FARE Act: NYC's Landmark Decision to Shift Rental Fee from Tenants to Landlords

• The FARE Act shifts broker fee responsibility to landlords, making it illegal for tenants to pay broker fees when brokers represent the landlord.

• Landlords must disclose all fees in rental listings and agreements or face penalties.

• The law is set to take effect by summer 2025, unless challenged in court​.

On November 13, 2024, the New York City Council passed the FARE Act, with 42 out of 51 council members voting “Yes.” Although the act enjoys strong backing from the Council, Mayor Eric Adams has previously raised concerns about its potential effects. However, with a veto-proof majority, the bill is set to take effect in roughly six months unless legally challenged.

What is the FARE Act?

The Fairness in Apartment Rental Expenses (FARE) Act shifts the responsibility for broker fees to the party who hires the broker — which, in most cases, is the landlord. It mandates landlords or their brokers to clearly disclose and advertise any fees tenants must pay in rental listings and agreements. Failure to comply could result in fines or legal action. It also gives renters the choice of hiring a broker to represent them, and ensures tenants aren’t forced to pay a broker fee as a condition of signing a lease agreement.

When will the FARE Act go into effect?

While the City Council has passed the FARE Act, it has not yet become law.

If it is enacted — either through Mayor Adams’ approval, a Council override of a veto, or by the bill becoming law without the Mayor’s signature — the changes will be implemented 180 days later, likely by summer 2025. Until then, NYC’s current system remains unchanged, meaning tenants may still be required to pay a broker fee to a landlord’s broker.

What Does FARE mean for Renters?

The immediate benefit of the FARE Act is clear: renters will no longer be required to pay hefty broker fees when securing a new apartment. This change could make finding a place to live in NYC more affordable, especially for those who’ve struggled with the burden of upfront costs. With many apartments charging broker fees that total 15% of the annual rent, this shift could help ease financial stress, particularly for low- and middle-income tenants.

What does FARE mean for landlords?

While renters may welcome this change, landlords will now bear the cost of broker fees, which could have a significant impact on how rental properties are marketed and leased. Brokers, who traditionally advocated for tenants, will now work for landlords, shifting the power dynamic. This change may impact the guidance brokers provide during price negotiations, as well as their level of support for tenants navigating the rental application process. Brokers, now representing landlords, may not have the same incentive to advocate for renters, leaving tenants to navigate the rental process without the same level of expertise or representation.

This shift could also influence pricing, as landlords may seek to recoup broker costs by raising rents, possibly negating some of the savings renters expect. In addition, while brokers working directly for landlords might help streamline leasing, it could also make apartment hunts more competitive, with fewer opportunities for tenants to negotiate favorable terms.

The Bigger Picture: Transparency and Fair Housing Concerns

While the legislation aims to make renting more equitable by shifting broker fees, it also raises concerns about transparency and fairness in the market. With landlords now responsible for paying broker fees, the cost could be passed on indirectly through rent increases, making it harder for some tenants to afford housing. Additionally, as the law requires greater transparency in fee structures, some property owners may become less forthcoming with other costs or hidden fees, complicating the rental process for tenants.

As the rental market adjusts to these changes, tenants and landlords alike will need to stay informed about the evolving landscape. Brokers, now working on behalf of landlords, will play an essential role in shaping how the market adapts, but tenants may face new challenges without the guidance they once had. Ultimately, whether this legislation proves to be a true win for renters will depend on how landlords and brokers navigate these changes in the coming months.

FAQ

Q: Who will pay the broker fees under the FARE Act?
A: The party that hires the broker will be responsible for paying their fees. In most cases, this will be the landlord.

Q: Will tenants still have the option to hire a broker?
A: Yes, renters can choose to hire a broker to represent them if they wish, but they will only pay the fees for brokers they personally hire.

Q:  What happens if landlords or brokers fail to disclose fees?
A: Landlords or brokers who do not clearly disclose tenant fees in listings and agreements may face penalties, including fines and potential lawsuits.

Q: When will the FARE Act take effect?
A: If enacted, the law will be implemented 180 days (approximately six months) after it is signed, overridden, or allowed to pass without the Mayor's signature. This means it is expected to take effect by summer 2025.

Q: What should tenants expect until the law goes into effect?
A: Until the FARE Act is officially enacted, the current broker fee system remains in place, and tenants can still be required to pay fees to brokers hired by landlords.

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