Compensation Limits Triggered by Publishing Rental Listings Are Content-Neutral Commercial-Speech Regulations Reviewed Under Central Hudson; FARE Act Likely Valid Under the Contracts Clause

Introduction

In Real Estate Board of New York, Inc. v. The City of New York (2d Cir. July 13, 2026), the Second Circuit affirmed the Southern District of New York’s denial of a preliminary injunction sought by trade groups, brokerages, and landlords challenging New York City’s Fairness in Apartment Rental Expenses Act (the FARE Act).

The FARE Act bars a landlord’s agent from charging tenants broker fees and, critically for the speech claim, provides that “any agent who publishes a listing … with the permission or authorization of the landlord” may not charge the tenant a fee for renting that unit (the opinion calls this the “publication bar,” though it does not bar publication). The Act also prohibits conditioning a rental on a tenant “engaging any agent.”

Plaintiffs argued the Act (1) violated federal and state free-speech protections by burdening brokers’ ability to publish listings and then charge tenants, and (2) violated the federal Contracts Clause by impairing existing “tenant-pays” exclusive listing agreements. The Second Circuit held the First Amendment claim failed as a matter of law under commercial-speech doctrine and that plaintiffs did not show a likelihood of success on the Contracts Clause claim sufficient to justify enjoining a public-interest statute.

Summary of the Opinion

  • First Amendment: The court agreed § 20-699.21(a)(2) implicates the First Amendment because it conditions compensation on a predicate act of speech (publishing a listing), but it is content neutral and not impermissibly speaker-based. Accordingly, it is reviewed under Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N. Y. intermediate scrutiny and survives all prongs.
  • Contracts Clause: The court held plaintiffs’ preliminary injunction request was not moot and assumed substantial impairment of certain pre-existing tenant-pays exclusive listing agreements, but concluded plaintiffs failed to show a likelihood of success that the Act is unreasonable or inappropriate under the Second Circuit’s multi-factor approach (drawn principally from Melendez v. City of New York).
  • Disposition: Affirmed the district court’s denial of a preliminary injunction and affirmed dismissal of the First Amendment claims.

Analysis

Precedents Cited

1) Commercial-speech framework and scrutiny selection

The court anchored its speech analysis in Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N. Y., which supplies the familiar four-part commercial-speech test. Relying on Second Circuit applications such as Vugo, Inc. v. City of New York, the panel emphasized that commercial speech receives “a limited measure of protection” and is typically tested under intermediate scrutiny rather than strict scrutiny.

Plaintiffs invoked Sorrell v. IMS Health Inc. to demand heightened scrutiny on the theory that the City targeted disfavored speech (rental listings) by disfavored speakers (brokers). The court rejected that move, reading Sorrell through later guidance including Reed v. Town of Gilbert and Ward v. Rock Against Racism: heightened scrutiny is triggered when the law draws distinctions based on message, topic, or viewpoint (or reveals an improper motive tied to content). Because the FARE Act is agnostic to listing content and applies regardless of what the broker says, the court found it content neutral.

To address plaintiffs’ “speaker-based” argument, the panel relied on Citizens United v. Fed. Election Comm'n and Turner Broad. Sys., Inc. v. Fed. Commc'ns Comm'n, alongside the then-recent Supreme Court decision TikTok Inc. v. Garland, to distinguish impermissible speaker discrimination (used as a proxy for content control) from permissible differentiation justified by “special characteristics” of the regulated speakers. Brokers were not “disfavored” speakers in the constitutional sense, the court said; they were the relevant actors to whom a broker-fee regime naturally applies.

2) “Burdening” speech versus “regulating conduct”

The City argued the Act “prohibits no speech” and therefore regulates conduct only. The panel disagreed, invoking United States v. Playboy Ent. Grp., Inc. and Sorrell v. IMS Health Inc. for the principle that the First Amendment is implicated by burdens on speech, not only outright bans. It then used United States v. Nat'l Treasury Emps. Union to treat denial of compensation as a “significant burden on expressive activity,” reasoning that § 20-699.21(a)(2) similarly makes compensation unavailable when the broker engages in the predicate expressive act of publishing a listing.

The court also cited Universal City Studios, Inc. v. Corley to underscore that the First Amendment can protect even “dry information” devoid of advocacy—an important premise for treating rental listings as speech that can receive First Amendment review, even if only within the commercial-speech lane.

For the practical coercion point—being forced to choose between speaking and economic viability—the panel cited Erznoznik v. City of Jacksonville and described the broker’s “unwelcome choice” of restricting speech or undertaking an impracticable business-model change.

3) Content-based suppression cases distinguished

Plaintiffs relied on Linmark Associates, Inc. v. Township of Willingboro (ban on “For Sale” signs) and 44 Liquormart, Inc. v. Rhode Island (ban on alcohol price advertising). The panel distinguished both as classic information-suppression measures aimed at what listeners might do with the information. By contrast, the FARE Act did not limit truthful information or advertising; it limited who may be charged after publication and left listings untouched.

