25-1506
Real Estate Board of New York, Inc. v. The City of New York
In the
United States Court of Appeals
For the Second Circuit
August Term 2025
Argued: November 3, 2025
Decided: July 13, 2026
No. 25-1506
REAL ESTATE BOARD OF NEW YORK, INC., NEW YORK STATE ASSOCIATION OF REALTORS, INC., BOHEMIA REALTY GROUP, BOND NEW YORK REAL ESTATE CORP., LEVEL GROUP INC., REAL NEW YORK LLC, FOUR CORNERS REALTY, LLC, 21 WEST 74
CORP., 8 WEST 119TH STREET HDFC,
Plaintiffs-Appellants,
v.
THE CITY OF NEW YORK, A MUNICIPAL ENTITY, SAMUEL A. A. LEVINE, AS
COMMISSIONER OF NEW YORK CITY DEPARTMENT OF CONSUMER AND WORKER
PROTECTION,
Defendants-Appellees. *
* Pursuant to Federal Rule of Appellate Procedure 43(c)(2), Samuel A.A. Levine— the current Commissioner of New York City Department of Consumer and Worker Protection—is automatically substituted in the caption for his predecessor in office as a defendant in this case. The Clerk of Court is respectfully directed to amend the caption as set forth above.
Appeal from the United States District Court
for the Southern District of New York
No. 24-cv-9678, Ronnie Abrams, Judge.
Before: PARKER, LIVINGSTON, and KAHN, Circuit Judges.
On November 13, 2024, the New York City Council passed the Fairness in Apartment Rental Expenses Act, or the “FARE Act.” The Act prohibits brokers from imposing fees (known as a brokers’ fee) on tenants with respect to properties for which the broker has either (1) published a listing with the landlord’s permission or (2) agreed to work on behalf of the landlord. The Act also prohibits landlords from conditioning the rental of an apartment on a prospective tenant engaging an agent.
Plaintiffs-Appellants, a group of trade associations, real estate brokerage firms, landlords, and other related organizations, sought a preliminary injunction to enjoin the law from going into effect, on the grounds that the law violated the United States Constitution and the Constitution of the State of New York. Defendants-Appellees, including the City of New York, opposed the preliminary injunction and moved to dismiss. The district court held oral argument on May 2, 2025, and on June 10, granted Defendants’ motion to dismiss in part and denied Plaintiffs’ motion for a preliminary injunction. We agree with the lower court’s decision and AFFIRM the judgment of the district court.
SEAN MAROTTA (J. Andrew MacKenzie, on the brief), Hogan
Lovells US LLP, Washington, D.C.; Claude G. Szyfer, Darya D.
Anichkova, on the brief, Hogan Lovells US LLP, New York, NY,
for Plaintiffs-Appellants.
JAMISON DAVIES (Richard Dearing, Claude Platton, on the brief),
Of Counsel, for Steven Banks, Corporation Counsel of the City
of New York, New York, NY, for Defendants-Appellees.
2
BARRINGTON D. PARKER, Circuit Judge:
On November 13, 2024, the New York City Council passed the Fairness in
Apartment Rental Expenses Act, or the “FARE Act.” The Act prohibits brokers
from imposing a fee (colloquially known as a brokers’ fee) on tenants with respect
to properties for which the broker has either (1) published a listing with the
landlord’s permission or (2) agreed to work on behalf of the landlord. The Act
also prohibits landlords from conditioning the rental of an apartment on a
prospective tenant engaging an agent.
Plaintiffs-Appellants, a group of trade associations, real estate brokerage
firms, landlords, and other related organizations, contend that the Act is
constitutionally deficient in two ways. First, they argue that the Act violates their
federal and state free speech rights by burdening their ability to publish rental
listings and charge tenants for their services after doing so. Second, they argue
that the Act violates the Contracts Clause of the United States Constitution by
rendering existing agreements between landlords and brokers unenforceable.
In the district court, Plaintiffs sought a preliminary injunction to stop the
Act from going into effect. The City opposed Plaintiffs’ motion and moved to
dismiss their claims. The district court granted Defendants’ motion to dismiss in
3
part and denied Plaintiffs’ motion for a preliminary injunction. We agree with the
district court, and we AFFIRM the judgment.
BACKGROUND
New York City has the largest rental market in the country, and rental
properties account for nearly 70% of the City’s overall housing stock. Jt. App’x at
669. Both parties agree that New York City is suffering from a housing crisis – as
the demand for residential rental units continues to meaningfully outpace supply
throughout the City. As of 2024, the median asking rent on publicly listed rentals
in New York City was $3,500 a month and in 2023 the vacancy rate had dropped
to 1.4%. Id. As a result of this, over half of the City’s residents are “rent burdened”
meaning they spend more than 30% of their income on their rent. Id.
In New York City, real estate brokers often act as intermediaries between
tenants and landlords, and prospective tenants often do not interact directly with
landlords. Brokers typically assist prospective tenants with searching, applying
for, and obtaining approval for residential rental units. Id. at 670-71. Brokers also
assist landlords with staging, advertising, and processing applications to fill
vacant units. Id. at 670.
4
When landlords decide to list an apartment for rent in New York, they may
enter into exclusive listing agreements with brokers, under which they hire a
broker or brokerage firm to market the apartment on an exclusive basis. Some
exclusive listings are advertised as “no-fee” listings. For “no-fee” listings,
landlords pay directly for a broker’s services. In some instances, however, the
landlord’s arrangement with the broker requires that the broker seek
compensation from potential tenants via “fee” or “tenant-pays” exclusive listings.
Alternatively, landlords may choose to rent their properties through “open
listings” by which various brokers market a property on a nonexclusive basis.
When a broker successfully rents out an “open listing” unit, the broker who
arranged the tenancy typically seeks compensation from the tenant who rents out
the property.
In either case, brokers’ fees can be substantial and generally range between
roughly 8–15% of the annual value of the lease. Jt. App’x at 671. In most of the
United States, the landlord is responsible for paying brokers’ fees when a broker
lists their property and finds a tenant to live in the unit. Jt. App’x at 672. New
5
York and Boston are the only two major American cities where these fees are often
paid by tenants – regardless of whether those tenants hired the broker. 1 Id.
However, the prevailing relationship between landlords, brokers, and
tenants was dramatically altered when the New York City Council passed the
FARE Act in November 2024, by a vote of 42 to 8. The FARE Act effectively
prohibits landlords and their agents from imposing compulsory brokers’ fees on
tenants and prohibits conditioning the rental of any unit on whether a tenant has
engaged an agent. Specifically, the FARE Act provides that “a landlord’s agent
shall not impose any fee on, or collect any fee from, a tenant related to the rental
of residential real property.” N.Y.C. Admin. Code § 20-699.21(a)(1). 2 The law also
provides that “any agent who publishes a listing for a rental of residential real
property with the permission or authorization of the landlord for such property
shall not impose any fee on, or collect any fee from, a tenant related to the rental
of such property.” § 20-699.21(a)(2). According to the City, the latter provision
1 It is not certain from the record exactly what percent of rental unit listings were “fee” or “tenant pays” exclusive listings before the passage of the FARE Act. However, based on witness testimony, we can ascertain that approximately 50-70% of rental units listed in New York City were “fee” or “tenant pays” exclusive listings.
2 Unless otherwise noted, all further section citations are to the New York City
Administrative Code.
6
was included in the FARE Act to prevent landlords offering “open listings” from
charging prospective tenants brokers’ fees after failing to disclose their agency
relationship with the broker advertising the listing.
The FARE Act also makes it unlawful for any person, including a landlord,
to condition the rental of an apartment on the tenant “engaging any agent.”
§ 20-699.21(c). The law provides for civil penalties and a private cause of action,
§ 20-699.23–24, and creates a rebuttable presumption that any agent publishing a
rental listing “does so with the permission or authorization of the landlord of such
property,” § 20-699.21(e). If a landlord’s agent, or any agent posting a listing with
the landlord’s authorization, violates the no-fee provisions of the FARE Act, the
landlord can be found vicariously liable. § 20-699.21(b). In short, the Act prohibits
landlords and their agents from imposing brokers’ fees on tenants renting units
when the tenants do not directly commission a broker’s services, regardless of how
a landlord hires a broker.
The FARE Act was enacted after a nearly year-long process which included
extensive public hearings, a city-led investigation into the rental market, and
substantial revisions to the initial draft legislation. During this process, many of
the bill’s supporters testified that brokers’ fees made moving prohibitively
7
expensive in New York City, and tenants received little in return for their fee
payments. The bill’s detractors argued that the law would simply shift the cost of
brokers’ fees into rental prices – worsening the City’s already-existing housing
affordability problems.
