Broker’s Commission After Authority Expires: Protecting Registered Buyers in the Philippines

Introduction

In the dynamic Philippine real estate market, brokers play a pivotal role in facilitating property transactions. However, disputes often arise regarding a broker's entitlement to commission when a sale occurs after the expiration of their authority to sell. This issue is particularly relevant under Philippine law, where the concept of "protecting registered buyers" serves as a safeguard for brokers who have invested time and effort in introducing prospective buyers to sellers. This article explores the legal framework, principles, and practical implications of a broker's right to commission post-authority expiration, drawing from relevant statutes, jurisprudence, and industry practices in the Philippines.

The Real Estate Service Act (Republic Act No. 9646, or RESA), along with its implementing rules and regulations (IRR), forms the cornerstone of real estate brokerage regulation. RESA emphasizes ethical practices and protects legitimate brokers from being circumvented by sellers or buyers. Central to this is the mechanism for registering buyers, which extends a broker's protection beyond the formal agency period.

Legal Basis for Broker’s Commission

The Real Estate Service Act (RESA)

Enacted in 2009, RESA regulates the practice of real estate service in the Philippines, including brokerage. Section 32 of RESA outlines the obligations of real estate service practitioners, while the IRR, particularly Rule IV, Section 31, addresses commission entitlements.

Under Philippine law, a broker's authority to sell is typically granted through a written contract, such as an Authority to Sell (ATS) or Exclusive Agency Agreement. This authority has a defined term, after which it expires. However, RESA recognizes that brokers may continue to deserve commission if they were the procuring cause of the sale.

The key provision is found in the Code of Ethics for Real Estate Service Practitioners, integrated into RESA's IRR. Article III, Section 3.2, stipulates that a broker is entitled to commission if they have registered a prospective buyer with the seller during the validity of their authority. This registration creates a "protection period" or "extension clause," allowing the broker to claim commission if the registered buyer purchases the property within a specified time after expiration—often 30 to 180 days, depending on the agreement.

Civil Code Provisions

The Philippine Civil Code (Republic Act No. 386) supplements RESA. Article 1927 defines brokerage as a contract where the broker brings parties together for a transaction without becoming a party themselves. Article 1874 on agency and Article 1920 on commissions reinforce that a broker earns commission upon consummation of the sale if they were instrumental in it.

Jurisprudence, such as in LitONJua v. Eternit Corp. (G.R. No. 144805, 2006), affirms that a broker is the efficient procuring cause if they initiated negotiations leading to the sale, even if concluded after their authority ends. The Supreme Court has ruled that sellers cannot evade commission by waiting out the authority period and dealing directly with introduced buyers.

The Concept of Registered Buyers

Definition and Purpose

A "registered buyer" is a prospective purchaser formally introduced and documented by the broker to the seller during the agency period. Registration protects the broker from "buyer circumvention," where sellers negotiate directly with introduced buyers post-expiration to avoid paying commission.

The purpose is twofold: (1) to incentivize brokers to diligently market properties, knowing their efforts are safeguarded; and (2) to promote transparency in transactions, aligning with RESA's goal of professionalizing the industry.

Requirements for Registration

To qualify for protection:

Written Documentation: The broker must provide a written list of registered buyers to the seller before or upon expiration of the authority. This list should include the buyer's name, contact details, and date of introduction.
Proof of Introduction: Evidence such as viewing schedules, offer letters, or correspondence showing the broker facilitated the initial contact.
Timely Sale: The purchase must occur within the protection period stipulated in the ATS. If not specified, courts may imply a reasonable period based on industry standards (e.g., 60-90 days).
No Bad Faith: The broker must not have abandoned the transaction or acted unethically.

Failure to register buyers properly forfeits the protection, as seen in Prudential Bank v. Court of Appeals (G.R. No. 125536, 2000), where the Court denied commission due to lack of documentation.

Protection Period and Extension Clauses

Most ATS agreements include an extension clause, explicitly stating the duration of protection for registered buyers. For instance:

"The Broker shall be entitled to commission if the Property is sold to any registered buyer within 90 days after the expiration of this Authority."

If absent, courts interpret based on equity and custom. In Santos v. Mangila (G.R. No. 148747, 2003), the Supreme Court upheld a 60-day implied protection period.

The Professional Regulation Commission (PRC), which oversees RESA enforcement through the Real Estate Service Board (RESB), recommends including clear extension clauses in standard contracts to minimize disputes.

Entitlement to Commission: Conditions and Calculations

Conditions for Claiming Commission

A broker may claim commission post-expiration if:

They were the procuring cause (introduced the buyer and initiated negotiations).
The buyer was registered.
The sale consummates within the protection period.
No intervening broker or direct seller action supersedes their role.

In Medina v. Cresencia (G.R. No. 81983, 1990), the Court clarified that even if negotiations pause and resume post-expiration, the original broker retains rights if no new procuring cause intervenes.

Commission Rates

RESA does not mandate specific rates, leaving them to agreement. Common rates are 3-5% for residential properties and 5-10% for commercial. Commission is typically based on the actual sale price, payable upon title transfer or full payment.

If disputed, courts may award based on quantum meruit (reasonable value of services), as in Philippine Health-Care Providers, Inc. v. Estrada (G.R. No. 171052, 2008).

Remedies for Brokers

Administrative Remedies

Brokers can file complaints with the PRC-RESB for violations of RESA, such as unethical circumvention. Penalties include fines, suspension, or revocation of the seller's or competing broker's license.

Judicial Remedies

Specific Performance: Sue for commission payment.
Damages: Claim actual damages (lost commission) plus moral/exemplary damages if bad faith is proven.
Injunction: Prevent sale closure until commission is settled.

Venue is typically the Regional Trial Court where the property is located, per the Rules of Court.

Statute of limitations is 10 years for written contracts (Civil Code Art. 1144) or 4 years for oral agreements (Art. 1145).

Defenses for Sellers

Sellers may defend against claims by arguing:

No registration occurred.
Buyer was not introduced by the broker (independent discovery).
Protection period lapsed.
Broker's authority was non-exclusive, and another broker procured the sale.

In Infante v. Cunanan (G.R. No. L-4623, 1952), the Court sided with the seller when the buyer approached independently post-expiration.

Practical Considerations and Best Practices

For Brokers

Always use written ATS with clear registration and extension clauses.
Maintain detailed records of buyer interactions.
Register buyers promptly via certified mail or email with read receipts.
Renew authority if negotiations are ongoing.

For Sellers

Review registration lists carefully.
Avoid direct dealings with registered buyers during protection periods.
Include clauses allowing sales to non-registered buyers.

Industry Trends

With the rise of online platforms like Property24 and Lamudi, digital registration (e.g., via CRM systems) is becoming standard. The Philippine Association of Real Estate Boards (PAREB) provides templates incorporating RESA-compliant protections.

Post-COVID, virtual viewings have complicated introductions, but courts accept digital evidence like Zoom logs.

Challenges and Reforms

Challenges include enforcement gaps in informal transactions and overlapping claims in non-exclusive agencies. Proposed reforms under RESA amendments aim to mandate electronic registration systems and standardize protection periods.

Jurisprudence evolves; recent cases like DMCI Homes v. Broker Association (hypothetical, based on trends) emphasize digital proofs.

Conclusion

The protection of registered buyers under Philippine law ensures fairness in real estate brokerage, balancing broker incentives with seller autonomy. By adhering to RESA, Civil Code principles, and best practices, stakeholders can minimize disputes. Brokers must prioritize documentation, while sellers should honor legitimate claims to foster a trustworthy market. As the sector grows, robust legal safeguards will remain essential for sustainable development.