4) Central Hudson’s “fit” requirement and deference

On prong three and four of Central Hudson, the panel leaned heavily on Vugo, Inc. v. City of New York, Lorillard Tobacco Co. v. Reilly, and Clear Channel Outdoor, Inc. v. City of New York to affirm that legislative bodies may rely on studies and anecdotes and are entitled to leeway in choosing means. It cited Bd. of Trs. of State Univ. of New York v. Fox for the “reasonable fit” concept—rejecting a least-restrictive-means requirement.

Plaintiffs suggested “better enforcement” of fiduciary obligations as an alternative. The panel invoked Rumsfeld v. F. for Acad. & Institutional Rts., Inc. and Clementine Co., LLC v. Adams to emphasize that intermediate scrutiny does not empower courts to pick the best policy; it asks whether the chosen policy reasonably advances the interest without burdening substantially more speech than necessary.

5) Contracts Clause structure, police power, and Second Circuit factors

The court framed Contracts Clause limits through Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co. and Home Bldg. & Loan Ass'n v. Blaisdell, emphasizing the modern, narrowed clause that allows impairment in service of legitimate police-power objectives.

For the three-step test—substantial impairment; legitimate public purpose; reasonable and necessary means—the panel cited Sullivan v. Nassau Cnty. Interim Fin. Auth. and, on the “general social or economic problem” requirement, Conn. State Police Union v. Rovella.

On substantial impairment, the court relied on Sveen v. Melin (bargain undermined, expectations, ability to safeguard rights) and Allied Structural Steel Co. v. Spannaus (severity and permanence). It also invoked Gen. Motors Corp. v. Romein to characterize the impairment as converting bargained-for compensation expectations into a “mere promise” of unpaid services.

The opinion’s reasonableness analysis was expressly guided by Melendez v. City of New York, applying its five factors (temporariness; record link; tailoring to harm-causer; need/relative financial position; compensation). The court also cited Buffalo Tchrs. Fed'n v. Tobe for deference to legislative choice among policy alternatives and Sal Tinnerello & Sons, Inc. v. Town of Stonington to reject judicial substitution of policy judgment.

On legislative purpose and alleged hostility, the panel referenced Gen. Media Commc'ns, Inc. v. Cohen for the principle that the motivations of individual legislators are not dispositive.

6) Justiciability and preliminary-injunction posture

The panel rejected mootness using principles tied to existing contracts (Fabri v. United Techs. Int'l, Inc.) and found plaintiffs had made a sufficient evidentiary showing at the preliminary stage under Do No Harm v. Pfizer Inc. and Cacchillo v. Insmed, Inc., while noting Univ. of Tex. v. Camenisch (no need to prove the full case at the preliminary hearing).

It also treated the City’s decision to proceed without an evidentiary hearing as significant, citing Fengler v. Numismatic Americana, Inc. regarding being “content to rest” on affidavits.

For the injunction standard, the panel used Res. Grp. Int'l Ltd v. Chishti, emphasized the heightened likelihood-of-success requirement when enjoining public-interest regulation under Metro. Taxicab Bd. of Trade v. City of New York, and reiterated the “clear or substantial likelihood” formulation with Frey v. City of New York.

Legal Reasoning

1) The “publication bar” burdens speech but remains commercial-speech regulation

The court’s threshold move is important: it rejected the City’s attempt to recharacterize § 20-699.21(a)(2) as purely conduct regulation. Because publishing a listing is the “singular predicate act” that triggers the compensation limitation, the statute burdens expression in a way that demands First Amendment review. But the court simultaneously kept the case within commercial-speech doctrine—limiting plaintiffs to the lower-protection Central Hudson path rather than strict scrutiny.

2) Heightened scrutiny under Sorrell is confined to content-based or message-targeting schemes

The opinion tightens the doctrinal gate around Sorrell: a law that changes the economic consequences of speaking does not become content-based merely because it attaches consequences to speech. The relevant question is whether the law draws distinctions “because of the topic discussed or the idea or message expressed” (as in Reed v. Town of Gilbert) or is motivated by disagreement with the message (as in Ward v. Rock Against Racism). Because brokers cannot “avoid or mitigate” the Act’s effects by altering what they say in listings (the court quoted TikTok Inc. v. Garland on this logic), the law is treated as content neutral.

3) Central Hudson applied: substantial interests, real harms, material advancement, reasonable fit

The City’s interests were treated as interrelated rather than artificially disaggregated: aligning the principal-agent relationship; increasing housing mobility by reducing upfront moving costs; and promoting negotiability, fairness, and transparency. The court found these substantial, supported by legislative record evidence (testimony, submissions, and a city investigation), and materially advanced by eliminating tenant-paid fees when tenants did not retain the broker.

