Why This Decision Matters in 2025
Previously, landlords in NYC could enter into listing agreements with brokers to market and lease their property, with the option to either: (A) pass the broker fee onto the incoming tenant or (B) pay it themselves. However, with the FARE Act in effect as of June 11th, landlords no longer have an option and are now obligated to compensate the agents they hire to represent them directly.
For landlords who were already structuring their agreements to pay the broker fee, it may seem like business as usual—but now that all listings on StreetEasy are “no-fee”, the playing field amongst comparable listings has effectively been leveled.
In addition to changing how broker fees are handled, the FARE Act imposes strict requirements around transparency. Under the new law, all fees that a tenant must pay to secure an apartment, both upfront and recurring, must be stated in the listing. This provision is especially relevant for landlords in condo and co-op buildings, as board applications often involve multiple fees (move-in deposit, credit check, etc.), ranging from several hundred to several thousand dollars.
Before signing a listing agreement, landlords should ensure compliance and understand how broker fees affect asking rents, vacancy loss, and property value.
Case Study: Landlord-Paid vs. Tenant-Paid Broker Fee
To illustrate the financial considerations, below is a real-world example. At this condo building in Williamsburg, Brooklyn, we listed two nearly identical one-bedroom condo units on the same floor. Despite their similarities, they yielded different outcomes in terms of achieved rental price. The key difference is that Apartment B (212 North 9th Street #3A) had a tenant-paid broker fee, whereas Apartment A (212 North 9th Street #3D) was offered as "No Fee" or landlord-paid fee.
Example: Rent & Fee Comparison
| Apartment A (Landlord‑Paid) | Apartment B (Tenant‑Paid) | |
|---|---|---|
| Monthly Rent | $5,500 | $5,000 |
| Broker Fee (one‑time) | −$5,500 | $0 |
| Gross Rent Collected | $66,000 | $60,000 |
| Profit After Broker Fee | $60,500 | $60,000 |
| Days on Market | 7 | 19 |
| Vacancy Loss | −$1,283.33 | −$3,166.66 |
| Net Revenue After Vacancy | $59,216.67 | $56,833.34 |
*Does not factor in any landlord/tenant paid condo board application fees.
By covering the leasing fee upfront, the landlord of Apartment A ultimately secured a higher base rent and incurred fewer days on market, resulting in less vacancy loss. Most importantly, the landlord of Apartment A improved their bottom line, earning ~$2,400 more than the landlord of Apartment B. Taking this one step further, assuming the tenants renew and are offered the same year-over-year increases, on a 3-year schedule, the delta in net revenue grows.
Example: 3-Year Net Revenue Growth
| Year | Apt A Rent | Apt B Rent | Δ Rent | Net Rev A | Net Rev B | Δ Net Revenue |
|---|---|---|---|---|---|---|
| 1 | $5,500.00 | $5,000.00 | $500.00 | $60,500.00 | $60,000.00 | $500.00 |
| 2 | $5,665.00 | $5,150.00 | $515.00 | $128,480.00 | $121,800.00 | $6,680.00 |
| 3 | $5,834.95 | $5,304.50 | $530.45 | $198,499.40 | $185,454.00 | $13,045.40 |
*Does not factor in any landlord/tenant paid condo board application fees.
Key Takeaways
- Year 1:
- Faster Lease‑up: Minimizing vacancy is critical, just one month of vacancy at $5,000 wipes out the value of a broker fee. Apartment A's 7-days on market compared to Apartment B's 19-days on market protected Landlord A from ~$1,880 in vacancy loss.
- Greater Net Revenue: Despite paying a $5,500 broker fee, Apartment A still out-earned Apartment B by $2,400 in year 1 alone.
- Year 2-3:
- Δ Net Revenue Growth: The earnings gap widens in future years due to compounding. At 3% annual increases, Apartment A pulls ahead by $13,000 by year 3.
- Δ Rent ($/mo): Increasing rent by a fixed % grows faster on a higher base ($5,500 vs. $5,000).
Additional Considerations
- Owner-Paid Condo/Co-op Application Fees: Landlords in condo and co-op buildings can also feel the burden of costly application fees to lease their apartments. In some cases, generally in co-ops, the landlord’s portion of these fees can substantially exceed the tenant’s share. To offset the increased expense of broker fees now required by landlords, landlords may opt to pass on some or all of their assigned condo or co-op fees to tenants, provided these charges are clearly disclosed in the listing.
- Larger Pool of Qualified Applicants: In NYC, the standard income requirement is 40X the gross monthly rent. By advertising an apartment at $5,500 compared to $5,000, Landlords are in turn raising their qualification requirements for the incoming tenants.
- Higher Appraisal: Lenders and buyers capitalize NOI. In year one, Apartment A had $66,000 in gross rent collected compared to Apartment B’s $60,000. The additional $6,000 in gross rent collected at a 5% cap theoretically adds $120,000 in value.
