What's the Difference Between Fee and No-Fee Apartments?
If you’re apartment hunting in NYC or Boston, you may run across “no-fee” apartments during your search. This means you’re not responsible for paying the broker’s fee if you end up renting the unit.
Finding a rental in New York City is never easy. And it’s not just because supply is limited and prices (and demand) are sky-high. You’ll also need to learn some new lingo: the distinction between “fee” and “no-fee” apartments.
What is this “fee,” exactly?
There are lots of fees associated with apartment hunting—application fees, security deposits, pet deposits, and more. But when it comes to no-fee apartments, the “fee” in question is a broker’s fee. This is the commission a broker receives for getting the apartment rented.
Landlords often hire brokers to serve as an intermediary when they’re trying to rent out a unit. Brokers tackle showing apartments and collecting applications from potential tenants—and, as independent contractors, they need to get paid for their work. Generally, one broker doesn’t get to keep the entire thing. They have to split it up among anyone else at the brokerage who worked to get that specific apartment rented. So some for the person who listed it, some for the person who showed the property, some for the person who took the application… you get the idea.
How much is a typical broker’s fee?
Here’s the bad news: Fees can get to be pretty pricey, depending on how much your apartment costs per month. Typically, renters can expect to pay between 12-15 percent of the yearly rent as a broker’s fee (although there are some situations in which a broker’s fee equals one month’s rent, or about eight percent). So, for an apartment that costs $2,500 per month, you can expect to shell out an extra $2,400 to $4,000 before you move in.
What’s the difference between fee and no-fee apartments?
Most landlords or property owners hire brokers to help rent out their empty units. The difference between a fee or no-fee apartment is simply who is paying the broker's fee. For fee apartments, the soon-to-be tenant foots the bill. For no-fee apartments, the landlord is the one shouldering the cost.
That said, there are some no-fee apartments where the landlord is doing the showing themselves. (This is common with private rentals, where the space is rented directly from the landlord—a young couple that owns a single building as an income property for instance.) In that case, there’s no fee because there’s no broker involved at all.
Why would a landlord be willing to pay the fee themselves?
There are a few possibilities! It could be that the landlord is having a hard time filling the unit—maybe it’s the middle of winter and there are fewer tenants looking for a place, or maybe there’s something truly bizarre about the apartment. It’s always a better deal for landlords to offer a one-time discount than lowering the monthly rent.
Big new developments, especially high-end ones, are also likely to offer no-fee apartments. This could mean a few things—if the building is big enough, the management may have its own employee to show the apartments rather than using brokers. Or, if it really is brand-new, there are probably a lot of units to fill quickly. Eliminating the fee is one way to entice new renters.
Does this only happen in New York City?
Fee apartments are most commonly associated with New York City (and are also the norm in many of the metropolitan areas around NYC, including Jersey City and Hoboken). That said, Boston also expects renters to pay brokers’ fees. Pretty much everywhere else, no-fee rentals are the standard. Brokers' fees still exist, of course, but the landlords or property owners pay them—not the renters.
How can I tell if an apartment is no-fee?
Generally, you’ll be able to tell if an apartment is fee or no-fee by looking closely at the listing. It should clarify—if it doesn’t mention fees, assume there is one. Often, the only distinction is a little note that says “no-fee rental” or something similar. If you’re intent on finding a no-fee place, avoid listing aggregators like StreetEasy. Craigslist and NextDoor.com are more likely to have owner-listed units (but be careful of scammers!). If you go directly to the management office or landlord, then there’s a better chance you won’t have to pay a fee. Another guaranteed way to avoid paying a fee is to sublet—check out Caretaker’s listings for sublets in NYC and Boston.
Are there any downsides to a no-fee apartment?
If you’re living in a city where fee apartments are the norm, it’s a real possibility that your rent at a no-fee apartment will be higher than rent at a fee apartment. Landlords have to recoup the money for the fee somehow, if they’re paying it themselves, and raising rent by a few hundred dollars will eventually reimburse them for the money they forked over to the broker. If you’re only planning to stay in the apartment for a year, then fee versus no-fee probably doesn’t make a big difference. But, over several years, the higher rent you’re paying will probably end up being more than the fee would have been—so keep that in mind as you search for apartments.
The information provided on this website does not, and is not intended to, constitute legal advice.