On “fit,” the court emphasized that the Act does not ban listings and leaves alternative channels: brokers may (i) be paid by landlords, or (ii) be paid by tenants where the tenant retains the broker under an exclusive tenant-broker arrangement. Those alternatives were enough to defeat overbreadth arguments under Fox and Second Circuit intermediate-scrutiny cases.

4) Contracts Clause: substantial impairment assumed, but reasonableness likely satisfied

The panel essentially accepted that pre-enactment tenant-pays exclusive listing agreements are substantially impaired, given the Act’s permanent elimination of key bargained-for terms. The case turned on the third step: whether the means are reasonable and appropriate to the public purpose.

Applying the Melendez v. City of New York factors, the court acknowledged two points against the City (permanence; no compensation) but found the remaining factors favored the City: a strong record link between means and ends; the burden placed on actors tied to the harm (landlords who structured listings to externalize broker costs); and legislative consideration of relative positions (tenants lacked negotiation power and faced large upfront costs, while landlords have greater ability to negotiate fees and, if they choose, amortize costs through rent).

The court’s treatment of “rent pass-through” arguments is notable: rather than viewing potential pass-through as defeating the Act’s public purpose, the court treated it as evidence of landlords’ flexibility and the City’s ability to reduce the especially mobility-suppressing feature of the old regime—large upfront transaction costs.

Impact

1) A clarified boundary for “speech-triggered” economic regulation

The decision establishes that municipal regulation can impose economic consequences tied to a predicate act of commercial speech (here, publishing a listing) and still be treated as content-neutral commercial-speech regulation. That framing is likely to matter for future challenges to rules that condition licensing, pricing, or compensation on advertising practices, particularly where the challenged rule does not dictate what may be said.

2) Sorrell constrained; Reed-style content analysis emphasized

By rejecting heightened scrutiny and repeatedly grounding analysis in Reed v. Town of Gilbert and TikTok Inc. v. Garland, the opinion signals that litigants in the Second Circuit will face an uphill battle invoking Sorrell v. IMS Health Inc. absent clear message-based distinctions or evidence of an intent to suppress a message.

3) Contracts Clause challenges to economic/housing regulation remain difficult at the injunction stage

Even where impairment is substantial and permanent, plaintiffs seeking to enjoin broad housing-market reforms must overcome deference built into reasonableness/appropriateness review, especially under Melendez v. City of New York. The court’s factor analysis suggests that when a legislature can plausibly (and with record support) connect contract impairment to a housing or mobility crisis, preliminary injunctions will be hard to obtain.

4) Practical regulatory implications for NYC and beyond

The decision strengthens the City’s footing to enforce the FARE Act (including vicarious liability and the rebuttable presumption regarding authorization to publish). Beyond New York City, the reasoning may influence other jurisdictions considering tenant-facing fee reforms, especially where lawmakers build an extensive record linking upfront transaction costs to mobility and market functioning.

Complex Concepts Simplified

  • Commercial speech: Advertising or other speech related mainly to economic interests (e.g., a rental listing). It is protected by the First Amendment, but less strongly than political or artistic speech.
  • Central Hudson test: A four-step intermediate-scrutiny test for laws regulating commercial speech: lawful speech; substantial government interest; direct/material advancement; and a reasonable fit (not more extensive than necessary).
  • Content neutral vs. content based: A rule is content based when it turns on what the speaker says (topic, idea, viewpoint). The FARE Act was treated as content neutral because the outcome does not change based on the listing’s message.
  • Speaker-based regulation: A law that treats speakers differently (e.g., brokers vs. others). This is not automatically unconstitutional; it is suspect mainly when used to control content. Here, brokers were regulated because they are the relevant market actors.
  • Contracts Clause: The Constitution restricts states from passing laws that impair contractual obligations. Modern doctrine allows impairment if it addresses a legitimate public purpose and uses reasonable/appropriate means (especially under the state’s police power).
  • Preliminary injunction: An emergency court order stopping a law while a case is pending. When a plaintiff seeks to halt a public-interest statute, courts require a strong showing of likely success on the merits.
  • Rebuttable presumption: A legal assumption (here, that a listing is authorized by the landlord) that can be overcome with evidence to the contrary.
  • Vicarious liability: Holding one party responsible for another’s wrongful acts (here, potentially a landlord for an agent’s violation).

Conclusion

The Second Circuit’s decision confirms two core principles. First, a compensation restriction triggered by publishing a rental listing can burden speech and still be upheld as a content-neutral commercial-speech regulation under Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N. Y. when supported by substantial interests, record evidence of real harms, and a reasonable fit. Second, even where a housing regulation substantially impairs existing contracts, plaintiffs seeking to enjoin a public-interest statute face a steep climb under the Contracts Clause, particularly under the reasonableness framework articulated in Melendez v. City of New York.

In practical terms, the opinion provides a durable appellate roadmap for defending fee-allocation reforms in highly regulated markets—so long as lawmakers avoid message-based distinctions, develop a factual record, and choose means that can be defended as reasonable rather than perfect.