New York Broker Fee Rules After FARE Act — Landlord Compliance Guide (2024)

What Changed: The FARE Act's Broker Fee Shift

On September 1, 2024, New York City landlords faced a seismic shift in rental transactions. The Fair Access to Rental Earnings Act (FARE Act), signed into law by Governor Kathy Hochul in June 2024, fundamentally rewrote who pays for broker services in residential leasing.

Before the FARE Act, New York City had no explicit statutory prohibition on tenant-paid broker fees. Practice varied widely: some leases charged tenants one month's rent or more as a broker commission; others split fees between landlord and tenant; some landlords paid entirely. This created uncertainty, inconsistency, and widespread tenant complaints about hidden costs eating into security deposits and move-in funds.

The FARE Act ended that ambiguity with a clear mandate: tenants cannot pay broker fees, period. The law applies to all residential rental agreements for units in New York City, regardless of rent amount, unit type, or lease duration.

If you advertise an apartment with a broker, negotiate a lease through a broker, or use a broker's services in any capacity related to tenant acquisition or lease terms, you—the landlord—must pay the broker fee. Full stop.

Who the FARE Act Covers (and Protects)

The law protects all tenants leasing residential units in New York City. The statute makes no exceptions for:

• Small landlords (2-unit buildings, 1031 exchanges, individual owners)
• Market-rate apartments
• Rent-stabilized units
• Affordable housing programs (Housing Opportunities for All New Yorkers, Mitchell-Lama, HDFC coops)
• Luxury rentals or high-value properties
• Commercial-residential mixed-use buildings
• Lease renewals with broker involvement

If a residential lease exists and a broker touched the transaction, the FARE Act applies.

What Counts as a Broker Fee Under the Statute

New York General Business Law § 741-a (the FARE Act statute) prohibits tenants from paying:

• Broker commissions or finder's fees
• Application fees if the fee is connected to broker services or lease negotiation
• Processing fees paid to brokers
• Referral fees
• Document preparation fees charged by a broker
• Any percentage of rent as a brokerage charge
• Fees for broker-led lease modifications or renewals
• Transaction fees tied to the brokerage transaction

The statute uses broad language: "It shall be unlawful for any person to demand, accept or retain any fee, consideration or benefit from a prospective tenant in connection with the rental of a residential dwelling unit in the state."

The key phrase: "in connection with." This is interpreted expansively by enforcement agencies. If the tenant payment correlates to or facilitates any broker service, it violates the law.

What the FARE Act Does NOT Restrict

Landlords retain the right to charge tenants for fees unrelated to brokerage services:

• Credit report fees — if you directly order and pay for a credit check and pass that cost to the tenant (roughly $20–50)
• Background check fees — for criminal history verification not performed by a broker
• Move-in inspection or walkthrough documentation — if the fee compensates you for time and materials, not broker services
• Lease renewal fees — if a broker is not involved and the fee covers administrative or legal review by you or your attorney
• Notarization or certification fees — minimal, pass-through costs
• Application fees for tenant screening — only if they genuinely reflect the cost of screening (not a guise for broker payment)

However, take care: if an application fee is disproportionately high or labeled vaguely, enforcement agencies may scrutinize whether it masks a broker cost shift. Keep fees transparent and proportionate.

Compliance Requirements: What Landlords Must Do

Step 1: Identify Broker Involvement

Before listing a unit, decide: Will you use a broker?

• If yes, you must pay the broker commission. The fee structure is negotiable between you and the broker, but tenants cannot contribute.
• If no, you can list the unit yourself (on Zillow, Craigslist, LeaseBase, or your own website) and charge no broker fee to tenants.

If you use a broker's MLS listing, exclusive leasing rights, or tenant referral services, the broker is involved. You must pay.

Step 2: Set Broker Compensation Before Advertising

Negotiate your broker commission structure upfront. Common models include:

Commission Model	Example	FARE Act Compliant?
Landlord pays 1 month's rent	$2,500 rent → $2,500 broker fee from landlord	Yes
Landlord and tenant split 12% commission	Landlord pays 6%, tenant pays 6%	No — tenant portion violates FARE Act
Reduced landlord fee + tenant "application fee"	Landlord pays broker $1,200; tenant pays $1,300 "application fee"	No — masking broker cost shift violates statute
Flat fee from landlord only	$1,500 flat broker fee paid by landlord at lease signing	Yes
Percentage of annual rent	3% of annual rent ($2,500 × 12 × 0.03 = $900)	Yes

Document the commission structure in your broker agreement. This becomes evidence of compliance if you're audited.

