1) What a “broker’s commission” is—and what it is not

A broker’s commission is the agreed professional fee paid for bringing about a real estate transaction—typically the sale, purchase, lease, or other disposition of real property—through brokerage services such as marketing, buyer/tenant screening, negotiations, assistance in documentation, and coordination up to closing.

It is different from:

Marketing expenses (photos, listings, flyers, transport), which may be reimbursable only if the contract says so.
Legal fees (for deed drafting, due diligence), which belong to the lawyer (and should not be bundled into a “commission” unless clearly itemized and permitted).
Government taxes and transfer costs (CGT/CWT/Documentary Stamp/Transfer Tax/Registration fees), which are obligations of the parties as allocated by their agreement and prevailing practice.
Referral fees (paid to a “lead source”), which raise regulatory/ethical issues if paid to unlicensed persons for acts that constitute real estate service.

2) Who may legally collect a broker’s commission

2.1 PRC-licensed real estate professionals

In Philippine practice, brokerage is regulated. The safest baseline is: the person claiming “broker’s commission” should be a PRC-licensed real estate broker (or acting within a lawful arrangement involving a licensed broker), and should be able to present:

PRC license/ID number and validity,
professional tax receipt (PTR) as applicable,
and issue proper documentation/receipts and, where relevant, invoices.

2.2 Why this matters in contracts

A commission clause that pays a “broker” who turns out to be unlicensed can create:

enforceability disputes,
risk of complaints and regulatory exposure,
and payment friction at closing.

For the owner/client, requiring proof of license in the contract is basic risk management. For the broker, it prevents “nonpayment” disputes by removing a common excuse.

3) Typical commission rates in the Philippines (practice norms)

There is no single universal rate fixed by law for all transactions. Rates are primarily contractual, shaped by market practice, property type, price bracket, location, and the scope of services.

That said, common practice norms often look like:

3.1 Sale of residential property (house/lot, condo)

Around 3% to 5% of the gross selling price is a common band in many private sales.
Higher-end properties, harder-to-sell assets, distressed sales, or heavy marketing/longer holding time can push higher (by agreement).
Some owners and brokers agree on a net listing (owner wants a “net” amount; broker keeps the excess), but this structure is risky and dispute-prone unless drafted with extreme clarity and fairness.

3.2 Sale of commercial/industrial property and large land

Often 1% to 3%, sometimes structured in tiers because the ticket size is larger and the work may involve multiple stakeholders, zoning/land use issues, and longer lead times.
For very large land deals, you may see stepped or phased commissions and success fees tied to milestones.

3.3 Leases (residential and commercial)

Common patterns include:

One month’s rent for a 1-year lease (or its local equivalent),
Half-month to one-month depending on the lease term and market,
Sometimes a percentage of the total contract value (e.g., a fraction of the annual rent), especially for commercial.

3.4 Developer sales vs. resale market

Developer/accredited agent commissions are typically dictated by the developer’s program and accreditation rules, not by the buyer.
Resale commissions are negotiated directly between seller (and sometimes buyer) and broker.

3.5 Who pays: seller, buyer, landlord, tenant?

Prevailing practice varies:

In many sales, the seller pays the commission (since it’s taken from proceeds).
In some buyer-heavy searches (especially for a buyer’s agent), the buyer may agree to pay a professional fee, or there may be commission sharing between listing and buyer’s brokers.
In leases, the landlord and tenant may split, or one side may pay in full depending on market leverage.

Key point: “Typical” is not “automatic.” In Philippine law practice, the contract controls—and if it’s silent, you invite conflict.

4) The legal foundation: commission is a contract right

In Philippine context, commission claims generally arise from:

A written brokerage agreement (preferred), or
A clear agreement proven by evidence (messages, emails, accepted offers, acknowledged broker involvement), but this is much harder and riskier to enforce.

Because commission is a form of compensation for services, courts look for:

a meeting of minds on rate, basis (selling price vs. net; gross rent vs. base rent), and
when earned and when payable.

5) When commission is “earned” vs. “payable”

This distinction is where most disputes happen.

5.1 Common “earned” triggers

Brokerage contracts usually define commission as earned upon one of these events:

Ready, willing, and able buyer/tenant produced on the owner’s stated terms
- Broker earns once they produce a qualified party who accepts the terms, even if the owner later backs out (if the contract is drafted that way).
Signing of a contract to sell / deed of sale / lease contract
- Broker earns when the binding contract is executed.
Closing / transfer / full payment
- Broker earns only upon consummation (safer for the client; riskier for the broker).

5.2 Common “payable” schedules

Even if “earned” earlier, parties often schedule payment as:

At signing (full or partial),
Upon buyer’s down payment, or
At closing, or
Staggered (e.g., 50% upon signing, 50% upon release of title/registration).

