Is No Fee Apartment Listing Worth It?

In many large metro cities like New York City when a rental is listed as having a “fee” it usually means a Broker’s Fee must be paid. A Brokers free is generally paid to a broker when they list a rental and work to get a tenant into the rental as quickly as possible. Generally, brokers will charge anywhere between 8-15% of the lease to list the rental

When apartments are listed as having a Fee, that generally means the tenant will be required to pay the broker's fee at the start of the lease. While this means less work and no cost for the landlord or property managers in regards to filling a vacancy, it also means the added cost of the rental to a tenant may make it less desirable to rent. When a broker lists an apartment as having No Fee, it generally means the landlord or property manager will be paying the fee once the rental is leased.

For many landlords or property managers, it might seem like a no brainer to have brokers list their rentals because not only is the broker going to be doing all the marketing work, the landlord does not have to pay them at any point for their services. However, landlords and property managers must calculate the risk vs. reward benefit of listing a rental as having a fee.

For example, if a landlord or property manager is mainly using brokers because they have found it has been hard to fill vacancies, adding the cost of a month or two worth of rent up front is likely going to lead the unit to stay vacant for longer. One must keep in mind that every month the unit is empty is a month of lost rent equivalent to the brokers free. Therefore, if a unit is vacant for more than a month partly because potential tenants are turned off by the broker’s fee on top of everything else they need to pay (moving expenses, security deposit, first and last month’s rent etc) then the landlord or property manager has actually lost more money then if they would have paid the fee out of pocket.

One compromise that some landlords or property managers may follow when they list an apartment with no fee is to include all or some of the cost into the rent over the course of the lease. Slightly higher rent could turn off some potential tenants but not as much as an upfront broker’s fee. Also, if the broker’s fee is included in rent, a landlord or property manager has more room to work with when the lease is being renewed given that they would not have to worry about paying any Broker’s fee if the tenants renew their lease.

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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.