The Act’s effective date was deferred until 180 days after it became law to
provide affected businesses and individuals with time to prepare for the
operational changes required by the FARE Act. During that time, Plaintiffs
brought this action for declaratory and injunctive relief, alleging that the FARE Act
violated the United States and New York Constitutions, or, in the alternative, was
preempted by state law. Plaintiffs sought an injunction barring enforcement of
the so-called “publication bar” (§ 20-699.21(a)(2)); 3 the so-called “no-conditioning
provision” (§ 20-699.21(c)); 4 and the bar on a landlords’ agents charging tenants
fees (§ 20-699.21(a)(1)). The City opposed the preliminary injunction and moved
3 The “publication bar” prohibits any agent who publishes a listing with the permission or authorization of the landlord from imposing a fee on prospective tenants. § 20-699.21(a)(2). To the extent this opinion references the term “publication bar,” it is worth noting that § 20-699.21(a)(2) does not inherently “bar” brokers from publishing any listing. Rather, it prohibits agents who publish a listing from imposing a fee on any tenant subsequent to the publication of the listing.
4 The “no conditioning provision” prohibits conditioning a rental agreement on
whether a potential tenant hired a real estate broker or other agent. § 20-699.21(c).
8
to dismiss. The district court asked the City if it wanted to request an evidentiary
hearing, but the City declined the court’s invitation. Eventually, the United States
District Court for the Southern District of New York (Abrams, J.) held oral
argument on the parties’ motions and granted the City’s motion to dismiss in part
and denied Plaintiffs’ motion for a preliminary injunction.
Specifically, the district court dismissed Plaintiffs’ First Amendment claims
and denied Plaintiffs’ motion for a preliminary injunction on those claims as moot.
Id. The district court found that, although § 20-699.21(a)(2) regulated “speech”
within the meaning of the First Amendment, Plaintiffs had failed to state a
plausible First Amendment claim because the FARE Act’s publication bar
“satisfies the Central Hudson test as a matter of law.” Real Est. Bd. of N. Y., Inc. v.
City of New York, 786 F. Supp. 3d 788, 811 (S.D.N.Y. 2025).
As for Plaintiffs’ Contracts Clause challenge, the district court denied the
City’s motion to dismiss. Id. at 815. It concluded that issues of fact remained as to
whether the Act’s impairment of Plaintiffs’ existing contracts was a reasonable and
appropriate means of advancing the City Council’s interests, thus precluding
dismissal of the Contracts Clause claim as a matter of law. Id. The district court
also denied Plaintiffs’ motion for a preliminary injunction with respect to their
9
Contracts Clause claim after finding Plaintiffs “failed to establish that they [were]
likely to prove that the FARE Act’s impairment of existing tenant-pays exclusive
listing agreements [was] not a reasonable and appropriate means of improving
housing mobility.” Id. at 818. The district court also dismissed Plaintiffs’ state
preemption claim, finding the FARE Act’s “regulation of broker compensation”
did not “unduly intrude” into the system of state laws governing real-estate
transactions and brokers. 5 Id at 819.
The FARE Act became law on December 13, 2024, and went into effect on
June 11, 2025, just hours after the district court denied Plaintiffs’ request for
injunctive relief.
This appeal followed.
DISCUSSION
I. Standards of Review
We review the district court’s denial of Plaintiffs’ motion for a preliminary
injunction for abuse of discretion and the legal conclusions underlying that
decision de novo. Hudson Shore Assocs. Ltd. P'ship v. New York, 139 F.4th 99, 106
(2d Cir. 2025) (citation omitted). “A district court has abused its discretion if it has
5 Plaintiffs do not contend on appeal that the district court erred in dismissing the state preemption claim.
10
(1) based its ruling on an erroneous view of the law, (2) made a clearly erroneous
assessment of the evidence, or (3) rendered a decision that cannot be located within
the range of permissible decisions.” Warren v. Pataki, 823 F.3d 125, 137 (2d Cir.
2016) (citation modified). Additionally, we review questions of law decided in
connection with requests for preliminary injunctions de novo. Lusk v. Village of Cold
Spring, 475 F.3d 480, 484 (2d Cir. 2007) (citation omitted).
The district court denied Plaintiffs’ motion for a preliminary injunction as
to § 20-699.21(a)(2) because it found, as a matter of law, that Plaintiffs failed to state
a claim upon which relief can be granted. Therefore, our review begins by
determining whether Plaintiffs’ claims are legally viable. See Hudson Shore, 139
F.4th at 107. In determining if a claim is legally viable, “we accept all factual
allegations as true, draw all reasonable inferences in favor of the plaintiffs, and we
will not dismiss as long as the pleadings support more than a sheer possibility that
a defendant has acted unlawfully.” Melendez v. City of New York, 16 F.4th 992, 1010
(2d Cir. 2021) (citation modified).
II. The First Amendment Challenge
The district court found that the FARE Act regulates commercial speech,
which the Supreme Court has defined as “expression related solely to the
11
economic interests of the speaker and its audience.” Cent. Hudson Gas & Elec. Corp.
v. Pub. Serv. Comm’n of N. Y., 447 U.S. 557, 561 (1980) (citations omitted). “The First
Amendment, as applied to the States through the Fourteenth Amendment,
protects commercial speech from unwarranted governmental regulation.” Id. But
our caselaw differentiates commercial speech from other forms of expressive
activity such as political speech. Commercial speech is carved out from our
general First Amendment analysis and instead “enjoys a limited measure of
protection, commensurate with its subordinate position in the scale of First
Amendment values, and is subject to modes of regulation that might be
impermissible in the realm of noncommercial expression.” Vugo, Inc. v. City of New
York, 931 F.3d 42, 49 (2d Cir. 2019) (citation modified). In the commercial speech
context, this Court typically applies the intermediate scrutiny test laid out by the
Supreme Court in Central Hudson, 447 U.S. at 557.
Plaintiffs argue that even though the FARE Act only regulates commercial
speech, it nonetheless violates the First Amendment because it prohibits brokers
from publishing a listing and subsequently receiving compensation from the
tenant who rents the listed unit, thus placing an unconstitutional burden on their
12
speech. 6 First, Plaintiffs argue that § 20-699.21(a)(2) should be subject to
heightened scrutiny because it burdens disfavored speech (rental listings) by
disfavored speakers (real estate brokers). In the alternative, Plaintiffs argue that §
20-699.21(a)(2) fails even intermediate scrutiny under Central Hudson. The City,
for its part, asserts that § 20-699.21(a)(2) does not implicate the First Amendment
at all because the challenged regulation does not burden protected speech. The
City also argues that § 20-699.21(a)(2) survives First Amendment scrutiny
regardless because intermediate, not heightened, scrutiny applies and the FARE
Act survives this inquiry.
In dismissing Plaintiffs’ First Amendment claim, the district court found
that the FARE Act regulated speech within the meaning of the First Amendment
but was content neutral and applied Central Hudson’s intermediate scrutiny test.
Real Est. Bd., 786 F. Supp. 3d at 804–05, 807. The district court then found that § 20-699.21(a)(2) satisfied Central Hudson as a matter of law and dismissed Plaintiffs’
First Amendment claims. Id. at 811. We agree with the district court’s analysis.
6Plaintiffs also assert that the publication bar violates the New York Constitution’s Free Speech Clause but concede that “[t]he New York Constitution affords commercial speech protection identical to the First Amendment.” Appellants’ Br. 24 n.1. We therefore consider both free-speech claims together under the applicable First Amendment standard.
13
The FARE Act regulates commercial speech, is subject to intermediate scrutiny,
and is valid under Central Hudson.
A.
The City argues that Plaintiffs’ First Amendment claim fails at its threshold
because § 20-699.21(a)(2) regulates conduct and thus does not implicate the First
Amendment. Specifically, the City argues that the regulation, “[b]y its plain terms
. . . prohibits no speech whatsoever.” Appellees’ Br. at 29. However, a law need
not prohibit speech to trigger judicial scrutiny. Laws that merely burden speech
may also be subject to review under the First Amendment. “It is of no moment
that [a] statute does not impose a complete prohibition. The distinction between
laws burdening and laws banning speech is but a matter of degree.” United States
v. Playboy Ent. Grp., Inc., 529 U.S. 803, 812 (2000). Under the First Amendment,
“[l]awmakers may no more silence unwanted speech by burdening its utterance
than by censoring its content.” Sorrell v. IMS Health Inc., 564 U.S. 552, 566 (2011).