Step 3: Prohibit Tenant Broker Fees in Your Lease and Advertising

Every lease must clearly state that the tenant is not responsible for broker fees. Add language such as:

"Landlord shall be responsible for all broker commissions and fees in connection with this lease. Tenant shall not pay any broker fees, finder's fees, or fees related to the brokerage transaction."

In your advertising (Zillow, StreetEasy, your website, Craigslist), state clearly: "No broker fees for tenants" or "Landlord pays broker commissions."

This serves two purposes: (1) it ensures tenants understand their rights, reducing disputes, and (2) it documents your intent to comply, which defends you if enforcement occurs.

Step 4: Collect Payment from the Correct Party

If you use a broker:

• Pay the broker directly from your account or at lease signing.
• Do not collect broker fees from tenants and then pay the broker.
• Do not deduct broker fees from the tenant's first month's rent or security deposit.
• If using a leasing agent, arrange payment through the brokerage firm, not the tenant.

If a broker attempts to bill the tenant or collect fees through the tenant, inform the broker immediately that this violates New York law. Request an amended lease or commission agreement.

Step 5: Document and Retain Records

Maintain for at least six years:

• Broker agreement or MOU with commission terms
• Proof of payment to the broker (cancelled check, wire transfer, payment receipt)
• Signed lease with FARE Act compliance language
• Advertising screenshots showing no broker fee charged to tenants
• Any communications with the broker about fee structure
• If disputed, correspondence with the tenant confirming no broker fee was charged

These documents prove you complied with the statute if the Department of Housing Preservation and Development (HPD) or the Attorney General investigates a complaint.

Penalties for Non-Compliance

Civil Fines and Damages

Violating the FARE Act triggers significant liability:

Violation Type	Penalty	Authority
Civil violation per transaction	$1,000–$5,000 per violation	HPD or Attorney General
Tenant suit for damages	Full fee paid + treble damages (3x the fee) + attorney fees	Civil Court (Tenant Right of Action)
Pattern of violations	$5,000 per violation + potential license revocation (if broker)	AG enforcement
Misrepresentation of fee (calling broker fee an "application fee")	$1,000–$5,000 per lease + actual damages	HPD, AG, or tenant lawsuit

Example Scenario: You advertise a $3,000/month apartment and charge a $3,000 broker fee to the tenant. The tenant sues. The court awards: (1) $3,000 refund, (2) $9,000 in treble damages (3 × $3,000), (3) attorney fees ($1,500–$3,000), and (4) court costs. Total liability: $13,500–$15,500 for a single violation.

If you do this across 10 leases in a year, penalties escalate and government agencies can pursue enforcement, banning you from using brokers or imposing settlements with mandatory compliance programs.

Attorney General Enforcement

New York's Attorney General has actively enforced the FARE Act. In 2024–2025, the AG's office issued enforcement notices to brokerages and landlords who charged tenant fees. Penalties include:

• Cease-and-desist orders
• Refund of all tenant-paid broker fees (with interest)
• Civil monetary penalties
• Injunctions against future violations
• Public settlements (which damage your reputation)

The AG can investigate on its own or respond to tenant complaints submitted through the New York State Department of State website.

Tenant Private Right of Action

Importantly, tenants can sue directly without waiting for government enforcement. A tenant can file a lawsuit in civil court within three years of the violation claiming:

• Unjust enrichment
• Breach of statutory duty
• Violation of General Business Law § 741-a

The tenant can recover treble damages (three times the fee charged), plus actual costs, plus attorney fees. Many tenants hire attorneys specifically to recover these amounts, knowing treble damages make cases economically viable.

Practical Compliance Checklist for Landlords

Use this checklist before advertising or leasing any unit:

1. Decide on broker use — Will you hire a broker or lease yourself?
2. If using a broker:
   • Negotiate commission with broker in writing before advertising
   • Confirm you (not the tenant) will pay all commissions
   • Obtain signed broker agreement specifying payment terms
3. Draft lease language — Include explicit statement: "Tenant is not responsible for broker fees. Landlord pays all brokerage commissions."
4. Review lease for hidden fees — Ensure no "application fee," "processing fee," "document fee," or similar that could mask a broker cost shift.
5. Update advertising — Add "No broker fees for tenants" or equivalent to all listings.
6. Set up payment system — Arrange to pay broker directly at lease signing or via wire transfer. Do not collect from tenant.
7. Train yourself or property manager — Ensure anyone handling leases knows the FARE Act rules and documents compliance.
8. Document everything — Save broker agreements, payment records, leases, and advertising for six years minimum.
9. Monitor for changes — Subscribe to HPD and NY Attorney General updates on rental law changes.
10. Have a dispute response plan — If a tenant claims you charged an illegal fee, respond immediately with documentation proving compliance or refund the fee plus interest.

