1. Understanding NYC'S Broker Fee Law
New York City reshaped residential broker fees with the FARE Act, which took effect on June 11, 2025. The law targets who pays the broker and how fees must be disclosed.
What the Fare Act Changed in 2025
The FARE Act (Local Law 119 of 2024) requires the party who hires the broker to pay that broker's fee, so a landlord who retains a listing agent cannot pass that commission, which has traditionally often ranged from about 10 to 15 percent of the first year's rent, to the tenant. Every fee the tenant is required to pay must be disclosed in the listing, and applicable fees must also be reflected in the lease or related rental documents before execution. A federal appeals court upheld the law in 2026, and the NYC Department of Consumer and Worker Protection enforces it.
Who the Law Applies to
The rule covers residential rentals in New York City, including most apartments listed by landlords and their agents. It does not reach a tenant who voluntarily hires their own broker, because that tenant is the hiring party. Tenants searching on their own for landlord-listed units are the clearest beneficiaries.
Practices the Law Prohibits
The FARE Act draws firm lines around what landlords and their agents cannot do. These are the practices that most often trigger complaints:
- Charging a tenant for a broker the tenant did not hire
- Failing to disclose required tenant-paid fees in the listing
- Collecting an undisclosed fee at or after lease signing
- Requiring the tenant to cover the landlord's broker commission as a condition of renting
2. How Franchise Fees Differ from Broker Fees
A franchise fee is a business cost, not a consumer rental charge, and a different body of law controls it. The table shows where the two regimes part ways.
| Feature | NYC Broker Fee (FARE Act) | Franchise Fee |
|---|---|---|
| Who pays | The party who hired the broker, often the landlord | The franchisee, paid to the franchisor |
| Governing law | NYC FARE Act (Local Law 119 of 2024) | FTC Franchise Rule and NY Franchise Sales Act |
| Regulator | NYC Department of Consumer and Worker Protection | FTC and the New York Attorney General |
| Core duty | Disclose fees and not shift the landlord's broker fee to the tenant | Register and disclose fees in the FDD before the sale |
| Who it protects | Residential rental tenants | Prospective franchisees |
Different Purpose, Different Regulator
A broker fee compensates a real estate agent for a single rental transaction, while a franchise fee buys entry into a brand system with ongoing royalties. The FTC Franchise Rule and New York's Franchise Sales Act, enforced by the FTC and the New York Attorney General, govern franchise fees through registration and disclosure. Filing a complaint with the wrong agency can delay enforcement or leave the applicable remedy unavailable.
3. Tenant Rights and How to Challenge an Improper Fee
If a landlord or agent charges a fee the FARE Act bars, you have concrete options. The key is acting on the disclosure and payment records you already hold.
What Tenants Can Demand
You can insist that any fee you owe was disclosed in the listing and lease before you signed, and challenge charges the landlord's broker imposed without your engagement. The law places the disclosure obligation on the party subject to the FARE Act. Understanding your tenant rights before signing prevents most improper charges.
Where to File and What to Document
Keep the listing, the lease, fee receipts, and any messages showing who hired the broker. File a complaint with the NYC Department of Consumer and Worker Protection, which investigates FARE Act violations and can impose penalties. Organized records turn a vague grievance into an enforceable claim.
4. Franchise Fee Compliance for Business Owners
Franchise operators face the opposite exposure: their risk runs to regulators and franchisees, not rental tenants. Brokerage franchises must satisfy both regimes at once.
Overlapping Duties for Brokerage Franchises
A franchise network that offers residential brokerage in New York must comply with the FARE Act at the storefront and with franchise disclosure law at the contract level. Franchisors should confirm that operations manuals never instruct franchisees to bundle or shift broker fees in ways the FARE Act forbids. Separating broker commissions from franchise royalties on client statements helps reduce compliance risk under both regulatory regimes.
5. Frequently Asked Questions
Do I still owe a broker fee if the landlord's agent showed me the apartment?
Under the FARE Act, you do not, when the landlord hired that agent, because the hiring party pays the fee. You owe a broker fee only when you separately retain your own broker to find or negotiate the unit. If a landlord's agent still demands a fee, that demand is the violation, not your refusal.
Does the FARE Act cover commercial leases and franchise locations, or only residential rentals?
The FARE Act reaches residential rentals in New York City and does not govern commercial lease broker fees, which stay negotiable between the parties. A franchisee leasing retail space is bound by the commercial lease terms, not by these tenant protections. That line matters when a franchise site sits in mixed-use space with both apartments and storefronts.
Can a landlord rename the broker fee as an application or administrative fee to get around the law?
Relabeling does not cure an illegal charge, because enforcement agencies and courts generally look to the substance of a fee rather than the label. A disguised broker commission is still a broker commission under the FARE Act. Undisclosed application or administrative fees can also breach the disclosure rules, giving you two grounds to challenge them.
6. Key Takeaways
Broker fees and franchise fees answer to different laws, regulators, and remedies, so your first move is identifying which one you face. Tenants gain the most by confirming that every fee was disclosed before signing and that they never hired the broker being charged. Franchise operators reduce compliance risk by keeping broker commissions and franchise royalties clearly separate in contracts and operational documents.
05 Mar, 2026