The FARE Act, through § 20-699.21(a)(2), plainly burdens Plaintiffs’
commercial speech. Indeed, one of the key value-adding components of a broker’s
services is their ability to advertise listings with the eventual goal of
consummating a rental transaction between a landlord and a renter. The Act’s
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“publication bar” prohibits a broker from charging a fee to a tenant only when a
predicate act of speech (e.g., publishing a listing for rent) occurs. Accordingly, a
broker’s speech is the singular predicate act for application of § 20-699.21(a)(2).
The FARE Act cannot escape First Amendment scrutiny simply because it makes
certain kinds of speech commercially or economically unviable rather than
outright prohibiting that speech. The Supreme Court has recognized that a
regulation’s “prohibition on compensation [for delivering speeches or writing
articles] unquestionably imposes a significant burden on expressive activity.”
United States v. Nat’l Treasury Emps. Union, 513 U.S. 454, 468 (1995).
The City argues that National Treasury doesn’t apply because the regulation
challenged in that case directly burdened employees’ expression and “the law
explicitly targeted their expression by means of . . . ensuring they could not be paid
for it,” and the City asserts that the “FARE Act presents no comparable restrictions
on brokers’ expression.” Appellees’ Br. at 34. Yet that is exactly what
§ 20-699.21(a)(2) does. When brokers publish a listing, they are no longer
permitted to be paid by a tenant for renting that unit. Both the regulation
challenged in National Treasury and § 20-699.21(a)(2) “place[] a significant burden”
on targeted speakers through a “denial of compensation,” 513 U.S. at 462 (1995),
15
albeit, under § 20-699.21(a)(2), the limitation on compensation is partial. It is of no
moment that National Treasury dealt with compensation for “making speeches,
publishing scholarly articles, or even writing novels.” Appellees’ Br. at 33. First
Amendment protections apply “[e]ven [to] dry information, devoid of advocacy,
political relevance, or artistic expression.” Universal City Studios, Inc. v. Corley, 273
F.3d 429, 446 (2d Cir. 2001).
The City also argues that the FARE Act does not directly regulate brokers’
protected expressive activity because the Act’s prohibition on “charging a fee to a
tenant whenever the landlord engages a broker’s services or authorizes a broker
to post a listing,” simply “functions as one way of establishing that a broker is
providing services to the landlord, such that the prohibition isn’t contingent on
speech at all.” Appellees’ Br. at 30 (internal citation omitted). But this is a rather
hollow distinction. The FARE Act states that, “any agent who publishes a listing for
a rental of residential real property with the permission or authorization of the
landlord for such property shall not impose any fee on” a tenant related to the
rental of real property. § 20-699.21(a)(2) (emphasis added). The plain language of
the FARE Act thus makes clear that a brokers’ commercial speech (publishing a
property listing) is the key predicate act that bans a form of compensation. On its
16
face, the FARE Act’s prohibition on tenant-pays brokers’ fees applies to the
expressive act of publishing a rental listing, not simply retention or an
authorization by a landlord. Commercial speech is thus the antecedent act that is
required to trigger the FARE Act’s restrictions on broker compensation.
As a result, brokers are left with an “unwelcome choice” of “either
restrict[ing] their [speech,]” or changing their business model in a way that “may
be extremely expensive or even . . . impracticable.” Erznoznik v. City of Jacksonville,
422 U.S. 205, 217 (1975). This is a paradigmatic example of a limitation on speech
that triggers constitutional scrutiny. Accordingly, we agree with the district court
that § 20-699.21(a)(2) implicates the First Amendment.
B.
We next determine the appropriate level of scrutiny to apply. As discussed,
supra Part II.A, because the FARE Act regulates only commercial speech, it enjoys
less protection than other forms of expressive activity under Central Hudson.
Because commercial speech enjoys only “limited” protection, laws and regulations
17
that restrict commercial speech are typically subjected to intermediate scrutiny.
Vugo, 931 F.3d at 49.
In Sorrell, however, the Supreme Court recognized an exception to the
general application of intermediate scrutiny in the commercial speech context.
The Court wrote that “heightened judicial scrutiny is warranted” when a statute
“is designed to impose a specific, content-based burden on protected expression.”
564 U.S. at 565. In other words, Sorrell held that the application of intermediate
scrutiny was insufficient when a challenged law “burdens disfavored speech by
disfavored speakers.” Id. at 564. Plaintiffs argue that this more stringent standard
applies here because the FARE Act similarly “targets disfavored speech – rental
listings – by disfavored speakers – brokers.” Appellants’ Br. at 24. We remain
unconvinced that Sorrell’s heightened standard applies here.
Sorrell held that heighted scrutiny is required “whenever the government
creates ‘a regulation of speech because of disagreement with the message it
conveys.’” 564 U.S. at 566 (quoting Ward v. Rock Against Racism, 491 U.S. 781, 791
(1989)). There is nothing in the record or in the challenged legislative text that
supports a finding that the City was concerned with the messages conveyed by
any real estate listings posted by brokers or that § 20-699.21(a)(2) regulates speech
18
based on its content. The challenged regulation is agnostic as to the content of any
listing, and instead simply restricts how a broker may be compensated after listing
a unit. The FARE Act makes no attempt to control the contents of listings or target
specific messages “for disfavored treatment.” Sorrell, 546 U.S. at 565. In contrast,
the legislation in Sorrell “[was] designed to impose a specific, content-based
burden on protected expression.” Id. The FARE Act does not impose its
restrictions “by reason of content” which is “confirmed by the fact that petitioners
‘cannot avoid or mitigate’ the effects of the Act by altering their speech.” TikTok
Inc. v. Garland, 604 U.S. 56, 71 (2025) (citation omitted). Regardless of the message
a broker includes in a publicly posted listing, he or she may not charge the tenant
a fee once the unit is rented. Accordingly, the Act is content neutral.
The Supreme Court’s decision four years after Sorrell in Reed v. Town of
Gilbert, 576 U.S. 155 (2015), supports our conclusion that Sorrell’s heightened level
of scrutiny should not be applied to § 20-699.21(a)(2). In Reed, the Supreme Court
relied on Sorrell for the proposition that “[g]overnment regulation of speech is
content based if a law applies to particular speech because of the topic discussed
or the idea or message expressed,” Reed, 576 U.S. at 163, and instructed courts to
apply a higher level of scrutiny when “a regulation of speech ‘on its face’ draws
19
distinctions based on the message a speaker conveys,” id. (quoting Sorrell, 564 U.S.
at 564). Because the FARE Act makes no such distinctions, Sorrell’s heightened
scrutiny does not apply.
Even if a law is not facially content-based, we are also called on to examine
“governmental motive, including whether the government had regulated speech
because of disagreement with its message, and whether the regulation [is] justified
without reference to the content of the speech.” Id. at 167 (citation modified).
There is no evidence that the FARE Act was driven by improper motives. Nothing
in the legislative record indicates the City Council was concerned with the content
of rental listings in passing the FARE Act or that the City Council was attempting
to suppress the effectiveness or reach of any particular message, as opposed to
simply trying to prevent landlords from disclaiming a relationship with brokers
after authorizing those brokers to post apartment listings. See, e.g., Jt. App’x at
676–78. In contrast, the “[f]ormal legislative findings accompanying [the
challenged statute] confirm that the law's express purpose and practical effect are
20
to diminish the effectiveness of marketing by manufacturers of brand-name
drugs.” Sorrell, 564 U.S. at 565.
In arguing the FARE Act regulates speech based on content, Plaintiffs also
point to Linmark Associates, Inc. v. Township of Willingboro, 431 U.S. 85 (1977), in
which the Supreme Court struck down a ban on “For Sale” yard signs. There, a
New Jersey city banned the use of “For Sale” signs to “stem what it perceive[d] as
the flight of white homeowners from a racially integrated community.” Id. at 86.
The city regulated “For Sale” signs specifically to “prevent its residents from
obtaining certain information.” Id. at 96. The Court expressed concern that the
city “proscribed particular types of signs based on their content because it fears
their ‘primary’ effect that they will cause those receiving the information to act
upon it.” Id. at 94. In other words, the city enacted the regulation “because of the
topic discussed or the idea or message expressed” by the signs. TikTok, 604 U.S. at
71 (quoting Reed, 576 U.S. at 163).
Linmark, like Sorrell, does not apply here because the challenged regulation
in Linmark was also designed to suppress disfavored messages. There was no
corollary attempt by the City Council to suppress a disfavored message via the
FARE Act because the Act makes no effort to curtail brokers’ ability to include any
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specific content in listings posted online. Nor does the law represent an attempt
by the City Council to prevent New York City residents from obtaining or acting
upon certain information. Accordingly, the FARE Act is content neutral.
