New York City's FARE Act: who pays the rental broker, and state rules

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Who pays the broker on a New York City apartment rental is now the subject of a written rule. Local Law 119 of 2024, known as the FARE Act, put it in the city's Administrative Code: the agent who works for the landlord may not collect a fee from the tenant.

That city rule does not stand alone. Around it sit New York State statutes that apply in the five boroughs and everywhere else in the State: a section of the Real Property Law that limits what a landlord may charge an applicant, and three sections of the same law that decide who may receive a share of a commission, who may pay a salesperson, and who may go to court to collect a fee. This guide sets out each rule as its text gives it, names the body that enforces it, works through the amounts, and ends with the points the pages read for this article leave open.

New York City Local Law 119 of 2024, sections 20-699.22 and 20-699.23 of the Administrative Code; New York Real Property Law section 238-a.

What Local Law 119 of 2024 is

The FARE Act is a law of New York City, not of the State. Its formal name is Local Law number 119 of 2024, and it began as Council introduction number 360-A, with Council Member Ossé as lead sponsor. Its official title describes it as a law amending the Administrative Code "in relation to the payment of fees imposed in relation to the rental of residential real property".

The text of the law gives two dates. The Council passed it on 13 November 2024. It was then returned unsigned by the Mayor on 16 December 2024, and the Corporation Counsel certified that it had been neither approved nor disapproved within thirty days. The law's last clause says it takes effect 180 days after it becomes law. Counting 180 days from the middle of December 2024 leads to June 2025; the exact first day in force is not printed in the text of the law and is listed among the open points at the end of this guide.

What the law adds to the code is a new subchapter, numbered 15 and headed "Rental Real Estate Agreements", in chapter 4 of title 20. It holds six sections, 20-699.20 to 20-699.25: definitions, the fee rule, the disclosure rule, penalties, a right to sue, and a duty of public education.

The words the law defines

The fee rule turns entirely on definitions, so they are worth reading before the rule itself. Section 20-699.20 sets them out.

An agent is a real estate broker or salesperson licensed under section 440-a of the State's Real Property Law who acts in a fiduciary capacity. The city law therefore speaks only about licensed people; it does not create a new kind of intermediary.

A fee is money charged for services, and the definition says in terms that it includes a commission. Whatever a charge is called on an invoice, if it pays for an agent's services it is a fee under this law. To engage someone is to enter an agreement that requires a person to pay a fee for another's services.

A listing is an advertisement or notice that a property is available to lease. A listing agent is the agent who holds a listing agreement with the landlord for compensation.

A landlord's agent is a listing agent, or an agent working with one, who finds or obtains a tenant. A tenant's agent locates property for a tenant, or presents the tenant's offer and negotiates on the tenant's behalf. A dual agent represents both tenant and landlord for the same residential property, and the law takes care to say that a dual agent is not a landlord's agent.

A landlord is the lessor, including an owner who lists a property with an agent or receives a rental offer. Cooperative housing corporations that lease to their own shareholders are left out of the definition. A tenant is a lessee, and the word also covers a person who makes an offer through an agent or engages an agent in order to lease, so the protection starts before any lease is signed.

Finally, residential real property means a dwelling unit as section 27-2004 of the code defines it, and the law adds that condominium and cooperative units are included. A privately owned co-op or condominium apartment offered for rent is inside the law.

Who may not charge the tenant

Section 20-699.21 holds five prohibitions. Read together they answer the question in this guide's title.

First, a landlord's agent may not impose a fee on a tenant, or collect one, in relation to the rental of residential real property. The only exception the sentence carries is a reference to subdivision 1 of section 238-a of the State's Real Property Law, the provision that allows a capped charge for background and credit checks and is described further down.

Second, the same ban applies to any agent who publishes a listing with the landlord's permission or authorisation, whether or not a formal listing agreement exists.

Third, the landlord answers for its agents. The section says a landlord is in violation when its own agent, or an agent who published a listing with its permission, breaks the rule. An owner cannot stand aside on the ground that it was the broker who sent the invoice.

Fourth, nobody may make the rental conditional on the tenant engaging an agent, and the text says this includes a dual agent. A tenant cannot be told that the apartment is available only if they first take on a particular broker and pay that broker.

Fifth, nobody may post a listing which says that fees must be paid in a way the section forbids. The advertisement itself is a violation, before any money changes hands.

The presumption matters because of the second prohibition. Without it, a tenant asked for a fee would have to prove a private arrangement between two other parties. With it, the publication of the listing is enough to bring the agent inside the ban unless the presumption is rebutted. The Real Estate Board of New York, in comments it filed with the Department of Consumer and Worker Protection in spring 2025, asked the department for an affidavit form that could be used to rebut the presumption. The comment document does not show whether the department took up the idea.

When a tenant still pays a broker

The FARE Act does not abolish broker fees and does not say that tenants never pay them. Its definitions keep a place for the tenant's agent: an agent who locates property for a tenant, or who presents and negotiates the tenant's offer. The prohibitions in section 20-699.21 are aimed at the landlord's agent and at agents who publish listings with the landlord's permission. A tenant who chooses to engage an agent of their own, under an agreement to pay that agent, is in a relationship the fee rule does not forbid.

