The Second Circuit Court of Appeals has upheld New York City's Fairness in Apartment Rental Expenses Act, commonly known as the FARE Act. This ruling affects real estate brokers, landlords, and tenants by prohibiting brokers from charging fees to tenants for rental listings. The court's decision is significant as it aims to address the ongoing housing crisis in New York City, where rental costs have skyrocketed and many residents are struggling to find affordable housing.
The FARE Act was passed by the New York City Council on November 13, 2024, and went into effect on June 11, 2025. The law prohibits brokers from imposing fees on tenants when they publish rental listings with the landlord's permission or when they work on behalf of the landlord. It also prevents landlords from requiring tenants to engage an agent as a condition for renting an apartment. The law was enacted in response to the city's housing crisis, where many residents spend over 30% of their income on rent, making it difficult for them to afford housing.
The plaintiffs in this case included the Real Estate Board of New York and several real estate brokerage firms and landlords. They argued that the FARE Act violated their constitutional rights, claiming it infringed on their free speech rights and impaired existing contracts between brokers and landlords. They sought a preliminary injunction to stop the law from taking effect, but the district court denied their request, leading to the appeal.
In its ruling, the Second Circuit Court affirmed the district court's decision, stating that the FARE Act does not violate the First Amendment. The court explained that the law regulates commercial speech, which enjoys limited protection under the First Amendment. The judges noted that the law serves a substantial government interest in addressing the housing crisis and that the restrictions imposed by the FARE Act are reasonable and appropriate.
The court ruled, "The FARE Act regulates commercial speech, is subject to intermediate scrutiny, and is valid under Central Hudson," referring to the legal standard for evaluating restrictions on commercial speech.
The judges emphasized that the FARE Act's provisions are designed to prevent landlords from shifting the burden of brokers' fees onto tenants, which the court recognized as a significant issue in New York City's rental market. The court found that the law's restrictions on brokers' fees directly advance the city's interest in improving housing mobility and affordability.
The impact of this ruling is substantial for both tenants and real estate professionals in New York City. By banning brokers' fees, the FARE Act aims to make renting more affordable for tenants, who often face high upfront costs when securing rental properties. This change could lead to a more equitable rental market where tenants are not burdened by additional fees that do not correspond to the services they receive.
For real estate brokers, the ruling may require adjustments to their business models. Brokers will need to find new ways to operate without relying on fees from tenants, which could lead to changes in how rental properties are marketed and how brokers are compensated. The court's decision could set a precedent for other cities facing similar housing challenges, encouraging them to consider similar regulations to protect tenants.
Looking ahead, the plaintiffs may consider appealing the ruling to the Supreme Court, but details on any such plans were not available in the court filing. The FARE Act remains in effect, and its implementation will likely continue to be monitored as the housing crisis in New York City evolves.