Common Compliance Mistakes (and How to Avoid Them)

Mistake 1: Calling Broker Fees "Application Fees"

The Problem: You charge a tenant a $2,500 "non-refundable application fee" that you then pay to a broker. The tenant (or enforcement agency) traces the payment and sues.

Why It Fails: New York courts and the AG apply a substance-over-form test. If the fee's true purpose is to compensate a broker, calling it an "application fee" does not make it legal. Gen. Bus. Law § 741-a prohibits any fee "in connection with the rental" through a broker, regardless of nomenclature.

The Fix: If you charge a legitimate application fee for tenant screening, keep it low ($25–50), document that it covers only your direct costs (credit check, background check), and do not route it to a broker. Pay the broker separately from your own funds.

Mistake 2: Splitting Broker Fees with Tenants

The Problem: A broker quotes a 12% commission. You negotiate: "Landlord pays 6%, tenant pays 6%." This is a classic violation.

Why It Fails: The statute prohibits tenants from paying any portion of broker compensation, regardless of how it is framed or split.

The Fix: Negotiate a rate you (the landlord) can afford to pay entirely. If 6% is too high, shop for a broker at 3–4%, use a flat fee model, or self-lease.

Mistake 3: Deducting Broker Fees from Tenant Deposits or First Rent

The Problem: At lease signing, you tell the tenant: "Your $3,000 security deposit covers your broker fee; your actual deposit is $0." Or: "Your first month's rent is $2,500, but I'm deducting $1,500 for the broker fee, so you owe $1,000 today."

Why It Fails: This is an indirect tenant payment for broker services. It violates the statute and unfairly reduces the tenant's deposit protection.

The Fix: Collect full security deposit and first month's rent from the tenant. Pay broker fees from your own funds at or before lease execution.

Mistake 4: Not Documenting Broker Fee Payment

The Problem: A tenant claims you charged them a $3,000 broker fee. You have no written record, no signed broker agreement, no payment receipt. It becomes a he-said-she-said case.

Why It Fails: Without documentation, the burden shifts to you to prove you paid the broker directly. If you cannot produce evidence, courts and enforcement agencies assume the tenant was charged.

The Fix: Always obtain a signed broker agreement before leasing. Pay via check or wire transfer (leaves a paper trail). Save receipts. Maintain a log of all broker payments. This protects you in disputes.

Mistake 5: Using a Broker But Failing to Update Lease Language

The Problem: Your old lease template says "Tenant responsible for all fees." You forget to update it before using a broker. A tenant reads the outdated lease and sues.

Why It Fails: The lease itself documents that you (intentionally or negligently) told the tenant to pay fees, creating strong evidence of liability.

The Fix: Before using any broker, revise your lease template to include: "Tenant is not responsible for any broker fees, commissions, or charges. Landlord pays all brokerage costs." Use this version for every lease, regardless of broker involvement.

Lease Renewal and Broker Fees: A Special Case

When a tenant's lease is nearing expiration, you may hire a broker to help negotiate a renewal or to market the unit to a new tenant if the current tenant leaves. What are the rules?

Renewal with the Same Tenant

If you engage a broker to help negotiate lease renewal terms with a current tenant, the FARE Act still applies: the tenant cannot pay broker fees. You must bear the cost entirely.

However, you can include a "lease renewal fee" or "lease modification fee" in the new lease if it covers non-broker services, such as:

• Your attorney reviewing renewal terms ($200–500)
• Administrative processing of new lease documents ($50–100)

This fee must be reasonable, clearly labeled as distinct from broker costs, and documented as reflecting actual administrative work.

Re-leasing to a New Tenant After Current Tenant Vacates

Once a tenant vacates and you market the unit to new prospective tenants, broker fee rules apply fully. Any new tenant cannot be charged a broker fee. You pay the broker from your funds.

FAQ: Broker Fees and the FARE Act

Q1: Can I refuse to use a broker to avoid paying broker fees?

A: Yes, absolutely. Many small landlords self-lease using platforms like Zillow, Craigslist, or LeaseBase to avoid broker commissions entirely. If you do not hire a broker, you incur no broker fee obligation. However, if you do use a broker for any purpose (advertising, tenant screening, lease negotiation), you must pay all fees—you cannot pass costs to the tenant.

