NYC Broker Fee Rules After the FARE Act — Who Pays in 2026

What the FARE Act Actually Changed (And Why It Matters)

Before February 14, 2024, NYC landlords and property managers routinely passed broker commissions directly to tenants in the form of a “broker fee” or “finder’s fee”—sometimes 10–15% of annual rent, collected upfront. The FARE Act (Fair Rent Affordability for Expansion Act) eliminated this practice for most residential properties.

The law changed one fundamental thing: who absorbs the cost of finding a tenant. Historically, tenants paid it. Now, landlords do—or they absorb it as a cost of doing business.

This shift exposes self-managing landlords to significant legal liability. Why? Because the statute doesn’t just prohibit the fee—it makes charging it a violation of NYC Consumer Protection Law § 20-700 et seq., with civil penalties enforced by both the Department of Finance and private right of action by tenants.

For small-scale landlords managing 2–75 units, this means even a single breach—charging a $2,000 broker fee to a tenant—can trigger fines, attorney fees, and damages before you realize what happened.

The FARE Act: Statute Language and Scope

The FARE Act amended NYC Administrative Code § 20-711, which now reads:

No owner or agent of an owner shall demand, charge, collect, or receive from a prospective tenant any fee for the provision of brokerage services, including but not limited to a fee for showing an apartment, preparing an application, accepting an application, reviewing an application, processing an application, approving an application, or arranging an occupancy or tenancy.

The statute is deliberately broad. It captures:

• Flat broker fees (e.g., “$1,500 broker fee”)
• Commission-style percentages (e.g., “12% of annual rent”)
• Hidden fees labeled differently (e.g., “application processing fee,” “lease preparation fee,” “finder’s fee,” “referral fee”)
• Fees paid to third-party brokers, agents, or intermediaries if you required the tenant to engage them

The law does not prohibit charging tenants for:

• Security deposits (capped at one month’s rent under NY RPL § 226-a)
• Application fees to cover credit checks, background checks, or reference verification (up to $20 per application under RPL § 226-d)
• Lease-related costs (e.g., notarization, recording) if genuinely tied to document processing and charged equally to all applicants

The distinction matters: a “$500 application fee” that covers the cost of your background check vendor is legal. A “$500 broker fee” that compensates a real estate agent is not.

The Luxury Exemption: What Qualifies and How to Apply It Correctly

NYC Administrative Code § 20-711(b) carves out one exception:

This subdivision shall not apply to units for which the monthly rent is two thousand seven hundred dollars or more.

This threshold was set in February 2024 and adjusts annually on February 14. For leases signed in 2026, confirm the current threshold—it typically increases 3–5% annually based on inflation indices used by the City.

Critical compliance point: This exemption applies only to new lease signings. If a tenant renews or extends an existing lease at the same or lower rent, the exemption may not apply in all scenarios. NYC case law and Department of Finance guidance are still developing here, but the safer approach is to treat renewals conservatively.

Additionally, the exemption applies only to residential occupancy. Commercial spaces, mixed-use properties, and non-primary-residence units operate under different rules.

How to Document Luxury Unit Exemption Compliance

If you charge a broker fee to a luxury unit tenant, you must prove eligibility:

1. Retain written lease documents showing the monthly rent figure that qualifies the unit
2. Document the date of lease signing to confirm the threshold that applied on that date
3. Preserve broker agreements showing what percentage or amount you agreed to pay the broker (not the tenant)
4. Create a disclosure statement given to the tenant before signing, explicitly stating that a broker fee is being charged and why the unit qualifies for the exemption

The Department of Finance and tenants’ attorneys will ask for this documentation if challenged. Absence of written proof will result in presumption of violation.

Penalties and Enforcement: What Happens If You Violate

Department of Finance Enforcement

The NYC Department of Finance investigates FARE Act violations through complaints and audits. Penalties include:

Violation Type	Penalty Range	Statute/Code
First violation (single tenant)	$5,000–$7,500	NYC Admin Code § 20-713(a)
Subsequent violation (within 5 years)	$10,000–$15,000	NYC Admin Code § 20-713(a)
Pattern (3+ violations same property/year)	$15,000+ per violation	NYC Admin Code § 20-713(b)

Private Right of Action: Tenant Lawsuits

Tenants can sue directly under NYC General Business Law § 349 (Consumer Protection Act). Damages include:

• Actual damages: The full broker fee amount charged to the tenant
• Treble damages: Up to three times the fee (for willful or knowing violations)
• Statutory penalty: $500 per violation (separate from actual damages)
• Attorney fees and costs: If the tenant prevails, you pay their legal fees plus court costs
• Class action liability: If you charged multiple tenants illegally, they can sue collectively

Example: You charge a tenant $2,000 in broker fees. The tenant sues. Even in a straightforward case without treble damages, you owe $2,000 (actual) + $500 (statutory) + $3,000–$8,000 (attorney fees for a simple demand letter and settlement). Total: $5,500–$10,500, plus your own legal costs defending the claim.