We next turn to Plaintiffs’ argument that the law should be subjected to
heighted scrutiny because it singles out disfavored speakers – brokers. This
argument is also unconvincing. While the Supreme Court has instructed that
“[s]peech restrictions based on the identity of the speaker are all too often simply
a means to control content,” it does not follow that the FARE Act is presumptively
invalid because it only applies to brokers. Citizens United v. Fed. Election Comm'n,
558 U.S. 310, 340 (2010). The Supreme Court has recognized that if a challenged
regulation does not aim to “exercis[e] a content preference, speaker distinctions . . .
are not presumed invalid under the First Amendment.” Turner Broad. Sys., Inc. v.
Fed. Commc’ns Comm’n, 512 U.S. 622, 645 (1994). The City Council’s decision to
single out brokers in passing the FARE Act is perfectly sensible as brokers are the
only people permitted to offer apartments in New York City and charge a broker
fee. Thus, brokers are not disfavored by the law, but rather they are the only
relevant ones to whom the law could apply, which, in turn, justifies the effect on
the brokers’ speech. Heightened scrutiny may be required when a legislature uses
22
speaker preference to control content or message expressed but, “such scrutiny is
unwarranted when the differential treatment is justified by some special
characteristic of the particular speaker being regulated,” as is plainly the case here.
TikTok, 604 U.S. at 73–74 (citation modified); see also Turner Broad. Sys., Inc., 512
U.S. at 660–61 (“[S]uch heightened scrutiny is unwarranted when the differential
treatment is ‘justified by some special characteristic of’ the particular medium
being regulated.” (citation omitted)). The FARE Act is therefore not impermissibly
speaker-based and, consequently, does not trigger heightened scrutiny.
Plaintiffs’ remaining arguments about the prohibition banning lawful
transactions and thus impeding debate over central issues of public policy are also
unavailing. In making this argument, Plaintiffs attempt to cast the FARE Act as a
full advertising ban, similar to the law challenged in 44 Liquormart, Inc. v. Rhode
Island, in which the Supreme Court struck down the state’s complete ban on price
advertising for alcoholic beverages. 517 U.S. 484 (1996). But as the City correctly
asserts, the FARE Act does not bar anyone from giving truthful information.
Brokers simply cannot advertise a listing on behalf of a landlord and require a
tenant to pay a fee to rent the same apartment. The FARE Act, unlike the law
challenged in 44 Liquormart, does not prohibit any “advertisements that provide
23
the public with accurate information.” 517 U.S. at 489. Plaintiffs are free to
continue advertising any apartment they would have listed before the enactment
of the FARE Act, all that has changed is that Plaintiffs can no longer advertise an
apartment on behalf of a landlord and then charge a tenant a fee to rent that
apartment. Because the FARE Act restricts only commercial speech and is neither
impermissibly content-based nor speaker-based, the intermediate scrutiny test set
forth in Central Hudson applies.
C.
Central Hudson lays out a four-prong test to determine if a challenged law or
regulation can survive intermediate scrutiny. Under that test, courts ask whether:
“(1) the speech restriction concerns lawful activity; (2) the City's asserted interest
is substantial; (3) the prohibition ‘directly advances’ that interest; and (4) the
prohibition is no more extensive than necessary to serve that interest.” Vugo, 931
F.3d at 51 (quoting Central Hudson, 447 U.S. at 566). The district court held that the
City satisfied each prong and concluded that, as a matter of law, Plaintiffs failed
to plausibly allege a First Amendment or Free Speech Clause claim. The Court
then granted Defendants’ motion to dismiss these claims. Real Est. Bd., 786 F.
Supp. 3d at 811. Again, we agree with the district court’s conclusion.
24
In challenging the district court’s Central Hudson analysis, Plaintiffs argue
that the three main interests articulated by the City cannot satisfy intermediate
scrutiny. The putative interests articulated by the City in passing the FARE Act
are principally: (1) aligning the principal-agent relationship, (2) increasing housing
mobility, and (3) promoting the negotiability, fairness, and transparency of broker
fees. Plaintiffs admit that “[s]ome of these interests check some of Central Hudson’s
boxes” but argue that “none checks them all.” Appellants’ Br. at 31. Plaintiffs then
proceed to analyze why each of the Council’s interests, when standing alone, is
insufficient to meet the standard required by Central Hudson. Id. at 31-43.
However, Plaintiffs’ analysis is flawed because nothing in our First Amendment
caselaw requires us to disaggregate the Council’s purported goals in enacting the
legislation and examine each independently, rather than analyzing them together.
While it is true that the City cannot rely on post hoc rationales for the FARE Act,
Cornelio v. Connecticut, 32 F.4th 160, 173 n.5 (2d Cir. 2022), the City is not required
to rest its argument on a single rationale. Instead, when conducting our de novo
review of the lower court’s opinion, we consider the interrelated justifications
proffered by the City to determine whether these interests allow § 20-699.21(a)(2)
to survive intermediate scrutiny under Central Hudson.
25
The parties do not dispute that Central Hudson’s first prong, that the speech
restriction concerns lawful activity, is satisfied, so our analysis is limited to prongs
two through four of the Central Hudson test. We conclude that the City has
identified a substantial interest in remediating what it views as market failures
caused by brokers’ fees and fashioned, through the FARE Act, a reasonable
mechanism to redress those perceived harms.
i.
“Under the second prong of Central Hudson, the [City] must identify ‘a
substantial interest in support of its regulations.’” Alexander v. Cahill, 598 F.3d 79,
90 (2d Cir. 2010) (quoting Florida Bar v. Went For It, Inc., 515 U.S. 618, 624 (1995))
(citation modified). At this step, we must determine whether the City’s asserted
goals in passing the FARE Act are “substantial.” See Vugo, 931 F.3d at 51. This
prong is met. The City’s putative interests are substantial. According to the City,
its core regulatory goal in passing the legislation was to “correct a market failure
and reduce punishing upfront costs for tenants seeking apartments.” Appellees’
Br. at 21. The City also intended the law to “accord with the commonsense
principle that the party who retains a service provider should be the one who pays
them.” Id. at 47.
26
Economic and development-oriented objectives such as promoting the
“economic vitality of [a] locality” are substantial interests that constitute
acceptable reasons to regulate commercial speech. DoorDash, Inc. v. City of New
York, 789 F. Supp. 3d 337, 356 (S.D.N.Y 2025) (quoting Edwards v. District of
Columbia, 755 F.3d 996, 1002 (D.C. Cir. 2014)) (citation modified). The economic
vitality of a city or locality rests in no small part on the health of its housing market.
The City has attested to the harm that brokers’ fees cause in New York City’s rental
market, explaining that they “increase the ‘upfront costs[s]’ tenants incur when
renting an apartment, which ‘impede mobility, contribute to lower housing
vacancy rates, and potentially trap households in apartments that no longer meet
their needs.’” Real Est. Bd., 786 F. Supp. 3d at 808 (citation omitted).
Addressing these market failures advances a substantial interest, but
intermediate scrutiny also requires that the City demonstrate the harms it recites
are “genuine and not merely post-hoc rationalizations.” Safelite Grp., Inc. v. Jepsen,
764 F.3d 258, 265 (2d Cir. 2014). Plaintiffs posit that the City Council’s purported
goal of “housing mobility” is such a post-hoc rationalization. Appellants’ Br. at
38. In support of this argument, Plaintiffs rely on language from a Committee
Report issued by the City Council’s Committee on Consumer and Worker
27
Protection in advance of a vote on the FARE Act that concedes the Act “is not an
attempt to solve the affordability crisis in the city,” but is meant “to properly align
the principal-agent relationship in the rental market to ensure that the principal
pays the agent for services rendered, not a third party.” Jt. App’x at 676.
But the record, when taken as a whole, does not support Plaintiffs’ argument
that housing mobility is a post-hoc rationalization. Indeed, that claim distorts the
City Council’s statements and conflates the issue of housing mobility with the issue
of housing affordability. While affordability and mobility are related, they are not
the same issue. Affordability is a broader issue related to the high cost of housing
in New York City and the shortage of units available on New York City’s rental
market relative to the demand for those units. The City Council’s mobility
concerns, on the other hand, were driven specifically by the high upfront cost of
moving rather than the overall high cost of rent in New York City. The Council’s
statement that the FARE Act would not be a solution to the affordable housing
crisis reflects that the FARE Act was not viewed by the City Council as a panacea
to solve the City’s housing shortage. The Council noted in the same report that
solutions to the affordability problem were “being explored by the Council in
multiple other avenues,” as it prepared to vote on the FARE Act. Id.
