When Is Commission Due—and Why Parties End Up in Court

Real estate transactions in the Philippines often collapse not because the parties cannot agree on price, but because they cannot agree on who gets paid, when, and for what work. Commission disputes usually arise when (1) the seller closes with the buyer without the broker, (2) the buyer backs out after “reservation,” (3) the seller backs out after “acceptance,” (4) multiple brokers claim they introduced the buyer, or (5) the broker is unlicensed or improperly documented.

This article focuses on the central question in most disputes: When is the broker’s commission legally due? It explains the governing legal framework, the default rules when contracts are silent, common fact patterns, and how to draft and document arrangements to avoid litigation—all in Philippine context.

1) The Philippine Legal Framework That Governs Broker Commissions

Broker commission issues sit at the intersection of three core areas:

A. Contract Law (Civil Code)

Commission is fundamentally a contractual obligation. If the parties have a written agreement on (a) the rate, (b) the triggering event for payment, and (c) exceptions (e.g., buyer default), courts generally enforce it unless it violates law or public policy.

B. Agency and Brokerage Principles (Civil Code on Agency)

A real estate broker typically acts as an agent—engaged to bring about a transaction (sale, lease, exchange). Even if people casually say “finder,” the law often treats the arrangement as agency/brokerage: the broker is compensated for producing a result, not merely for effort—unless the parties agree otherwise.

C. Regulation of Real Estate Service Practice (Real Estate Service Act, RA 9646)

Philippine law regulates who may lawfully act as a real estate broker and who may legally collect professional fees/commissions for real estate service practice. A recurring issue in commission suits is whether the claimant is properly licensed/registered (and whether the person acted within the scope of lawful practice).

Practical impact: Even if a broker “did the work,” entitlement can be attacked if licensing/registration requirements are not met, or if the person is effectively operating as an unlicensed practitioner.

2) The First Principle: Commission Is Due When the Contract Says It’s Due

The “Trigger Event” Controls

The most important clause in any listing/brokerage agreement is the commission trigger. Common triggers include:

Upon introduction of a ready, willing, and able buyer on the seller’s terms
Upon signing of a contract to sell / deed of sale
Upon receipt of earnest money or down payment
Upon full payment / consummation / transfer of title
Upon closing, or upon release of loan proceeds

If the written agreement is clear, that agreement is usually the starting point and the ending point.

Why triggers vary in the Philippines

Philippine sales commonly involve:

financing approvals,
protracted documentation,
estate/heirship issues,
title clean-up, and
developer paperwork and government processing.

So parties sometimes prefer “pay on closing.” Brokers, on the other hand, often prefer “pay on signing/acceptance” so they aren’t unpaid after producing a buyer only to have the seller or buyer walk away.

Bottom line: Most commission disputes are really disputes over what the parties meant the trigger to be—because they didn’t write it clearly.

3) When There Is No Clear Written Trigger: The Default Brokerage Rule People Fight About

When contracts are unclear or absent, disputes commonly pivot to a default principle used in brokerage relationships:

A. “Ready, Willing, and Able” Buyer (RWA)

A frequent default concept is that a broker earns commission when the broker produces a buyer who is:

ready to proceed,
willing to buy on the seller’s terms, and
able to perform (financially and legally).

But “able” is the battleground.

If the deal requires bank financing, is the buyer “able” before loan approval?
If the seller demands cash, is a buyer “able” without proof of funds?
If the seller’s terms include a deadline, must the buyer meet it?

B. Perfection vs. Consummation Under the Civil Code (Sale Context)

Philippine law distinguishes:

Perfection of sale: meeting of minds on object and price (even if not yet delivered/paid in full).
Consummation: performance (delivery, payment, transfer).

A broker may argue that once a binding agreement is reached (or a contract to sell is signed), the “result” has been achieved. A principal may argue commission is only due upon consummation (full payment and transfer).

In practice: Courts look hard at the parties’ intent and the transaction structure (e.g., contract to sell vs deed of absolute sale) and the evidence showing whether the broker truly produced a buyer who could and would complete under the agreed terms.

C. “Procuring Cause” (Who Really Caused the Sale?)

Where multiple brokers claim entitlement, the question becomes: who was the effective cause of the completed transaction?

Who found and introduced the buyer?
Who negotiated material terms?
Was the broker cut out at the last minute?
Did the buyer already know the property and broker did little?

The claimant typically must show a direct causal connection between their efforts and the eventual sale/lease.

4) The Commission Trigger Depends on the Type of Transaction Document Used

Philippine real estate deals use different instruments, and commission disputes often hinge on what was actually signed.