If the court finds willfulness (you knew the law and violated it anyway), treble damages apply: $6,000 + $500 + attorney fees.

Attorney General Enforcement

The NY State Attorney General has authority to investigate FARE Act violations and pursue civil penalties on behalf of multiple tenants. AG enforcement typically occurs when there is a pattern—e.g., a management company or landlord charging illegal fees to 20+ tenants.

AG settlements have resulted in:

• Full restitution to all affected tenants
• Civil penalties of $50,000–$500,000+
• Injunctive relief (court order prohibiting future violations)
• Mandatory compliance training and monitoring

Practical Compliance Steps for Self-Managing Landlords

Step 1: Audit Your Current Lease Agreements

Review every active lease in your portfolio. Look for:

• Any mention of “broker fee,” “finder’s fee,” “referral fee,” or “agent commission”
• Language that passes tenant-side costs to the tenant
• Application fee structures that might exceed legitimate credit-check costs

If violations exist in active leases, stop collecting immediately and consult an attorney about remediation (typically, you owe the tenant a refund).

Step 2: Rewrite Lease Templates and Disclosures

Create a standardized lease addendum or disclosure statement that:

• Explicitly states: “No broker fee, finder’s fee, or agent commission will be charged to the tenant”
• Clarifies permitted charges (security deposit, application fee for credit verification, etc.) and their amounts
• States that broker commissions, if any, are the landlord’s responsibility
• For luxury units (if applicable), discloses the monthly rent threshold and confirms that threshold eligibility for any broker fee arrangement

Example disclosure language:

The Owner will not charge Tenant any broker fee, finder’s fee, referral fee, or commission for leasing this apartment. Any brokerage commissions owed to a third-party real estate broker are the sole responsibility of the Owner. Tenant’s only permitted upfront charges are (a) a security deposit not to exceed one month’s rent, and (b) an application fee not to exceed $20 to cover credit and background verification costs.

For luxury units:

This unit qualifies for the luxury exemption under NYC Administrative Code § 20-711(b) because the monthly rent is $[X], which meets or exceeds the threshold of $[current threshold] as of [lease date]. The Owner has engaged a broker and agreed to pay a commission of [X]% directly to the broker. This commission will not be charged to Tenant.

Step 3: Develop Broker Communication and Contract Terms

If you work with real estate brokers or agents, your agreements with them must clearly state:

• The broker commission amount and source (landlord, not tenant)
• That the broker must comply with FARE Act requirements and may not collect fees from tenants
• Indemnification language: the broker agrees to defend and indemnify you against any claim that the broker violated the FARE Act
• That failure to comply entitles you to withhold payment and pursue damages

Example broker agreement clause:

Broker shall comply with all applicable laws, including NYC Administrative Code § 20-711 (FARE Act). Broker shall not charge, collect, or receive any fees from Tenant for brokerage services. Broker’s commission shall be paid solely by Owner from Owner’s funds. Broker shall indemnify and hold harmless Owner from any claim, penalty, or liability arising from Broker’s violation of the FARE Act or applicable tenant fee laws.

Important: This language protects you contractually but does not protect you from tenant claims. If the broker collects an illegal fee and pockets it, the tenant can still sue you—the property owner. You then pursue the broker for breach of contract and indemnification, but you are liable first.

Step 4: Train Your Leasing Process

If you handle showings, applications, or lease signings yourself:

• Remove any fee-collection language from your application forms
• Update your leasing scripts and email templates to state clearly that no broker fees apply
• If you use a leasing coordinator or assistant, confirm they understand the FARE Act rules
• Document that you provided the proper disclosure to each tenant before signing

Step 5: Implement Records Retention

For every lease signed after February 14, 2024, retain:

• Signed lease and all addenda, including broker fee disclosures (or the statement that no broker fee applies)
• Application and supporting documents (to show you only charged permitted fees)
• Payment records showing what fees were actually collected from the tenant
• Broker agreements (if any) showing who paid the broker commission
• Correspondence with brokers or tenants about fees
• The date the lease was signed (to confirm which rent threshold applied)

Retain records for at least 6 years (tenants have up to 4 years to sue; the Department of Finance can audit within 3–5 years).

Common Mistakes Self-Managing Landlords Make

Mistake #1: Labeling Broker Fees as “Application Fees”

A $500 “application processing fee” that actually compensates a broker is still a broker fee violation. The label doesn’t matter—the substance does.

Legitimate application fees must be tied to verifiable costs: credit report ($10–$15), background check ($5–$10), reference verification ($0–$5). Anything beyond those amounts is presumptively a broker fee.

Mistake #2: Assuming Broker-Tenant Contracts Protect You

Some landlords hire brokers and assume the broker’s contract with the tenant (if any) absolves the landlord. It doesn’t. If a broker collects an illegal fee from a tenant, the tenant can sue the landlord directly under the FARE Act. You then must pursue the broker separately.