28
The distinction between housing affordability and mobility is borne out in
the record. The same City Council Report cited by Plaintiffs for the proposition
that the FARE Act was not intended to solve the City’s affordable housing crisis
begins its section titled “Issues and Concerns Related to Broker Fees” by stating
that “[b]roker fees can be a significant financial burden for New York City renters
who wish to move.” Id. at 673. The Council’s Report frames housing mobility
issues caused by brokers’ fees as a market failure under the current housing model.
Id. (“60 percent of New York City renters said broker fees prevent them from
moving into a different apartment . . . .”). The Report also bemoans the low
turnover rates of New York City’s rental units and found that “tenants who moved
from 2021 to 2023 are more likely to be white and have higher incomes than those
who remained in their homes.” Id. The City Council, as this Report makes clear,
believed the FARE Act could improve housing mobility issues in the City, even if
the Act would not be a solution to the broader affordability issues in the City’s
housing market. The City has thus identified multiple, substantial and genuine
interests in passing the regulation, one of which is improving housing mobility for
renters in the City. As a result, the second prong of Central Hudson is satisfied.
ii.
29
In order “[t]o satisfy the third prong of Central Hudson, the City must
demonstrate that (1) the harms it recites are real, and (2) that its restriction will in
fact alleviate them to a material degree.” Vugo, 931 F.3d at 52 (citation modified).
The City has developed a detailed legislative record that demonstrates that the
harms it identifies are real. One such harm, as discussed supra Part II.C.i, is that
the high cost of brokers’ fees prevents New York City renters from moving
apartments. As part of its deliberations on the FARE Act, the City Council heard
a full day’s worth of testimony from interested parties and accepted hundreds of
pages of written submissions from the Act’s supporters and critics, including
submissions from multiple tenant-advocacy organizations (Jt. App’x at 73–393; Jt.
App’x at 395–665). The testimonials and data submitted to the Council clearly
support the City’s claim that the brokers’ fees prevented mobility by increasing
the upfront costs of moving, Jt. App’x 438, and as previously discussed, the survey
that said “60 percent of New York City renters said broker fees prevent them from
moving into a different apartment and over half of the city’s renters (54 percent)
would be willing to a pay a higher monthly rent if they didn’t have to pay upfront
broker fees.” Id. at 673. This Court has previously allowed the City “to justify
speech restrictions by reference to studies and anecdotes,” such as the ones it relied
30
upon in enacting the FARE Act. Vugo, 931 F.3d at 52 (quoting Lorillard Tobacco Co.
v. Reilly, 533 U.S. 525, 555 (2001)).
Another harm the City raises is the existence of a mismatch between those
hiring brokers and those paying their fees. In addition to relying on surveys and
written submissions from individuals and advocacy organizations, the City
Council’s Oversight and Investigations Division (OID) conducted an investigation
to determine how brokers’ fees were actually being presented by brokers and paid
by tenants. The results of this investigation support the City’s contention that the
principal-agent relationship in the City’s rental market is misaligned. The OID
investigation found that: (1) brokers often refused to engage in any meaningful
negotiation with tenants; (2) brokers rarely required prospective tenants to sign a
brokerage agreement before touring a rental property; (3) whether a broker
purports to represent the landlord, the tenant, or both does not correlate
meaningfully with the provision of different services by the broker; and (4) in 12%
of properties toured by investigators, no broker was present at all. Jt. App’x at
674–76.
Cumulatively, the City’s investigation, studies, and anecdotal information
it received as part of the legislative process sufficiently support the City’s claim
31
that the misalignment of the principal-agent relationship in New York City’s rental
market causes “real” harm because those paying brokers’ fees are often not the
same parties hiring the brokers. See Vugo, 931 F.3d at 52. As a result, tenants “are
often forced to pay a broker’s fee despite lacking a meaningful ability to negotiate
the amount of those fees.” Jt. App’x at 674. Either of the City’s articulated harms
(reduced renter mobility or a misalignment in the principal-agent relationship),
standing alone demonstrate that the harms the City identified, and aims to remedy
by passing the FARE Act, are real.
Having shown that the harms targeted by the FARE Act are genuine, to
satisfy prong three of the Central Hudson test, the City must also demonstrate that
the publication bar will alleviate those harms. See Vugo, 931 F.3d at 52. Again, the
City has done so. The FARE Act materially advances the City’s interest in
improving housing mobility by lowering the costs of moving. If renters no longer
have to pay a fee to brokers at the time they move into a new apartment – the cost
of relocation falls, which is why 60% of New York City’s renters said brokers’ fees
prevent them from moving and why over half of the City’s renters would be
willing to pay more in monthly rent if they didn’t have to pay brokers’ fees
upfront. Jt. App’x at 673.
32
Plaintiffs argue that the June 12, 2024 testimony of the Deputy
Commissioner of Housing Preservation and Development (HPD) demonstrates
the Council had “no data” before it to support the notion that ending tenant-pays
broker fees would improve housing mobility. Jt. App’x at 110. But this quote by
a Councilmember was pulled out of context from the Deputy Commissioner’s
testimony at the June 12 Hearing regarding brokers’ fees. Earlier in his testimony
he had explained that HPD “[has] no broker fees,” so it was not particularly
surprising that he didn’t bring data regarding the impacts of brokers fees on
housing mobility. Id. at 101. The lack of data provided by a single witness also
does not support the conclusion that the Council lacked any evidence before it that
eliminating tenant-pays broker fees would improve housing mobility. As
explained above, the City relied on substantial evidence, including surveys,
supporting its claim that a majority of New York City tenants would be able to
move apartments more freely if they did not have to contend with upfront broker
fees. As Plaintiffs’ own expert concedes, “a new tenant will face a lower total
upfront cost under the FARE Act.” Id. at 814.
Plaintiffs also assert that the FARE Act will actually worsen housing
mobility. Appellants’ Br. at 40. Specifically, they argue that the FARE Act will
33
decrease available housing stock in New York, make the housing market less
transparent, and drive increases in rents. Even if this were true, Plaintiffs fail to
convincingly argue that their parade of horribles will outweigh the benefits of
ending tenant-pays broker fees. Again, even Plaintiffs’ own expert concedes that
the “magnitude of the fee’s impact relative to housing scarcity . . . is not fully
understood.” Jt. App’x at 814. Further, as we will discuss in more detail in our
analysis of Central Hudson’s final prong infra Part II.C.iii, it is not within this
Court’s purview to predict second- or third-order effects of enacted legislation
based on the premise that a law could have unintended consequences which could
undermine its ultimate effectiveness. Instead, we “defer[] to the city’s judgment
about ‘the appropriate means to further [its] legitimate governmental interest.’”
Vugo, 931 F.3d at 58 (quoting Clear Channel Outdoor, Inc. v. City of New York, 594
F.3d 94, 105 (2d Cir. 2010)).
The City Council identified multiple legitimate government interests –
including reducing the high cost of moving apartments in New York City and
aligning the principal-agent relationship in the City’s rental market. To further
these interests, the City decided to prohibit tenant-pays broker fees for open
listings. This was a proper use of the City Council’s authority and Plaintiffs are
34
not entitled to injunctive relief because they dislike the outcome of the legislative
process.
iii.
At Central Hudson’s final step, we determine “whether the speech restriction
is not more extensive than necessary to serve the interests that support it.” Reilly,
533 U.S. at 556 (citation modified). The Supreme Court has made clear that
reviewing courts should not apply a “least restrictive means” test, id., but instead
must determine if there is “a reasonable fit between the means and ends of the
regulatory scheme,” id. at 561.
Plaintiffs argue that § 20-699.21(a)(2) is both unnecessary and overinclusive
because it also regulates brokers who have no fiduciary responsibility to landlords
who own the units posted online. Instead, Plaintiffs contend that the “solution is
better enforcement of tenant’s agents’ fiduciary obligations, not forbidding
speech.” Appellants’ Rp. Br. at 16. But it is “beside the point” if a court can
identify “proposed alternative methods” for achieving a certain goal. Rumsfeld v.
F. for Acad. & Institutional Rts., Inc., 547 U.S. 47, 67 (2006). When applying
intermediate scrutiny, this Court does not question whether other policies “might
be adequate, because that determination is left to City officials.” Clementine Co.,
LLC v. Adams, 74 F.4th 77, 88 (2d Cir. 2023) (citation modified). Rather this Court
35
looks to whether the “interest would have been achieved less effectively absent
[the challenged policy].” Id. Therefore, Plaintiffs fail to meet their burden by
simply arguing better solutions exist to the harms the City has identified. The
standard under Central Hudson and its progeny does not require that at prong four
we insist “there be no conceivable alternative, but only that the regulation not
‘burden substantially more speech than is necessary to further the government’s
legitimate interests.’” Bd. of Trs. of State Univ. of New York v. Fox, 492 U.S. 469, 478
(1989) (quoting Ward, 491 U.S. at 799). In other words, the test at this step of Central
Hudson is whether the regulation is a reasonable fit, not whether it is the best fit.