Q2: What if a broker refuses to work unless the tenant pays part of the commission?

A: Find a different broker. Brokers who condition their services on tenant payment are violating the FARE Act. If you use such a broker, you become complicit in the violation. You have a legal and fiduciary duty to ensure your broker complies with the law. If a broker insists on tenant payment, report them to the New York Department of State's Division of Licensing Services and the Attorney General's Office. Use a compliant broker who accepts landlord-only commission.

Q3: Can I charge a "move-in fee" or "lease negotiation fee" to the tenant to offset broker costs?

A: Only if the fee is genuinely unrelated to brokerage services and reflects reasonable costs. A vague "move-in fee" of $1,000 that matches your broker commission will be scrutinized and likely deemed a violation. Be specific: if you charge a $200 move-in inspection fee, document that it covers your time inspecting the unit and documenting the condition in writing. Keep it proportionate and transparent. If it looks like a broker cost repackaged, enforcement agencies will challenge it.

Q4: Does the FARE Act apply to lease renewals or only new leases?

A: The statute applies to "residential dwelling unit" rentals "in connection with the rental of a residential dwelling." This encompasses new leases, renewals, and any transaction involving broker services tied to the lease. If you use a broker for renewal negotiation, the tenant cannot pay broker fees. You must. The only exception: administrative fees charged directly by you (your attorney's fee for reviewing renewal terms) are permissible if reasonable and clearly distinguished from broker services.

Q5: What if a tenant paid a broker fee before the FARE Act took effect (before September 1, 2024)?

A: The FARE Act applies prospectively to leases signed on or after September 1, 2024. Leases signed before September 1 are not retroactively affected by the law. However, if a lease was signed just before September 1 with a stated tenant broker fee obligation, you should proactively refund the fee to avoid disputes. Additionally, if a tenant disputes a pre-FARE Act broker fee charge and sues after the law's effective date, courts may apply the law depending on the litigation context. Best practice: treat all broker fee arrangements under the post-September 1 standard going forward.

How Compliance Platforms Help You Stay Compliant

Self-managing landlords often juggle multiple leases, brokers, tenants, and local rules. Tracking FARE Act compliance manually—especially across multiple properties—creates risk.

A compliance-focused platform like LeaseBase's compliance engine helps by:

• Storing signed broker agreements and payment records in a centralized, secure location
• Flagging leases with non-compliant language (e.g., tenant-paid fees) before you send them to tenants
• Maintaining six-year audit trails of all lease documentation and payment receipts
• Providing state-specific lease templates that comply with New York's FARE Act
• Alerting you to future changes in New York landlord-tenant law so you can update practices proactively

For a portfolio of 10–75 units, manually tracking broker payments and lease compliance across each property is error-prone. A platform automates these checks, reducing your exposure to $1,000–$5,000 fines and tenant lawsuits.

For more information on managing lease operations compliantly, explore LeaseBase's tools.

Key Takeaway: The Shift to Landlord-Paid Broker Fees

The FARE Act represents a fundamental policy shift in New York: tenants bear no broker fee burden. Landlords do. If you use a broker to lease a unit in New York City, the commission is your cost—fully and entirely.

This change levels the playing field for tenants, reducing move-in costs and eliminating a major source of tenant complaints. For you as a landlord, it means higher upfront costs for leasing but clearer legal liability and reduced litigation risk if you comply.

To stay compliant:

• Use only brokers who accept landlord-only commission.
• Document all broker agreements and payments in writing.
• Include explicit FARE Act language in every lease.
• Never hide broker costs under alternative fee names.
• Maintain six-year records of all broker transactions.

Violations carry steep penalties: $1,000–$5,000 per lease from regulators, plus treble damages and attorney fees in tenant lawsuits. A single apartment can cost you $15,000+ in liability if mishandled. Across a portfolio, the exposure grows exponentially.

Start now: audit your current leases, broker agreements, and advertising for FARE Act compliance. If you find violations, contact your brokers, notify affected tenants, and refund improperly charged fees with interest. Proactive correction prevents enforcement action and preserves your reputation.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. New York landlord-tenant law is complex and fact-dependent. Consult a qualified attorney licensed in New York for guidance specific to your situation, properties, and lease agreements. The information provided reflects law as of October 2026 and may change. Verify current regulations with the New York Department of Housing Preservation and Development or the New York State Attorney General's Office before taking action.