Understanding New York City Rental Fees

Most people understand that they will be required to pay the first month’s rent and a security deposit in order to secure a home. However, when it comes to “fees” many people are confused. There are actually several different types of fees associated with renting in New York City.

Application fees: The owner, manager, or rental agent for a particular unit can charge an application fee. Generally, this fee covers the cost of running credit and employment checks, tenant and landlord court checks, income verification, and reference checking. It may also cover the costs associated with lease preparation. There are no rules as to how much an agent or owner may change in application fees, only that it should be reasonable in relationship to the cost of the various services required. Most landlords run a full gamut of credit and background checks and pass on the associated costs to the applicant. Typical fees range from $75.00 to $200.00. These fees are rarely refundable in the event that the applicant is not approved simply because the landlord has to pay for the checks, no matter if the unit is rented or not.

Some owners or management companies will charge separate credit report fees and application fees. This is simply a way of breaking down the costs that they incur, for ease in book keeping.

Broker’s fees: A licensed real estate broker can charge you a finder’s fee for finding the apartment that you ultimately rent. These finder’s fees are called “brokers fees.” There are no set rules as to how much a broker can charge in broker’s fees. Some companies charge a high percentage based on their reputation or on the services that they provide. Other brokerages compete with each other as to how little they charge in order to court the discount market. Most companies will negotiate the fees with you. It should be noted however that a broker’s fee is paid at the lease signing and only on an apartment that the agency has found and rented to you. There are contingencies. If you have been approved for an apartment and agree to lease it, but back out at the last minute, a broker can demand the fee. Brokerage fees do NOT cover application fees. You are responsible for application fees, not the broker.

Key fees: While a real estate broker can require a fee for finding you the apartment that you ultimately rent, the building owner can’t. Called “key money” or “key fees”, this once common practice saw building owners charging potential tenants fees in order to rent an apartment. This practice is illegal. However, even today, key fees are exchanged, generally for very desirable units or for rent stable apartments where competition is fierce. Basically, today’s key fees are simply under-the-table payments made to insure that your application is the accepted application.

Vendor or Referral Fees: An apartment vendor or apartment referral service is a company that acts as a referral agent. Generally, they compile lists of available units and provide this information to potential renters for a fee. Currently, the law requires that the fee be refunded (less a $15.00 charge) if you don’t find an apartment. However several recent law suits challenge this requirement.

originally posted March 31, 2007