New York City Enacts FARE Act: Landlords to Shoulder Broker Fees Starting June 2025

By: Rafael Pinkhasov
Edited by: Thomas S. Tripodianos

In a major shift for the New York City rental market, the City Council passed the Fairness in Apartment Rental Expenses Act (FARE Act) on November 13, 2024. This legislation, effective mid-June 2025, significantly alters who bears the cost of broker fees in residential leasing transactions.

Key Provision: Landlords Pay Broker Fees

The FARE Act mandates that when a landlord hires a broker to market or lease an apartment, the landlord—not the tenant—must pay the associated broker fee. This effectively ends the longstanding (and often criticized) practice of tenants covering broker costs, even when they had no role in engaging the broker.

Historically, these fees have ranged from 10–15% of annual rent. For a typical $3,000/month apartment, this could add more than $5,000 to a tenant’s upfront costs, on top of first month’s rent and security deposit.

Legislative Background

Sponsored by Council Member Chi Ossé, the FARE Act passed by a 42–8 margin, with supporters citing the financial strain broker fees impose on tenants—particularly those in low- and middle-income brackets. The legislation aligns New York City with other major cities, such as San Francisco and Boston, where broker fees are commonly paid by landlords.

Pushback and Litigation

Opposition came swiftly from the real estate industry. The Real Estate Board of New York (REBNY) has filed a federal lawsuit challenging the FARE Act, claiming it infringes on state law and brokers’ First Amendment rights. Industry groups also warn that landlords may recoup costs through higher monthly rents, undercutting the Act’s intended relief for tenants.

Implications for Stakeholders

• Tenants should see reduced upfront costs when renting apartments where the landlord has retained a broker.
• Landlords must now budget for broker commissions when using intermediaries, potentially impacting rent-setting strategies.
• Brokers may need to adjust business models and expectations regarding fee recovery.

What’s Next?

With the law set to take effect in June 2025, landlords, brokers, and tenants should begin reviewing their leasing practices and form agreements. Industry participants are advised to monitor the ongoing litigation, which could impact enforcement or interpretation of the FARE Act.

For further guidance on how the FARE Act may affect your leasing strategy or contractual obligations, please contact us.