5.3 Why you must define this

If your clause says only “commission is 5%,” but says nothing about timing, you will fight about:

whether the broker can demand payment when an offer is accepted,
whether payment waits until transfer and full payment,
what happens if the deal collapses due to financing, title defects, or a party’s fault.

6) Common dispute scenarios—and how contracts should address them

6.1 Owner sells directly to a buyer introduced by the broker

This is the classic “circumvention” problem. Good contracts include:

Protection/holdover clause (e.g., commission due if sale occurs within X months after expiry to a party introduced during the term),
Definition of “introduced” (viewing, written offer, confirmed communications, buyer registration forms).

6.2 Multiple brokers claim commission

To reduce double-claims:

Require a written authority to sell/lease (exclusive vs. non-exclusive),
Identify whether the broker may co-broke and how commission splits,
Maintain a registered prospect list acknowledged by the owner.

6.3 Transaction fails: who is at fault?

Your contract should allocate outcomes:

If owner/seller defaults (refuses to sign, refuses to deliver clean title, changes mind): Commission may remain due if broker already delivered a qualified buyer and the failure is the owner’s fault.
If buyer defaults (fails to pay, fails loan approval): Decide whether commission is (a) not due, (b) partially due, or (c) due only from forfeited amounts (e.g., part of earnest money) if applicable.
If failure is due to title/legal defects: Decide whether broker is still entitled (often not, unless broker disclosed and parties proceeded knowingly).

6.4 Price reduction, seller concessions, or sale structured as “net”

Commission basis must clarify whether computed on:

Gross selling price stated in deed/CTS,
Net proceeds after certain costs,
Adjusted price after discount, VAT, parking separation, furniture, or assumed liabilities.

Ambiguity here is expensive.

6.5 Reservation fees, earnest money, and option money

Define whether commission attaches when:

reservation is paid (often not),
earnest money is paid (sometimes partial commission),
option is exercised (commission becomes due),
or only upon signing of CTS/Deed/Lease.

Also address whether broker may be paid from:

earnest money, or
seller proceeds, and whether escrow is used.

7) Exclusive vs. non-exclusive listings: the commission implications

7.1 Exclusive listing

Typically means:

Only one broker has the authority to market,
Commission is due if the property is sold during the term—even if the owner finds the buyer—depending on the exact wording.

Exclusive agreements must be precise to be enforceable and fair:

term,
scope,
owner’s reserved rights (if any),
commission due on owner-found buyers (yes/no),
prospect registration and reporting.

7.2 Non-exclusive (open) listing

Typically:

Owner may engage multiple brokers,
Commission is paid to the broker who is the procuring cause of the sale/lease,
Higher risk of conflict unless prospect registration is used.

8) Co-brokerage and commission sharing

Co-brokerage is common, especially where:

listing broker markets,
buyer’s broker brings the buyer,
and they split the total commission (e.g., 50/50) or on a negotiated basis.

Contracts should state:

whether co-brokers are allowed,
whether owner consent is needed,
and how the commission is allocated (and who pays whom).

9) Taxes and documentation for commission payments

Commission is income and is generally subject to:

proper invoicing/receipting,
applicable withholding taxes (depending on payor’s status and tax rules),
and supporting documentation.

The contract should require:

official receipt/invoice and proof of license,
and specify whether commission is inclusive or exclusive of VAT (if the broker/entity is VAT-registered) and who bears any required withholding.

Because tax compliance rules can vary by the status of both payor and payee (individual vs. corporation, registered vs. not), parties often add: “subject to applicable taxes and withholding as required by law.”

10) What the contract should say: a practical clause-by-clause guide

Below are the core provisions a Philippine brokerage agreement should contain to avoid the usual disputes.

10.1 Parties and property identification

Full names, addresses, and IDs where appropriate
For the broker: PRC license number and validity
Complete property description: TCT/CCT number, location, area, improvements, and authority of signatory (owner, attorney-in-fact, corporate officer).

10.2 Nature of engagement

Exclusive or non-exclusive
Scope: sale, lease, or both; resale vs. developer assignment; asset sale vs. shares sale (if relevant).

10.3 Listing price, terms, and negotiables

Listing price and currency
Payment terms acceptable (cash, bank financing, installment)
Included/excluded items (parking, furnishings, appliances)
Authority to negotiate within a range (if granted).

10.4 Commission rate and basis

Specify:

Commission percentage or fixed fee
Commission base: gross selling price, contract price, or total rent
Treatment of VAT and withholding
Treatment of discounts, assumed liabilities, furniture packages, parking allocation.

10.5 When commission is earned

Choose one trigger and define it:

upon producing a ready, willing, able buyer on acceptable terms; or
upon signing of the binding contract; or
upon closing/transfer.

If you pick “ready, willing, able,” define how that is evidenced (written offer, proof of funds/loan approval, signed term sheet).