The FARE Act does not “burden substantially more speech than is
necessary,” and leaves open alternative channels for communication. Id. Plaintiffs
label § 20-699.21(a)(2) as a “publication bar,” but brokers are not banned from
posting open listings – they simply cannot charge tenants fees when they openly
list an apartment for rent. Brokers are also not banned from collecting fees from
tenants when they have an exclusive brokerage agreement with a tenant. In that
arrangement, the Act allows brokers to work, and communicate, directly with
tenants and still be compensated by those tenants. The FARE Act also leaves the
door open for brokers to publish open listings and be compensated by landlords.
36
“[W]here the regulation leaves open alternative channels for communicating the
speech, they need not be perfect substitutes for those channels denied to plaintiffs
by the regulation at hand.” Clementine, 74 F.4th at 88 (citation modified). Here,
the FARE Act leaves open those alternatives as our caselaw under the First
Amendment requires.
Through § 20-699.21(a)(2), the City has developed a regulation that is a
“reasonable” way to address the problem it has identified. Vugo, 931 F.3d at 58.
“[T]he City is afforded considerable leeway in determining the appropriate means
to further a legitimate government interest,” Clear Channel, 594 F.3d at 105 (citation
modified), and a court should not “second-guess [the City’s] judgment to that
effect,” Vugo, 931 F.3d at 58 (quoting Fox, 492 U.S. at 478), unless the law is
unreasonable. We hold that § 20-699.21(a)(2) is not unreasonable. The City has
sufficiently demonstrated that the Act addresses “real-world concerns” and
“functional realities,” that it is empowered to regulate. Appellees’ Br. at 50.
Accordingly, the fourth and final prong of the Central Hudson test is satisfied. We
therefore conclude that Plaintiffs have failed to state a plausible First Amendment
commercial speech claim and affirm the district court’s dismissal of this claim.
37
III. The Contracts Clause Challenge
Before the district court, the City moved to dismiss Plaintiffs’ Contracts
Clause claim and Plaintiffs moved for a preliminary injunction – seeking to enjoin
the FARE Act from being enforced during the pendency of this litigation. The
district court denied the motion to dismiss, finding under this Court’s decision in
Melendez, 16 F.4th 992, that Plaintiffs’ Contracts Clause claim raised factual issues
that “preclud[e] dismissal of [the] Contracts Clause claim as a matter of law.” Real
Est. Bd., 786 F. Supp. 3d at 815 (quoting Melendez, 16 F.4th at 1040). The district
court also denied Plaintiffs’ motion for a preliminary injunction, finding that
Plaintiffs “failed to establish that they are likely to prove that the FARE Act’s
impairment of existing tenant-pays exclusive listing agreements is not a
reasonable and appropriate means of improving housing mobility.” Real Est. Bd.,
786 F. Supp. 3d at 818.
The Contracts Clause restricts the power of the States to disrupt contractual
arrangements and forbids the passage of “any . . . Law impairing the Obligation
of Contracts.” U.S. Const., art. I, § 10, cl. 1. In interpreting the Contracts Clause,
the Supreme Court has limited its scope and allowed laws that impair private
contracts, so long as those restrictions are in furtherance of “the inherent police
38
power of the State ‘to safeguard the vital interests of its people.’” Energy Rsrvs.
Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, 410 (1983) (quoting Home Bldg. &
Loan Ass'n v. Blaisdell, 290 U.S. 398, 434 (1934)).
Plaintiffs argue that the City exceeded its authority under the Contracts
Clause by passing the FARE Act because it substantially impaired Plaintiffs’
tenant-pays exclusive-listing agreements by prohibiting landlords’ agents from
collecting fees for those listings from tenants.
The exclusive listing agreements at issue share three characteristics: (1) a
broker works to secure tenants for a vacant apartment, (2) the broker seeks
payment for their services from a tenant, not a landlord, and (3) a landlord
promises to refer all inquiries about an apartment to the same broker. Plaintiffs
assert that because the FARE Act prohibits the second and third elements, the Act
upends both contractual parties’ (landlords and brokers) reasonable expectations
about how brokers will be paid and thus unconstitutionally impairs the parties’
private contractual arrangements.
On appeal, Plaintiffs contend the district court erred in denying their motion
for a preliminary injunction, because they are likely to succeed in demonstrating
that the FARE Act violates the Contracts Clause. The City, on the other hand,
39
argues that the district court correctly held that Plaintiffs are not entitled to a
preliminary injunction, and in any event, the request for a preliminary injunction
is moot as of October 31, 2025.
A.
We must first turn to mootness. The City argues that Plaintiffs’ motion for
a preliminary injunction is now moot because nearly all of the contracts produced
by Plaintiffs post-date the law’s enactment, and the only contract entitled to a
preliminary injunction during the pendency of this appeal was due to expire on
October 31, 2025. We are not persuaded that this issue is moot.
At this stage of litigation, Plaintiffs’ Contracts Clause claim must plausibly
allege that the City impaired “existing contracts,” at the time the challenged law
went into effect. Fabri v. United Techs. Int’l, Inc., 387 F.3d 109, 124 (2d Cir. 2004).
Accordingly, Plaintiffs’ claim is limited to tenant-pays exclusive listing
agreements executed before December 13, 2024, which is when the FARE Act
became law, and that remained executory beyond June 11, 2025, which is when
the law took effect. Further, Plaintiffs’ request for injunctive relief is limited only
to agreements that are still valid during the pendency of this appeal.
40
At the preliminary injunction stage, to show that their Contracts Clause
claim is justiciable, Plaintiffs “must set forth by affidavit[s] or other evidence
specific facts,” beyond “mere [factual] allegations,” Do No Harm v. Pfizer Inc., 126
F.4th 109, 119 (2d Cir. 2025) (quoting Cacchillo v. Insmed, Inc., 638 F.3d 401, 404 (2d
Cir. 2011)), but are “not required to prove [their] case in full at a preliminaryinjunction hearing,” Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). Here,
Plaintiffs have met their burden.
The strongest proof for the proposition that Plaintiffs’ Contracts Clause
claim remains “live” comes from the declaration of Thijs Menger, a managing
member of two companies (Milan Associates, L.P. and Franpearl LLC) that own
buildings in New York City. Jt. App’x at 937-38. According to Menger, the FARE
Act impaired existing contracts when it went into effect. In his uncontested
declaration, Menger explained that “Milan Associates and Franpearl have
longstanding exclusive listing agreements with BOND New York Real Estate
Corp. (‘BOND’) giving BOND the exclusive right to advertise apartments in the
Buildings and to collect its broker fee from the tenant when an apartment is
rented.” Id. at 938. Menger further submits that the “Building Owners and BOND
entered into these exclusive listing agreements in 2017 and the agreements
41
continue to this day.” Id. BOND, for its part, separately alleges that it had many
tenant-pay exclusive listing agreements. See e.g., id. at 778 (“70 percent of BOND’s
listings are open listings, and 30 percent are exclusive.”); id. at 776 (“[T]he FARE
Act will invalidate many long-term exclusive listing agreements that BOND
executed with landlords across the City.”).
Plaintiffs provided additional support for the proposition that the Act
impaired existing contracts when it went into full effect. Plaintiffs highlighted
examples of the contractual terms of tenant-pay exclusive listing agreements
impaired by the FARE Act, from BOND’s “Exclusive Right to Rent” agreement.
Id. at 49–50. Furthermore, several affidavits attested to the fact that these
agreements “last for a year, or even longer.” Id. at 780, 800. At oral argument,
Plaintiffs’ counsel represented that they would be able to produce a contract
executed before December 13, 2024 that remains executory beyond the pendency
of this appeal.
The City failed to challenge these claims or the affidavits that supported
them below and declined an evidentiary hearing on Plaintiffs’ preliminary
injunction motion. Id. at 9. “A party against whom an injunction is sought will be
found to have waived its right to a hearing only where that party was
42
demonstrably ‘content to rest’ on affidavits submitted to the court.” Fengler v.
Numismatic Americana, Inc., 832 F.2d 745, 748 (2d Cir. 1987). Thus, the City was
“content to rest” on the affidavits submitted to the district court. See id.
Based on their submissions to the district court, Plaintiffs have sufficiently
demonstrated the existence of tenant-pays exclusive listing contracts that were
executed before December 13, 2024, and remain executory beyond the pendency
of this appeal. Accordingly, Plaintiffs’ motion for preliminary injunction as to
their Contracts Clause claim is not moot and we proceed to evaluate it on the
merits.
