The author, in 2016, ranked 8th in the Real Estate Broker examination and later passed the Appraiser examination in the Philippines.
Following the Law
This year, I was approached by three potential clients, among other prospects. One of the properties, located in Baguio City, is worth about Php 20 million. The other two are here in Metro Manila; one is worth about Php 40 million and the other about Php 12 million. All three owners wanted to sell their holdings and sought my help in putting up their houses and lots in my listings, in reaching out to my network, and other brokerage services like complete documentation and tax preparation.
I said no to all of them, even though I could have easily earned upwards of Php 4 million for these transactions alone.
See, my licenses expired recently. I obtained my Real Estate Broker’s license from the Professional Regulation Commission (“PRC”) back in 2016. A few months later, I became a certified Real Estate Appraiser. Section 17 of Republic Act No. 9646 or the Real Estate Service Act of the Philippines (“RESA”) provides that, “The professional identification card shall be renewed every three (3) years [x x x].” I have yet to renew my licenses. I did not do so immediately because I was focused on graduating from school.
I also need to fulfill 15 CPE credit-hours to renew each of my licenses according to the PRC. This is pursuant to the Continuing Professional Development Act of 2016, which, according to a memo, was enacted to “promote and upgrade the practice of the professions in the country [x x x].”
We also have to post a Professional Indemnity Bond/Cash or Surety Bond worth Php 20,000, which also has to be renewed every three years (Sec. 26 of RESA). And as you can imagine, this pandemic has made things complicated and has put a lot of things on hold. I have signed up for digital seminars over the course of the next few months to earn credits for my broker’s license. I have not even considered renewing my appraiser’s license just yet.
So the law regulates real estate professions quite well—you need to pass some difficult examinations, take an oath, post a bond, earn CPE credits continuously, abide by the rules of the accredited professional organization, pay privilege taxes, pay or withhold the proper professional income taxes, register with the Housing and Land Use Regulatory Board et cetera. It’s tough.
Real Estate Service Practice Affects the Public Interest
See, Section 2 of RESA provides that the “State recognizes the vital role of real estate service practitioners in the social, political, [and] economic development and progress of the country by promoting the real estate market, stimulating economic activity and enhancing government income from real property-based transactions. [x x x]”
Doctors save lives, engineers make sure bridges do not collapse, and accountants ensure businesses stay afloat and make wise decisions. Real estate service practitioners provide expert service as well.
Looking at Section 3(g) of RESA shows us that consultants help in “(i) the acquisition, enhancement, preservation, utilization or disposition of lands or improvements thereon; and (ii) the conception, planning, management and development of real estate projects.” A broker “acts as an agent of a party in a real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage, lease or joint venture, or other similar transactions on real estate or any interest therein” while appraisers “perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services of which shall be finally rendered by the preparation of the report in acceptable written form.”
The real estate industry is massive. From your college dorm to your retirement bungalow, the decisions made by these professionals impact large aspects of your life. They help determine what house your kids will grow up in, or find out where the next IKEA should be put up. Real estate professionals ensure a plethora of many things such as:
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- Making sure the correct taxes are paid (like Capital Gains Tax, Withholding Tax, Estate Tax, Donor’s Tax, Local Real Property Tax, and Property Transfer Tax);
- Determining if there is fraud or deception in a given transaction (agents often check if certain claims or titles are spurious, fake, or deficient);
- Analyzing, given expertise, if a certain deal is the best for both parties (yes, we are taught to look out for all persons in a transaction);
- Amassing a wide network of listings, information, advertising options, and other data to provide the best option for clients (business cards are taken seriously);
- Negotiating, as best as possible, by making competent use of pricing, materials, and industry knowledge; and
- Taking care of all the necessary government requirements, legwork, and documentary needs.
No, Unless You are a Professional, You are not Entitled to the 6% Commission
Obviously, one would be statutorily liable if he or she tries to perform the services (see Sec. 3(g) of RESA and above) of real estate practitioners without being properly licensed and registered (Sec. 29). Even regular Salespersons have to be supervised by a Broker (Sec. 31) and have to undertake their own accreditation process, which includes attending seminars and earning hours.
Failure to be compliant would result in stiff penalties. The RESA provides in Section 39 that “Any violation of this Act, including violations of implementing rules and regulations, shall be meted the penalty of a fine of not less than One Hundred Thousand Pesos (Php 100,000.00) or imprisonment of not less than two (2) years, or both such fine and imprisonment upon the discretion of the court. In case the violation is committed by an unlicensed real estate service practitioner, the penalty shall be double the aforesaid fine and imprisonment.”
Let me emphasize the last point. Unlicensed real estate service practitioners may be fined by not less than Two Hundred Thousand Pesos (Php 200,000.00) and/or imprisoned for at least four years.
But note the exceptions in Section 28, which I have summarized: (a) anyone dealing with their own property, except real estate developers; (b) any receiver, trustee or assignee in bankruptcy or insolvency proceedings; (c) any person acting on court orders; (d) any person who is a duly constituted attorney-in-fact who acts without compensation or remuneration; and (e) public officers in the performance of their official duties and functions, except government assessors and appraisers.
So no, just because you referred some buyer to your friend selling a house (a mere fraction of what actual brokerage entails), you are not entitled to get a commission. Splitting of fees with a broker is also prohibited by the Code of Ethics and Responsibilities. Article 739(2) of the Civil Code would also probably void any circumventing donation.
Thus, while I appreciate the hustle people have been exerting in putting up signs and displaying their listings on places like Facebook, unless above board, such acts definitely constitute engaging in the illegal practice of real estate services.
And as much as doctors would want to sanction charlatans to save lives, protect the integrity of their craft, and remove “competitors”, it is in the interest of the government, real estate practitioners, and the public at large to go after illegal service providers for the important reasons mentioned above.
All it takes is one letter to the PRC legal department for someone to go away for four years.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Bree Hamada on October 11, 2020: