Can Landlords Ask for Key Money? A Guide to NYC Rental Fees
Can Landlords Ask for Key Money? A Guide to NYC Rental Fees
In the fast-paced, competitive world of New York City real estate, the search for an apartment can feel like navigating a minefield of hidden costs and confusing rules. One term that often surfaces in hushed tones is "key money." As a prospective renter, you may wonder if this practice is still common, what it is, and most importantly, is it legal?
At Yeo Real Estate, we believe in transparency and empowering our clients with the knowledge they need to make informed decisions. Here’s a detailed look at what "key money" is, what's legal for landlords to charge, and how to protect yourself.
What is "Key Money" in NYC?
"Key money" refers to an illegal, often under-the-table payment demanded by a landlord, superintendent, or even a current tenant in exchange for securing a residential apartment lease. The term originated decades ago, primarily associated with rent-stabilized or rent-controlled apartments—units so valuable that a landlord could demand an extra bribe on top of the first month’s rent and security deposit.
This practice is different from a legal broker's fee, which is a commission paid to a licensed real estate broker for their services in finding an apartment. However, both have been points of contention, leading to new legislation.
Key Difference:
Key Money (Illegal): An upfront, illicit payment to a landlord or super to get an apartment.
Broker's Fee (Legal in some cases, with new regulations): A commission paid to a licensed real estate professional.
Is Key Money Legal for Residential Apartments?
No. Key money for a residential lease is illegal in New York.
According to New York State law, a landlord or their agent cannot demand any payment, fee, or charge from a prospective tenant before or at the start of a tenancy, with the exception of specific, legally sanctioned fees. This practice, often conducted in cash, is considered an illegal bribe and is a form of tenant harassment.
While the practice has largely fallen out of favor, it's not unheard of, especially for highly desirable or rent-regulated units. If a landlord, building manager, or super asks for this type of payment, you should refuse and consider reporting the illegal activity to the New York State Attorney General or the NYC Department of Consumer and Worker Protection (DCWP).
What's the Difference for Commercial Leases?
It's a completely different story in the commercial real estate world.
In commercial transactions, particularly in the restaurant and retail industries, "key money" is a common and legal practice. It is not a bribe, but rather a payment from an incoming tenant to an outgoing tenant for the value of their existing long-term, below-market-rate lease. This payment, also known as a "lease assignment fee," is often an official part of the deal and is transparently disclosed in the listing.
The Current Landscape: What Landlords Can and Cannot Charge
The "key money" issue has become less of a concern for most NYC renters due to recent legislative changes that have tightened rules on all rental fees. The most significant of these is the Fairness in Apartment Rental Expenses (FARE) Act, which went into effect on June 11, 2025.
This new law fundamentally shifts who pays the broker's fee in a landlord-represented transaction.
Summary of Legal & Illegal Fees
This table provides a clear overview of common fees and whether they are legal for a landlord to charge in NYC.
Type of Fee | Is It Legal? | Notes |
Broker's Fee | Depends. | As of June 11, 2025 (FARE Act), if a landlord hires a broker, the landlord is responsible for paying that broker's fee. A tenant is only responsible for a broker's fee if they hired a broker to represent them in the search. |
Application Fee | Yes, but capped. | Landlords or their agents can only charge a maximum of $20 per applicant to cover the cost of a credit and background check. They must provide you with a copy of these checks. |
Security Deposit | Yes, but capped. | Landlords cannot ask for more than one month's rent as a security deposit. They must return it to you within 14 days of you moving out, with an itemized statement for any deductions. |
First Month's Rent | Yes. | This is a standard and legal payment required at lease signing. |
Late Fees | Yes, but capped. | A landlord can only charge a late fee if rent is more than five days late. The fee cannot exceed $50 or 5% of the monthly rent, whichever is less. |
"Key Money" or Bribes | No, absolutely not. | Any cash or under-the-table payment demanded by a landlord to secure a residential apartment is illegal. |
Additional Fees | Generally, no. | Landlords cannot charge for other fees like moving fees, elevator use fees, or other surcharges unless they are specifically outlined and legal. All fees that are required must be disclosed. |
The FARE Act: A Game-Changer
The FARE Act aims to increase transparency and reduce the financial burden on renters. Here’s what it means for you:
Landlord-Paid Brokers: If you find an apartment listed by a landlord's broker, you no longer have to pay that broker's fee. The landlord is responsible for it.
Tenant-Hired Brokers: You can still hire your own broker to help you find an apartment, in which case you would be responsible for paying your own broker's fee.
Mandatory Disclosure: Landlords and their agents are now required to provide a clear, itemized, and signed written disclosure of all fees a tenant must pay before a lease is signed.
This law is a significant step toward making the NYC rental market more equitable and transparent. However, some industry experts predict that landlords may simply raise the monthly rent to absorb the cost of the broker fee, which could lead to higher rents overall.
Tips & Takeaways for Renters
Know Your Rights: Familiarize yourself with New York State's tenant protection laws. Resources from the NYS Attorney General's Office and NYC's official government websites are the most reliable sources.
Be Skeptical of "Key Money": If a landlord, super, or agent asks for a cash payment or any undisclosed fee to "secure" a residential apartment, walk away. It is illegal and a major red flag.
Ask for a Breakdown: Always request an itemized list of all fees before you sign a lease. This is now a legal requirement under the FARE Act.
Document Everything: Keep a record of all correspondence, including emails and texts, and receipts for all payments.
Report Violations: If you believe a landlord is engaging in illegal activities, you can file a complaint with the DCWP or the Attorney General's office.
The NYC real estate market can be challenging, but understanding your rights is the best way to protect yourself from illegal practices.
Looking for a trustworthy partner in your NYC real estate journey? At Yeo Real Estate, we're dedicated to guiding you through the process with integrity and expertise. Whether you're a first-time homebuyer, a seasoned seller, or a new renter, our team is here to help you navigate the market and find your perfect place. Contact us today to learn more about how we can help you achieve your real estate goals.