A. Reservation Agreement / Reservation Fee

A “reservation” is common in developer sales and sometimes in resales. However:

A reservation fee can be merely a holding arrangement and may not always constitute a perfected sale.
Some forms treat reservation as part of a structured path toward a contract to sell; others treat it as refundable and non-binding.

Commission risk: If the commission trigger is “upon reservation,” the broker should insist on a written clause. Without it, parties may argue reservation is not the sale and does not prove readiness/ability.

B. Earnest Money

Under Philippine civil law principles, earnest money is generally treated as evidence of a perfected sale and part of the purchase price when given in a sale context—but parties sometimes misuse the term “earnest money” when they really mean a refundable deposit pending due diligence.

Commission risk: If “earnest money” is actually conditional/refundable and the deal is still tentative, the seller may argue there was no buyer who was ready/willing/able in a legal sense.

C. Contract to Sell

A contract to sell is widely used when the seller retains title until full payment. It usually indicates the buyer has committed to purchase, but the seller’s obligation to transfer title arises only upon fulfillment of conditions (often full payment).

Commission disputes:

Broker: “Buyer is secured; commission earned.”
Seller: “No transfer yet; buyer may default; commission not due.”

This is exactly why the commission trigger must be explicit.

D. Deed of Absolute Sale

This is closer to consummation, especially once notarized and used for title transfer. If the agreement says “pay on deed signing” or “pay on transfer,” disputes decrease—but brokers may end up unpaid for long periods unless protected by clear clauses.

5) Common Dispute Scenarios and How Philippine Courts Tend to Analyze Them

Scenario 1: Seller backs out after accepting the offer

Typical facts: Broker brings buyer, terms are agreed, seller later refuses to sign or demands higher price.

Core issue: Did the broker already earn the commission based on the agreed trigger (e.g., acceptance/perfection), or was it conditioned on closing? Key evidence: written offer/acceptance, messages showing agreement on price/object, draft contracts, seller’s written confirmation.

Scenario 2: Buyer backs out after acceptance or after paying a deposit

Core issue: Was the buyer truly “able,” or did the buyer default unjustifiably? If the broker’s trigger is merely producing a qualified buyer and acceptance occurs, commission may still be argued as earned. If the trigger is closing, seller may deny commission because no closing occurred.

Many agreements address this by stating:

commission is earned upon acceptance, but
payable either immediately or from forfeited deposits; or
payable upon closing, unless seller is at fault.

Scenario 3: Seller and buyer close “direct” to avoid commission

Typical facts: Broker introduced buyer; later seller and buyer sign without broker, often after the listing expires or through a relative.

Core issue: Was the broker the procuring cause, and is there a “protection” or “tail” clause? A well-drafted agreement often includes a protection period (e.g., commission still due if sale occurs within X months to a buyer introduced/registered by broker).

Key evidence: buyer registration forms, viewing sheets, emails, Viber/WhatsApp threads, meeting logs, property inspection photos, and any document showing the broker’s introduction preceded the sale.

Scenario 4: Multiple brokers claim the same buyer

Core issue: Who was the procuring cause, and were there co-brokerage agreements? Without co-brokerage terms, principals may get caught between competing claims, or brokers may sue each other.

Best practice: Always document co-brokerage splits in writing and identify the “lead broker.”

Scenario 5: Broker is unlicensed or improperly authorized

This is a high-stakes defense in commission suits. Regulation of real estate service practice can affect whether a person may lawfully claim professional fees/commission.

Practical effect: If the claimant is not properly licensed/registered for the services performed (or is acting outside lawful practice), the entitlement to commission can be attacked, and the payer may also face regulatory risks.

6) The Documents and Proof That Usually Win (or Lose) Commission Cases

In many commission disputes, the deciding factor is not what “should” be fair, but what can be proven.

A. Must-have documents

Written Authority / Listing Agreement (exclusive or open)
Commission Agreement with a clear trigger and rate
Buyer Registration / Introduction Proof (name, date, acknowledgment)
Offer to Buy / Letter of Intent and Seller Acceptance
Evidence of Negotiation and Deal Progress (messages, emails, meeting notes)
Proof of Buyer Ability when required (bank pre-approval, proof of funds)

B. “Soft proof” that becomes critical

chat threads showing that the buyer first learned of the property from the broker,
maps/pins, inspection schedules, gate logs, and
witness testimony from viewings/meetings.

C. Clauses that prevent predictable fights

Trigger clause (exact event)
Protection period / tail clause (post-expiry sale to introduced buyer)
Default allocation clause (who bears loss if buyer or seller backs out)
Attorney’s fees and interest clause
Exclusive vs open listing clarity
Co-brokerage authorization and split clause

7) How “Exclusive” vs “Open” Listings Change the Commission Analysis

Exclusive Listing

In an exclusive listing, the seller agrees to work through one broker (or grants one broker exclusive right to sell). Depending on drafting:

the broker may be entitled even if the seller finds a buyer directly, and/or
the broker may be entitled if any sale occurs within the listing period.