B.
A party “seeking a preliminary injunction must show: (1) a likelihood of
success on the merits; (2) that the plaintiff is likely to suffer irreparable injury in
the absence of an injunction; (3) that the balance of hardships tips in the plaintiff's
favor; and (4) that the public interest would not be disserved by the issuance of the
injunction.” Res. Grp. Int’l Ltd v. Chishti, 91 F.4th 107, 114 (2d Cir. 2024) (citation
modified). Typically, district courts in this Circuit may also grant a preliminary
injunction if the plaintiff fails to demonstrate a likelihood of success on the merits
but can demonstrate that the case presents “sufficiently serious questions going to
43
the merits to make them a fair ground for litigation, and a balance of hardships
tipping decidedly in the movant's favor.” Trump v. Deutsche Bank AG, 943 F.3d
627, 635 (2d Cir. 2019), vacated and remanded on other grounds sub nom., Trump v.
Mazars USA, LLP, 591 U.S. 848 (2020). But, “[w]hen, as here, the moving party
seeks a preliminary injunction that will affect government action taken in the
public interest pursuant to a statutory or regulatory scheme, the injunction should
be granted only if the moving party meets the more rigorous likelihood-of-success
standard.” Metro. Taxicab Bd. of Trade v. City of New York, 615 F.3d 152, 156 (2d Cir.
2010) (citation modified). Accordingly, our analysis ends if we agree with the
district court’s conclusion that Plaintiffs failed to show a likelihood of success on
the merits of their claim.
To determine whether Plaintiffs are likely to succeed on the merits of their
Contracts Clause claim, this Court asks: “(1) whether the contractual impairment
is substantial and, if so, (2) whether the law serves a legitimate public purpose
such as remedying a general social or economic problem and, if such purpose is
demonstrated, (3) whether the means chosen to accomplish that purpose are
reasonable and necessary.” Sullivan v. Nassau Cnty. Interim Fin. Auth., 959 F.3d 54,
64 (2d Cir. 2020) (citation modified).
44
i.
To determine under step one whether the FARE Act substantially impairs
the contractual rights of brokers and landlords who have entered into tenant-pays
exclusive listing contracts, we consider “the extent to which the law undermines
the contractual bargain, interferes with a party's reasonable expectations, and
prevents the party from safeguarding or reinstating his rights.” Melendez, 16 F.4th
at 1033 (quoting Sveen v. Melin, 584 U.S. 811, 819 (2018)).
In applying these factors, we conclude that the FARE Act substantially
impairs tenant-pay exclusive listings contracts. The three essential elements of an
exclusive-listing tenant-pays contract are: (1) a broker working to identify tenants,
(2) a tenant paying the broker for their services, and (3) the landlord only referring
inquires to a single broker. In these types of agreements, brokers are effectively
agreeing to forgo their right to seek payment from a landlord in exchange for
exclusive rights to a listing from a landlord. By effectively prohibiting the second
two elements of these types of contracts, the FARE Act straightforwardly
“undermines the contractual bargain” between the parties. Sveen, 584 U.S. at 819.
And while the City deferred implementation of the law for 180 days after its
passage, after the FARE Act went into effect it “worked a severe, permanent, and
45
immediate” change rather than a “temporary alteration” of the parties’ contractual
relationships. Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 250 (1978).
The parties, in entering into these contracts, reasonably expected their
bargains would not be upended by the City not withstanding “the fact that New
York has sometimes, and to varying degrees, regulated its . . . real estate market.”
Melendez, 16 F.4th at 1034. The fact that real estate is heavily regulated in New
York does not shield any regulation of that market from scrutiny under the
Contracts Clause. The Act was also not foreseeable simply because Plaintiffs knew
the City may have, at some point in the future, implemented a law like this one,
that effectively nullified tenant-pays exclusive listings. By removing brokers’
ability to seek compensation from tenants directly, a broker’s contractual
commitment to forgo seeking payment from the landlord is “‘converted into a
mere promise’ to provide [their] services free of charge, ‘thereby impairing the
contract’s obligatory force,’” as brokers cannot be expected to work for free of
charge. Real Est. Bd., 786 F. Supp. 3d at 813 (quoting Gen. Motors Corp. v. Romein,
503 U.S. 181, 189 (1992)) (citation modified).
The City, on the other hand, offers no rebuttal other than to suggest that
Plaintiffs were only able to identify one active contract impaired by the Act.
46
However, we have already considered, and rejected, the City’s mootness
argument. Because we find Plaintiffs “have plausibly alleged a significant
impairment of contract,” we proceed to the second step of our Contracts Clause
analysis. Melendez, 16 F.4th at 1035.
ii.
To serve a legitimate public interest, the challenged law or regulation must
be “aimed at remedying an important general social or economic problem.” Conn.
State Police Union v. Rovella, 36 F.4th 54, 63 (2d Cir. 2022) (citation omitted). The
record demonstrates that the FARE Act was directly aimed at addressing the City’s
housing crisis. Indeed, Plaintiffs themselves admit that “City officials have
acknowledged the current situation as a ‘housing emergency’.” Jt. App’x at 20. As
we previously discussed, one of the City’s core objectives in passing the Act was
to “reduc[e] the upfront cost of moving, thereby improving housing mobility
amongst renters.” Real Est. Bd., 786 F. Supp. 3d at 814. The district court correctly
found this purpose to be “legitimate under the Contracts Clause,” id., and found
that the Act was intended to remedy multiple “general social or economic
problem[s],” Rovella, 36 F.4th at 63 – including the high cost of moving in New
York City.
47
In response to the district court’s conclusion, Plaintiffs recycle their
argument that housing mobility was a post hoc rationalization and assert that “[t]he
Council expressly disclaimed an interest in improving housing mobility.”
Appellants’ Br. at 48. But to support this claim, Plaintiffs rely in large part on their
own statements submitted during the legislative process. Id. As previously
discussed, the record below is clear that the Council was concerned about the high
cost of moving within New York City, and the impact this so-called market failure
has on housing and economic mobility in the City. See, e.g., Jt. App’x at 673.
Plaintiffs also, once again, contend that “ending tenant-pay[s] fees will make
moving harder, not easier,” and thus does not further a legitimate purpose.
Appellants’ Br. at 49. This conclusory argument fails for the same reason it failed
in the First Amendment context: Appellants offer no evidence to support their
claim and their expert only argued that the “FARE Act is unlikely to significantly
increase tenant mobility.” Jt. App’x at 825 (emphasis added). Indeed, he admitted
that “[w]hile the upfront cost of the broker fee is a transaction cost that contributes
to lower mobility for renters, the magnitude of the fee’s impact relative to housing
scarcity . . . is not fully understood.” Id. This concession offers no real support for
Plaintiffs’ claim that the FARE Act will make moving within New York City
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harder, as opposed to easier. Putting aside the veracity of Plaintiffs’ claims, our
Contracts Clause precedent also does not permit us to second-guess the City’s
actions based on potential second-order effects. See Sal Tinnerello & Sons, Inc. v.
Town of Stonington, 141 F.3d 46, 54 (2d Cir. 1998) (“[I]t is not the province of this
Court to substitute its judgement [sic] for that of . . . a legislative body . . . .”).
Plaintiffs also argue that demonstrated hostility from the Council toward
landlords and brokers, and a desire to benefit a “favored group” (tenants) at the
expense of a “disfavored group” (landlords) undermines the Council’s argument
that the FARE Act was enacted to protect a basic social interest. Appellants’ Br. at
49. However, this argument is foreclosed by our opinion in Melendez. There, we
evaluated a law enacted by the New York City Council that made personal lability
guaranties on certain commercial leases unenforceable for any rent obligations
that arose during a specific period of the COVID-19 pandemic. Melendez, 16 F.4th
at 1004-08. Corporate landlords challenged the “Guaranty Law” under the
Contracts Clause, and in part argued that in passing the law, the City Council was
not aiming to “protect a basic societal interest” but instead intended to benefit “a
favored group,” who were often small business owners that personally
guaranteed to pay rent in the event their businesses defaulted on rental
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obligations. Id. at 1037. We rejected that argument. We concluded that the law
was not passed to further the interest of a subset of individuals but rather
represented an effort by the City to advance “society’s larger interest in
maintaining the small businesses necessary for functioning neighborhoods.” Id.
The same is true here. Both improving housing mobility and realigning the
principal-agent relationship in the real estate market are valid societal interests.
