The short answer
A disposition fee is a fee a sponsor, manager or general partner earns when an investment program sells a property, usually stated as a percentage of the contract or gross sale price. Because it is figured on price rather than profit, an unsubordinated disposition fee is paid whether or not investors gain on the sale, while a subordinated one waits until investors have received a stated return. Where it sits in the sale waterfall decides how much cash reaches you and your next exchange.
At a glance
| Paid to | The sponsor, manager or general partner |
|---|---|
| Usual base | Contract or gross sale price of the property |
| Waterfall position | Off the top, or subordinated to investor returns |
| Where to find it | Compensation section of the offering documents |
Filed offering documents show both unsubordinated and subordinated versions.
A non-traded industrial real estate partnership's Form 10-K for 2025 pays its general partner a disposition fee of up to 0.50% of the contract sale price of each property sold, payable regardless of how the investment performed. A non-traded REIT's Form S-11/A from November 2021 describes its DST program manager earning a disposition fee of a to-be-agreed percentage of the gross sales price of any DST property sold to a third party, which the manager may reduce or waive.
An older net lease partnership's Form 10-K for 2005 shows the subordinated form: its general partner's liquidation fee was capped at the lesser of 3% of the gross sales price or 50% of customary real estate commissions, and was payable only after limited partners had received a cumulative, non-compounded 10.5% annual return plus distributions equal to 100% of their original contributions.
In a worked example, the fee comes out before investors are paid.
Hypothetical: a DST sells its building for $30,000,000, owes $15,000,000 on its loan and pays $600,000 of closing costs. A 1% unsubordinated disposition fee takes $300,000, leaving $14,100,000 for investors. If you own 5% of the beneficial interests, the fee costs you $15,000 of sale proceeds whether the sale price is above or below what the trust paid. Run your own numbers with your CPA.
Under a subordinated fee, the same $300,000 would be paid only after investors had received the return and capital the agreement specifies, so a weak sale could leave it unpaid. The full order of payments at a DST sale is set out in the DST sale waterfall.
It bites on the day the trust sells and you roll into the next exchange.
When a DST sells, your share of the net proceeds is what goes to your qualified intermediary for the next exchange, so a disposition fee shrinks the equity you carry forward. The Instructions for Form 8824 let exchange expenses reduce the cash and other property you received, or add to the basis figure on line 18, and how the trust's sale costs are passed through to each investor shows on the sponsor's closing statement and tax reporting. See exchange expenses and the DST sale and your next 1031.
Read the fee with the rest of the sponsor's compensation: a fee earned only on third-party sales, as in the 2021 filing, can create a different incentive from one earned on any sale. Ask whether the fee is subordinated, what it is charged on, and whether it applies if the property is acquired by an affiliate.
Related questions
Is a disposition fee the same as the broker's commission on the sale?
No. The broker's commission pays the real estate brokerage that sells the building; the disposition fee pays the sponsor side. The 2005 partnership filing capped its fee by reference to customary real estate commissions, which shows the two are separate charges.
Does a disposition fee apply if the property sells at a loss?
An unsubordinated fee does, because it is figured on the sale price. A subordinated fee is paid only after investors receive the return and capital the agreement specifies.
Can the sponsor waive the fee?
Some documents allow it; the 2021 filing says the DST manager may reduce or waive its disposition fee in its sole discretion. Whether it will is up to the sponsor.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.