Two limits protect that choice. The engagement has to be the tenant's decision, because no rental may be conditioned on engaging an agent. And an agent who has published the landlord's listing cannot become "the tenant's agent" for the same apartment simply by saying so, because the publishing agent is barred from collecting from the tenant and is presumed to act with the landlord's permission.

The principle that results can be put in one line: under the city law, the party who engages the agent is the party who pays the agent. Where a given arrangement falls, between a real tenant-side engagement and a landlord-side fee under another name, depends on its facts, and the law leaves that judgment to the enforcing department and to the courts.

Fees in listings, and the disclosure a tenant signs

Section 20-699.22 adds two duties of transparency that apply to every charge, not only to broker fees.

The first concerns advertisements. Every listing for the rental of residential real property must disclose, in a clear and conspicuous manner, any fee the prospective tenant will have to pay. A reader comparing two listings is meant to see the full cost of each on the listing itself.

The second concerns the moment before signing. The procedure the section sets out runs in this order:

1. Before the rental agreement is executed, the landlord or the landlord's agent gives the tenant a written disclosure that itemises all fees the tenant must pay to the landlord, or to any other person at the landlord's direction.
2. Each fee on the list comes with a short description of what it is for.
3. The tenant signs the disclosure, and does so before signing the rental agreement.
4. The landlord or the landlord's agent gives the tenant a copy of the signed disclosure.
5. The landlord or the landlord's agent keeps the signed disclosure for 3 years.

The three-year retention period is what makes the duty enforceable. A complaint lodged well after move-in can still be checked against a document that the landlord's side is required to have on file. The Real Estate Board of New York asked the department, in the same 2025 comments, to clarify and to list the fees that must be disclosed; the law's own wording is broad, covering all fees payable to the landlord or at its direction.

Penalties: the code's ceilings and the proposed schedule

Section 20-699.23 sets maximum civil penalties, and sets them separately for the two rules. In an enforcement proceeding the department may ask for every applicable penalty and also for restitution, meaning the return of fees charged in violation of the law.

The code gives ceilings, not fixed fines. The amounts actually sought are set by rule, and the Department of Consumer and Worker Protection published a proposed penalty schedule on which it received comments dated from 21 April to 14 May 2025. The proposed schedule distinguishes a violation from a default. Every amount in it is a proposal: the schedule as adopted was not read for this guide.

A worked example shows how the two rules add up. Assume one rental in which a landlord's agent both collects a fee from the tenant and fails to provide the signed disclosure, and assume it is a first violation of each rule. Under the proposed schedule the penalties would be US$750 plus US$375, or US$1,125; at the code's ceilings they would be US$1,000 plus US$500, or US$1,500. For a second violation of each rule within two years, the proposed schedule gives US$1,800 plus US$900, or US$2,700, against ceilings of US$2,000 plus US$1,000, or US$3,000. Restitution of the fee itself would come on top in each case. These are illustrative sums built from the published amounts, not the record of any proceeding.

The proposed first-violation amounts stand at 75 per cent of their ceilings (750 of 1,000, and 375 of 500) and the second-violation amounts at 90 per cent (1,800 of 2,000, and 900 of 1,000). That closeness was the centre of the comments. The Real Estate Board of New York, which describes itself as a trade association founded in 1896 with more than 10,000 residential brokerage members, called the proposed fines excessively high and asked for lower figures. Other commenters argued the opposite: one proposal was a penalty of the greater of US$2,000 or twice the advertised rent from the first violation, with a multiplier of 1.5 for repeat violations and a four-year look-back; others suggested 30 per cent of a year's rent. Proposals of that size would exceed the ceilings in section 20-699.23.

The right to sue, and the court challenge

Enforcement does not belong to the department alone. Section 20-699.24 gives any person who alleges a violation the right to bring a civil action in any court of competent jurisdiction, and allows the court to order compensatory, injunctive and declaratory relief. A tenant charged a fee by a landlord's agent may therefore sue, alongside the department's own enforcement. The Real Estate Board of New York noted in its comments that this private right of action raises costs.

Section 20-699.25 looks the other way, towards prevention. The commissioner must run an outreach and education campaign for real estate brokers, tenants, prospective tenants and the affected public, with materials posted on the department's website in English and in the designated citywide languages.

The law was challenged in federal court before it applied. The same comment document refers to a pending case, Real Estate Board of New York, New York State Association of Realtors and others against the City of New York and others, docket 24-cv-09678, and describes it as seeking to block enforcement. That is as far as the documents read for this guide go; the outcome of the case was not verified and is not set out here.

The city law does not say that tenants never pay a broker. It says the agent a landlord engages cannot send the tenant the bill.

The State's limit on what a landlord may charge

The exception written into the city's fee rule points to section 238-a of the New York Real Property Law, headed "Limitation on fees". It is State law, in force across New York, and it applies to a residential dwelling unit.