As to the alleged hostility demonstrated by the Council, in “divin[ing] the true
purpose of [a] measure,” this Court will not view “the motivations of individual
legislators . . . [as] dispositive.” Gen. Media Commc'ns, Inc. v. Cohen, 131 F.3d 273,
283 n.13 (2d Cir. 1997). For those reasons, we conclude that the legislative record
on this issue is clear: the FARE Act was enacted to further a legitimate public
purpose. Accordingly, we proceed to the third step of our analysis to determine
if the legislation reasonably advances the City’s proffered interests.
iii.
Because the regulation both substantially impairs contractual obligations
and was enacted in furtherance of a legitimate public purpose, we must now,
under step three, determine whether Plaintiffs have plausibly alleged that the
FARE Act is not “drawn in an ‘appropriate’ and ‘reasonable’ way to advance” the
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Act’s purpose. Sveen, 584 U.S. at 819 (quoting Energy Rsrvs. Grp., 459 U.S. at 411–
12). In Melendez, we identified at least five factors relevant in this analysis:
(1) whether the law impairs contractual rights on a temporary or limited basis, or
whether it permanently and entirely extinguishes them; (2) whether there is some
record basis to link the legislature’s purpose and its chosen means; (3) whether, if
the burden of contractual impairment comes at the expense of a discrete group of
private persons, it is tailored to the party causing the public harm that the state
sought to mitigate; (4) whether the relief provided by the law is conditioned on
need and, if not, whether the legislature adequately considered the extent to which
the party burdened by the contractual impairment is better positioned financially
than the relieved party to bear that burden; and finally, (5) whether the law
provides compensation for damages or losses sustained as a result of the
impairment. 7 16 F.4th at 1038–46. No single factor controls. Instead, it is the
7 The list of Melendez factors used to determine whether a regulation is drawn in an appropriate and reasonable way to advance its purpose is not exhaustive. See 16 F.4th at 1046 (“[T]he parties may . . . identify still other circumstances relevant to determining whether the [law] is a reasonable and appropriate means to serve the City’s professed public purpose.”). Since the parties have not addressed additional circumstances, we proceed to analyze the FARE Act under those factors identified in Melendez.
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“totality” of the factors that determines the strength of a plaintiff’s claim and thus
likelihood of success on the merits. Id. at 1038.
The City concedes that Plaintiffs’ contractual rights are impaired on a
permanent basis and that the law provides no compensation to offset the resulting
losses. As a result, both parties agree that prongs one and five weigh against the
reasonableness of the regulation. However, the parties dispute which way prongs
two, three, and four cut. And so we analyze each in turn.
a.
The second Melendez factor asks whether there is a “record basis” that links
the legislature’s stated purpose for a piece of legislation with the means chosen to
achieve the goal. We agree with the district court that the required record basis
has been demonstrated by the City.
Plaintiffs dispute this contention, arguing that the law could have exempted
existing contracts, which would have been an equally effective method of
achieving their stated goals, but the Council considered this option and rejected it.
We are convinced that had the City included carveouts for various pre-existing
contracts in the final version of the Act, it would have likely decreased the law’s
efficacy and enforceability. This change would have created the risk of a dual-tier
housing market, in which some units would have been subjected to the old tenant52
pays model of brokers’ fees and some units would have been regulated under the
new regime. Such a system would likely cause significant confusion among
renters who would often not have visibility into the origin of the agreements
governing the relationships between brokers and landlords.
The current regulatory regime, as put in place by the City under the enacted
version of the FARE Act, is far more straightforward – these types of arrangements
are prohibited – full stop. Renters in New York City can be reliably informed by
their government officials that they will not have to pay brokers’ fees when they
do not retain a broker. Creating exceptions would have made it considerably more
difficult for renters to report FARE Act violations, undercutting the City’s ability
to enforce the law. In any event, it is not for this Court to “second-guess the
wisdom of picking [the FARE Act] over other policy alternatives” when
determining whether the legislative enactment is reasonable and necessary.
Buffalo Tchrs. Fed'n v. Tobe, 464 F.3d 362, 372 (2d Cir. 2006). Accordingly, we
conclude that there is a record basis to link the legislature’s purpose to its chosen
means of achieving that purpose. The City had no obligation to structure the law
to exempt contracts entered into before the date of the bill’s introduction or to
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otherwise circumscribe the law along the lines that Appellants would have
preferred. Accordingly, factor two weighs in favor of finding reasonableness.
b.
The third and fourth factors focus on which party bears the burden of the
contractual impairment. The third prong asks us to consider whether the burden
of contractual impairment comes “at the expense of a discrete group of private
persons,” and if so, whether the targeted group is “causing the public harm that
the [City] sought to mitigate.” Melendez, 16 F.4th at 1042. Plaintiffs and the City
both agree that the contractual impairment imposed by the FARE Act comes at the
expense of landlords and benefits tenants, but they disagree as to the fairness of
that distribution of burdens.
Under the previous “tenant-pays system,” landlords that listed units with
fees chose to impose the cost of brokers’ services on tenants rather than bear it
themselves. This approach, however, significantly increased the upfront costs of
relocation in the City. See Jt. App’x at 673. Therefore, it is reasonable to conclude
that landlords are the “persons . . . responsible for the circumstances warranting
relief,” even if landlords do not bear all the responsibility for the affordability crisis
in New York’s housing market. Melendez, 16 F.4th at 1042.
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At the fourth prong, we ask the related question of whether the legislature
adequately considered the extent to which the party burdened by the contractual
impairment is “better positioned financially” than the relieved party to bear that
burden. Id. at 1044. Ultimately, the cost of brokers’ services must be borne by a
party. The City Council chose to allocate that burden, in the form of fees, to
landlords in part because they can withstand (or re-allocate) the burden. See e.g.,
Jt. App’x 673–76. While landlords can negotiate with brokers in an effort to obtain
the best deal on their fees, potential tenants were stuck with the brokers
advertising their chosen apartment – and the fees those brokers charged.
Significantly, the City’s investigation found fee negotiations between brokers and
renters almost never happened. See Jt. App’x at 674. Instead, under the old tenantpays system, renters were confronted with “take-it-or-leave-it” offers and could
either pay the fee required by a broker for a given apartment, or they could walk
away and look elsewhere. Id.
Landlords, in contrast, likely have more bargaining power than tenants, or
as Plaintiffs concede, have more flexibility in allocating fees. For example,
Plaintiffs argue that ending the tenant-pays model will cause rents to rise because
landlords will choose to pass that cost along to tenants in the form of higher rents.
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Inherent in this argument is the reality that landlords can reallocate the fees – they
may pass on the entire brokers’ fee to the tenant in terms of rent, they may pass on
half, or they may pass on none. The amount they increase rent, however, will at
least partially dictate how attractive the pricing of their unit is to prospective
renters as the higher they price a unit, all else being equal, the lower demand will
be for that unit. The point remains that even if landlords price the entire brokers’
fee into a years’ worth of rent, this will amortize what was previously a one-time,
upfront cost across a yearlong period.
In the vision of the housing market advanced by Plaintiffs, both landlords
and tenants are on equal footing. But the reality is that landlords often choose
their role in the housing market and tenants typically do not. While there may be
some exceptions, few landlords are “forced” to hold property in New York City.
On the other hand, the majority of those who choose to live in New York have no
choice but to navigate the City’s complicated and difficult rental market. Given
these realities, the City Council’s decision to reallocate the economic burden of
brokers’ fees to landlords is not unreasonable. Appellants’ reliance on Melendez is
misplaced here. In Melendez, commercial landlords were stripped of their ability
to seek unpaid rental arrears from guarantors during the COVID-19 pandemic and
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had no way of reallocating that burden. 16 F.4th at 1004-08. Here, as Plaintiffs
themselves argue, landlords can do so in the form of higher rents. The weight of
the burdens is thus not the same and can more easily be reallocated. Id. at 1042.
Accordingly, for these reasons, we conclude that factors three and four cut in favor
of the City and consequently, we conclude that Plaintiffs have failed to
demonstrate that they are likely to establish that the FARE Act violates the
Contracts Clause.
Because Plaintiffs “seek[] a preliminary injunction that will affect
government action taken in the public interest pursuant to a statutory or
regulatory scheme, the injunction should be granted only if the moving party can
establish a clear or substantial likelihood of success on the merits.” Frey v. City of
New York, 157 F.4th 118, 127 (2d Cir. 2025) (citation modified). Plaintiffs have failed
to establish a substantial likelihood of success on the merits. Consequently, we are
not called on to determine whether other factors, such as public interest and a
balancing of the equities, favor injunctive relief. Accordingly, we conclude that
the district court did not abuse its discretion when it denied Plaintiffs’ motion for
a preliminary injunction.
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CONCLUSION
For the foregoing reasons, we AFFIRM the judgement of the district court.
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