Mistake #3: Charging Luxury Unit Fees Without Documentation

You claim the unit qualifies for the luxury exemption but fail to document the rent or provide the required disclosure. A tenant who sues will argue the unit didn’t qualify or the exemption was misapplied. Without proof, you lose.

Mistake #4: Not Updating Leases When the Law Changed

Some landlords continued using old lease templates after February 14, 2024, unaware the law changed. Every active lease now should contain FARE Act-compliant language.

Mistake #5: Verbal Agreements About Fees

You tell a tenant verbally, “We don’t charge broker fees; that’s handled between us and the broker.” If the broker later collects a fee anyway, you have no written proof of your promise. Written disclosures are essential.

How Technology Can Help: LeaseBase Compliance Engine

For self-managing landlords, tracking FARE Act compliance across multiple leases is operationally difficult. LeaseBase’s Compliance Engine flags potential violations before leases are signed:

• Automatically checks lease language for prohibited fee terms
• Confirms rent thresholds for luxury unit exemptions based on current NYC thresholds
• Generates compliant disclosure statements specific to your lease terms
• Stores required documentation and audit trails for tenant fee records
• Alerts you to active leases with legacy language that needs updating

LeaseBase also integrates with rent payment processing to separate legitimate application fees from broker compensation, ensuring clarity in your records.

For portfolios of 10+ units, this automated compliance tracking reduces the risk of human error and ensures consistency across all leases.

FAQ: Common Questions About NYC Broker Fees and the FARE Act

Q1: If I use a broker, who pays their commission now?

A: You do, the landlord. The broker commission is your business expense, not the tenant’s. You pay the broker from your own funds after the lease is signed. You cannot pass the cost to the tenant in any form (whether labeled “broker fee,” “finder’s fee,” “agent commission,” or otherwise).

Q2: What if my lease was signed before February 14, 2024?

A: The FARE Act applies to all leases signed on or after February 14, 2024. Leases signed before that date are generally grandfathered, meaning you can continue collecting broker fees under the terms of that lease if they were disclosed and legal when signed. However, when the tenant renews or extends the lease, the new term is subject to the FARE Act. Consult an attorney for your specific situation, as case law is still developing on renewals.

Q3: Can I charge a higher security deposit instead of a broker fee?

A: No. NY Real Property Law § 226-a caps security deposits at one month’s rent (or one-and-a-half months for buildings over 6 units in certain circumstances). You cannot circumvent the FARE Act by calling a broker fee a “security deposit.” The Department of Finance and courts treat this as a disguised fee violation.

Q4: What if the tenant agrees to pay the broker fee?

A: Tenant consent doesn’t override the statute. The FARE Act is a bright-line rule—no broker fees to tenants, period. A tenant’s written agreement to pay a broker fee doesn’t make the practice legal. In fact, it strengthens the tenant’s claim because you have a signed document admitting you charged the fee.

Q5: Do the FARE Act rules apply if the property is in a co-op or condo building I don’t own?

A: Yes. The FARE Act applies to any “owner” of residential units in NYC who leases to tenants. It doesn’t matter if you’re a condo resident, a co-op shareholder, or a multi-building landlord. If you collect rent from a tenant, you’re subject to the law.

Key Compliance Checklist

Use this checklist to audit your current leasing practices:

• ☐ All active leases signed after Feb 14, 2024 contain FARE Act-compliant language (no broker fees from tenants)
• ☐ Lease templates distinguish between legitimate fees (application fee ≤$20) and prohibited fees (broker fees)
• ☐ Luxury unit exemptions (rent ≥ current threshold) are documented in lease with specific rent amount and threshold date
• ☐ Broker agreements explicitly state landlord pays commission and broker cannot collect from tenant
• ☐ Indemnification clause in broker agreements protects landlord from FARE Act violations by broker
• ☐ Records retained for all leases: lease, disclosures, application records, fee documentation, broker agreements
• ☐ Leasing staff trained on FARE Act rules and compliant fee practices
• ☐ Written disclosure statement provided to each tenant before lease signing
• ☐ Rent payment system separates legitimate application fees from broker compensation
• ☐ Annual review completed to confirm luxury rent thresholds remain current

Conclusion: Compliance is Non-Negotiable

The FARE Act shifted the financial burden of tenant acquisition to landlords. While this increases your leasing costs, it also eliminates a common source of tenant disputes and legal exposure. For self-managing landlords, the compliance payoff is significant: no FARE Act violations, no Department of Finance fines, no tenant lawsuits for treble damages and attorney fees.

The law is clear, penalties are high, and enforcement is active. Invest in updated lease templates, broker agreements, and documentation now. It costs far less than defending a violation later.

For portfolios with 10+ units, LeaseBase’s compliance platform provides automated checks that ensure every lease meets current NYC standards. For smaller portfolios, the compliance checklist above covers the essential steps.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. NYC tenant law is complex and fact-specific. Consult a qualified attorney licensed in New York for guidance on your specific situation, lease language, or enforcement response.