Subdivision 1 says that a landlord, lessor, sub-lessor or grantor may not demand any payment, fee or charge for processing, reviewing or accepting an application, or any other payment before or at the beginning of the tenancy, unless a statute or regulation allows it. The one charge it then permits is for background and credit checks, on three conditions. The total may not exceed the actual cost of the checks or US$20, whichever is less. The fee must be waived when the applicant supplies a background or credit check carried out within the past 30 days. And the fee cannot be collected at all unless the applicant receives a copy of the check together with the receipt or invoice from the firm that ran it.

Two worked examples, with assumed costs. If the checks cost the landlord US$15, the most that can be passed on is US$15, since the actual cost is the lower figure. If they cost US$35, the most is US$20, and the remaining US$15 stays with the landlord.

Subdivision 2 deals with late rent. No late fee may be charged unless the rent is still unpaid five days after it fell due, and the fee may not exceed US$50 or 5 per cent of the monthly rent, whichever is less. On an assumed rent of US$3,000 a month, 5 per cent is US$150, so the cap is US$50. On an assumed rent of US$800, 5 per cent is US$40, so the cap is US$40. The two limits meet at a rent of US$1,000; above that, US$50 is always the lower figure.

The section lists its own exemptions from the application-fee rule, among them continuing care retirement communities, assisted living providers and adult care facilities. Subdivision 3 closes the door on private workarounds: any lease provision that waives or limits the section is void as against public policy.

What the Department of State told licensees in 2019

Section 238-a speaks of landlords, not brokers. The link to the licensed trade was made by the New York Department of State, which licenses brokers and salespersons. On 13 September 2019 the Secretary of State, Rossana Rosado, announced that the department's Division of Licensing had issued guidance for real estate professionals on the tenant protection legislation of that year.

According to the department's announcement, the guidance says that landlords, lessors, sub-lessors and grantors may not collect an application fee above US$20, and that the same limit applies to licensed brokers and salespeople when they act as agents of those parties. A licensee who collects more, or who fails to tell the landlord client that such fees are prohibited, may face discipline by the department. Where a prohibited fee is collected at a rent-regulated property, the announcement adds that the tenant may seek relief through HCR, a body the announcement refers to by its initials.

The announcement also lists other parts of the 2019 law that licensees were expected to know: a landlord may not refuse to rent because of a tenant's history in landlord-tenant proceedings, no fee may be charged for rent paid within five days of its due date, and a security deposit must be returned within 14 days. The announcement does not say how the guidance treats a broker's commission paid by a tenant; that question is the one New York City later answered for itself in Local Law 119.

Who may share a commission under Real Property Law 442

The city law decides who pays. State law decides who may be paid, for rentals and sales alike, in article 12-A of the Real Property Law.

Section 442, splitting commissions. A broker may share a commission only with a defined set of recipients: a licensed salesperson associated with that broker, another licensed broker, or a person regularly engaged in the brokerage business outside New York. The section also allows payment to certain unlicensed corporations or limited liability companies whose members are individually licensed with the broker. A second subdivision covers a narrow case, the original sale of cooperative or homeowners' association interests by a registered broker, where a share may go to certain persons whose main business is not selling such interests.

Rebates to a principal. The same section says that, outside those cases, a broker may not pay part of a commission to a party to the transaction. It then permits one thing expressly: a broker may offer part of the compensation to a buyer, seller, landlord or tenant, provided the payment is not for performing an activity that requires a licence. In practice this is the provision under which a broker may hand part of a fee back to the client. What it does not allow is paying an unlicensed party to do brokerage work. The New York State Senate's legislation site shows the latest revision of the section as dated 19 August 2022.

Section 442-a, compensation of salespersons. A salesperson may not accept compensation of any kind from anyone other than the licensed broker with whom they are associated, for work on the appraisal, sale, exchange, leasing or rental of real estate, or on negotiating a loan secured by it. A landlord, a seller or a tenant who wishes to reward a salesperson cannot pay that person directly; the money goes to the broker, who then pays the salesperson under their own arrangement.

Section 442-d, actions for commissions. No person, partnership, limited liability company or corporation may bring or maintain an action in a New York court to recover compensation for brokerage services without alleging and proving that it was a licensed broker or salesperson on the date the cause of action arose. The relevant date is the day the claim came into being, not the day the suit is filed.

Placed beside the FARE Act, these sections describe a single chain. On a New York City rental, the fee for a landlord-side agent is owed by the landlord; it is paid to the broker and never to the salesperson directly; the broker may share it only with licensees and the other recipients section 442 names; and part of it may be offered back to a principal, so long as the principal is not being paid for licensed work.

What the pages read for this guide do not settle

Four points remain open, and a reader relying on any of them should look for the official text.

• The first day in force. The law says 180 days after it becomes law. The text read here does not print the resulting calendar date.
• The final penalty schedule. The amounts of US$750, US$1,800, US$375 and US$900 are those of the proposed rule on which the Department of Consumer and Worker Protection took comments in April and May 2025. Whether the adopted rule kept them was not verified.
• The litigation. The only official reference read is the mention of federal docket 24-cv-09678 as pending in spring 2025. No court decision was read for this guide.
• Commission on sales. This guide describes who may share a commission and who may sue for one. It does not describe how a sale commission is negotiated or what a listing agreement must contain in New York, because no official page on those points was read for it.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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