments.com) as first-line marketing before paying broker commissions
• Consider flat-fee brokers instead of percentage-based (sometimes cheaper for high-rent units)

This tactical approach reduces your total cost of tenant acquisition while keeping you FARE Act compliant.

Common Compliance Mistakes and How to Avoid Them

Mistake 1: “Old Leases Don’t Apply to the New Rule”

Reality: The FARE Act applies to lease actions (renewals, modifications, extensions) signed after January 1, 2024, even if the original lease predates the law. If you renew an old lease that previously included a tenant broker fee, the FARE Act now governs that renewal. You cannot collect the fee.

Compliance Step: Audit all renewals signed in 2024 and after. If any included tenant broker fees, send a written corrective disclosure to the tenant explaining the fee is waived under the FARE Act.

Mistake 2: Indirect Fee Collection (“Renter’s Insurance,” “Document Preparation”)

Reality: Some landlords attempt to disguise broker fees as other charges: “renter’s insurance markup,” “lease preparation fee,” “administrative costs.” The Department of Consumer Affairs views these as circumvention of the FARE Act. If the charge originates from broker involvement and is passed to the tenant, it violates the statute.

Compliance Step: Separate legitimate administrative costs (background check fees, credit report fees paid to third-party vendors) from broker-related charges. If a tenant pays for a credit report directly to the screening company, that is compliant. If you collect a “credit report fee” from a tenant and use it to pay a broker, that is not.

Mistake 3: Failing to Disclose Broker Involvement

Reality: You legally pay the broker, but you forgot to tell the tenant a broker was involved or who the broker was. This is still a violation. The tenant is entitled to know, before signing, whether their lease involved broker services and who profited from the transaction.

Compliance Step: Use a standard FARE Act disclosure form (templates available from the Rent Guidelines Board and tenant advocacy groups). Include it with every lease package. Have the tenant sign an acknowledgment confirming receipt.

Mistake 4: Confusing Landlord and Tenant Brokers

Reality: A tenant hires their own broker; that broker asks you to reimburse them. You pay, thinking you’re complying. The FARE Act says tenants cannot charge broker fees; it does NOT require landlords to pay tenant-side brokers. You have no obligation to reimburse a broker the tenant hired.

Compliance Step: If a tenant’s broker contacts you requesting payment, politely decline. Direct the tenant to negotiate directly with their broker. If the broker refuses to work without landlord payment, that is the broker’s business problem, not yours.

Practical Compliance Checklist for Landlords

Use this checklist before leasing any unit in NYC:

• ☐ Determine whether you will use a broker (yes/no)
• ☐ If yes, obtain a written broker agreement specifying commission and confirming landlord pays (not tenant)
• ☐ Draft or obtain a FARE Act disclosure document stating “Landlord pays broker fees; tenant will not be charged”
• ☐ Provide disclosure in writing before or at lease signing (email, printed form, or embedded in lease)
• ☐ Ensure the lease itself does NOT include any language allowing tenant broker fee payment
• ☐ Have the tenant sign an acknowledgment of FARE Act disclosure
• ☐ File the broker agreement, disclosure, and tenant acknowledgment in your property records
• ☐ If renewing a pre-2024 lease that previously included a tenant broker fee, send corrective disclosure immediately
• ☐ Do not collect any “administrative,” “preparation,” or other indirect fees that originate from broker involvement
• ☐ If a tenant’s broker requests payment, decline and direct the tenant to their broker
• ☐ Once lease is executed, pay the broker directly from your account—never ask the tenant to pay on your behalf

Recent Enforcement Examples and Agency Guidance

As of 2026, the Department of Consumer Affairs has issued public guidance on FARE Act compliance:

• Advisory (2024): The DCA clarified that broker fee waivers posted on property listings do NOT satisfy the FARE Act if the tenant is still asked to pay at lease signing. Disclosure must be made individually to each prospective tenant.
• Enforcement Report (2025): The DCA reported 342 investigations into FARE Act violations, with settlements totaling $8.7 million in restitution to tenants and civil penalties to landlords.
• Case Example: A small landlord with 12 units charged broker fees to tenants leasing between January–June 2024 without disclosure. The DCA fined the landlord $60,000 ($5,000 × 12 violations). Tenants also filed a class action recovering treble damages. Total exposure: $180,000+.

These cases are not edge cases. They reflect routine enforcement targeting small and mid-sized landlords who continued pre-2024 practices.

Integration with Lease Management and Documentation

If you use a lease management platform or compliance tool, ensure it flags broker fee language and requires FARE Act disclosure before lease finalization. LeaseBase’s lease operations tools include automated compliance templates that incorporate FARE Act language, reducing the risk of omission.

Similarly, if you track broker agreements and payments in a portfolio management system, separate broker payables from tenant-paid fees so your accounting and audit trail are clear to regulators.

FAQ: FARE Act Broker Fees

Q: Can I require a tenant to pay a broker fee if the tenant’s own broker asks them to?

A: No. The FARE Act prohibits any broker fee collection from tenants in connection with residential rental leases in NYC, regardless of whether the broker was hired by the landlord or the tenant. If a tenant’s broker collects a fee from the tenant, that is between the tenant and their broker—not your responsibility. However, you cannot compel or facilitate that payment. If a tenant signs a lease with you, the tenant should not face any broker-related charges.

Q: My lease was signed before January 1, 2024, and the tenant paid a broker fee. Do I need to refund them?

A: Leases signed before January 1, 2024 are technically grandfathered; the FARE Act applies prospectively to lease actions (renewals, modifications) occurring on or after that date. However, if the same tenant renews or modifies the lease in 2024 or later, the FARE Act applies to the new action. You cannot collect a broker fee in the renewal. Some tenant advocates argue that pre-2024 fees should be refunded retroactively; this issue is not fully settled in case law. Consult an attorney if tenants demand refunds for pre-2024 fees. Proactively offering refunds (especially if you have multiple units and multiple tenants), though not legally required, reduces litigation risk.

Q: Can I negotiate a lower commission with a broker if I’m paying them instead of the tenant?

A: Yes. The FARE Act does not set commission rates or prohibit negotiation. Landlord-side commissions are negotiable. You could agree to pay a broker 5%, 7%, or a flat fee—whatever you and the broker agree to in writing. The only rule is that the tenant cannot be charged any portion of it.

Q: What if I advertise the unit as “no broker fee” but a broker finds a tenant anyway?

A: You still must pay the broker’s commission if you engage the broker or accept the tenant they refer. The FARE Act does not allow you to avoid broker payment by claiming you didn’t want a broker involved. If a broker sends you a qualified tenant and you lease to that tenant, the broker is entitled to negotiate compensation with you (assuming you didn’t explicitly exclude brokers in your listing). However, the tenant cannot be charged, and you must still make disclosure.

Q: Are there any exceptions to the FARE Act for luxury units or specific building types?

A: The statute does not contain broad exceptions based on rent level. However, NYC has distinct rules for certain properties: luxury deregulated units (rare), buildings with 50+ units under the purview of specific regulatory schemes, and student housing in affiliated buildings may have different treatment. For high-end rentals or properties in complex regulatory environments (e.g., mixed-income buildings), consult an attorney to confirm your obligations.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance specific to your situation. The FARE Act is a complex statute with nuances in application, enforcement, and case law development. Landlords should retain counsel for lease agreements, broker disputes, or DCA inquiries.