Dispute risk: Sellers often misunderstand “exclusive,” believing they can still sell direct without paying.

Open Listing

In an open listing, the seller can engage multiple brokers and even sell directly. The commission typically goes to the broker who is the procuring cause of the sale.

Dispute risk: Multiple brokers may claim they were the procuring cause; documentation becomes decisive.

8) Commission for Leases: When Is It Due?

Lease commissions have their own patterns. Common triggers include:

upon signing of the lease contract,
upon tenant move-in,
upon payment of the first month rent and deposit,
sometimes spread over time for long leases.

Common disputes:

tenant backs out before move-in,
landlord cancels after screening,
lease signed but tenant never pays,
renewal commissions (whether broker is entitled on renewals).

As with sales, the cleanest solution is a written commission trigger that addresses:

cancellations,
non-payment,
early termination, and
renewals/extensions.

9) Can a Broker Claim Commission on Quantum Meruit?

Quantum meruit is a principle invoked when there is no enforceable rate or the contract is deficient, but services were rendered and benefited the principal. Courts may allow recovery of reasonable compensation in appropriate circumstances.

However, quantum meruit is fact-sensitive and not a substitute for:

a clear written authority,
proof of causation (procuring cause), and
compliance with regulatory requirements for lawful practice.

In practice, quantum meruit arguments strengthen when:

the principal undeniably benefited from the broker’s work (e.g., used the broker’s buyer list),
the broker’s role is documented, and
the principal’s refusal to pay appears inequitable.

10) Remedies and Where Commission Disputes Are Fought

A. Civil Action for Collection of Sum of Money

Most disputes go to regular courts. The venue and procedure depend on:

the amount claimed,
existence of contractual clauses (venue, arbitration, attorney’s fees),
and whether the claim can fit within simplified procedures (where applicable).

B. Claims Against Deposits

Some agreements provide that broker’s commission can be taken from forfeited earnest money/deposits if the buyer defaults. This must be explicitly written; otherwise, sellers resist releasing deposits to brokers.

C. Administrative/Regulatory Complaints

Where issues involve unlicensed practice, misrepresentation, unethical conduct, or professional violations, parties may also pursue regulatory complaints under the real estate service regulatory framework.

11) A Practical “When Is Commission Due?” Checklist (Philippine-Style)

Ask these in order:

Is there a written commission/listing agreement?
- If yes: follow the trigger clause.
- If no/unclear: proceed to default principles and evidence.
What is the agreed trigger?
- introduction of RWA buyer?
- acceptance/perfection?
- signing of contract to sell/deed of sale?
- closing/transfer/full payment?
Was a buyer produced who met the seller’s stated terms?
- price, payment method, timeline, conditions.
Was the buyer actually “able” based on the transaction structure?
- cash requirement vs financing reality.
Did the broker’s efforts cause the sale/lease (procuring cause)?
- especially in open listings or multiple-broker situations.
Did either party act in bad faith to avoid commission?
- direct closing after introduction, use of dummy intermediaries, sudden “price change.”
Does a protection period apply?
- sale after expiry to introduced buyer.
Are licensing/registration and authority issues present?
- entitlement can fail if the claimant cannot legally collect fees for the services performed.

12) Drafting Rules That Prevent Most Commission Litigation

A litigation-proof commission clause typically defines:

Parties (including licensed broker identity and authority to act)
Property (title details, location, tax declaration, etc.)
Scope (sale/lease, marketing, negotiation limits)
Commission Rate and Tax Treatment (gross vs net, withholding, VAT if applicable)
Trigger Event (one unambiguous sentence)
Payment Timing (e.g., “within 3 business days from X”)
Default Allocation (seller fault vs buyer fault vs force majeure)
Protection Period (e.g., 6–12 months to introduced buyers)
Co-brokerage (who may co-broke and how splits work)
Attorney’s Fees/Interest (to discourage non-payment)
Dispute Resolution (venue, arbitration/mediation clause if desired)

Key Takeaways

In the Philippines, commission is primarily governed by contract; the written trigger event is decisive when clear and lawful.
When the contract is silent or unclear, disputes turn on whether the broker produced a ready, willing, and able buyer and whether the broker was the procuring cause of the completed transaction.
The instrument used (reservation, earnest money, contract to sell, deed of sale) matters because it affects whether the sale is merely exploratory, perfected, or effectively consummated.
Commission disputes are won with documentation: written authority, buyer introduction proof, acceptance evidence, and records showing causation.
Regulatory compliance (licensing/registration) can become a threshold issue that determines whether a commission claim is enforceable.