10.6 When commission is payable

full at signing / closing / staggered
if staggered, specify amounts and exact milestones.

10.7 Handling failed transactions

Allocate outcomes:

seller’s fault vs. buyer’s fault vs. force majeure/title defects
whether broker gets full, partial, or none
whether broker is entitled to commission out of forfeited earnest money (if any), and the percentage.

10.8 Authority, representations, and cooperation

Owner warrants:

authority to sell/lease
status of title, liens/encumbrances disclosure
tax declaration and dues status, association dues
obligation to provide documents for due diligence.

Broker warrants:

lawful capacity (license)
compliance with anti-fraud and confidentiality.

10.9 Marketing and expense policy

Whether broker may advertise online
Whether owner reimburses specific expenses (rare unless agreed)
Whether broker may place signage, conduct open house.

10.10 Non-circumvention and protection period

Commission due if sale/lease occurs with introduced prospects during term or within a defined protection period after expiry.
Mechanism for identifying prospects: written buyer registration, viewing log, email notice to owner.

10.11 Co-brokerage

Allowed or prohibited
If allowed, clarify that commission is total and broker handles splitting (or owner pays only listing broker).

10.12 Confidentiality and data privacy

Keep negotiations and party information confidential
Use of personal data consistent with consent and lawful purpose.

10.13 Term and termination

Fixed term (e.g., 90/180 days)
Termination for cause (fraud, misrepresentation)
Effects of termination on registered prospects.

10.14 Dispute resolution and venue

Governing law: Philippines
Mediation/conciliation option
Court venue or arbitration (if chosen)
Attorney’s fees and costs clause (careful: must be reasonable).

10.15 Signatures and authority

Owner signature(s); spouse consent issues may arise in certain cases (practically, many buyers demand it)
Corporate secretary certificate/board authority if owner is a corporation
SPA if signed by attorney-in-fact.

11) Sample commission provisions (for adaptation)

11.1 Sale commission clause (closing-based)

“Commission. The Owner shall pay the Broker a commission equivalent to five percent (5%) of the Gross Selling Price stated in the Deed of Absolute Sale. The commission shall be payable upon consummation of the sale and receipt by the Owner of the purchase price (or the relevant release of proceeds in escrow), subject to applicable taxes and withholding as required by law. The commission is exclusive/inclusive of VAT (specify).”

11.2 Earned-upon-contract clause (risk-shift to owner)

“Commission is Earned. The commission shall be deemed earned upon the signing of a binding Contract to Sell/Deed of Sale between the Owner and a buyer procured through the Broker’s efforts, and shall be payable within ___ days from such signing, regardless of subsequent delay in transfer not attributable to the Broker.”

11.3 Ready-willing-able clause (strongest for broker; must be precise)

“Ready, Willing, and Able Buyer. The commission shall be earned when the Broker presents a buyer who (i) offers in writing to purchase on terms acceptable to the Owner, and (ii) demonstrates financial capacity through proof of funds or lender pre-approval. If the Owner refuses to proceed without lawful cause after such presentation, the commission shall remain due and demandable.”

11.4 Protection period clause

“Protection Period. If, within ___ months after the expiration or termination of this Agreement, the Property is sold/leased to any prospect introduced by the Broker during the term (as evidenced by written communications, viewing registration, or offer documents), the Owner shall pay the same commission as if the sale/lease occurred during the term.”

11.5 Failed transaction allocation clause

“Failure of Transaction. If the transaction fails due to the Owner’s breach or unjustified refusal to proceed after acceptance of the buyer’s offer/after signing, the commission shall be payable. If the transaction fails solely due to the buyer’s default, no commission shall be payable, except that the Broker shall be entitled to ___% of any forfeited earnest money actually received by the Owner, if any.”

(These samples must be tailored to the specific deal, tax posture, and risk allocation.)

12) Red flags to watch for in commission contracts

No written authority (verbal-only arrangements).
No trigger for “earned” and “payable.”
Ambiguous price basis (gross vs. net, inclusions, concessions).
Perpetual exclusivity or overly long protection period.
Net listings without clear disclosure and fairness safeguards.
Payment to unlicensed persons for acts that are essentially brokerage.
Double-commission exposure (multiple brokers without prospect registration).
Hidden add-ons (marketing reimbursements not agreed).

13) Practical guidance for parties (Philippine deal realities)

For owners/sellers/lessors

Insist on a written agreement stating: commission rate, basis, and exact payment trigger.
Require proof of PRC license and proper receipts.
Use prospect registration and define a reasonable protection period.
Clarify whether you reserve the right to sell to your own buyer without commission (only if that is truly your intention and the broker agrees).

For buyers/lessees

Confirm whether the broker represents the seller/lessor, you, or both.
If you are paying a professional fee, insist on a separate written engagement spelling out services and conflict rules.
Avoid paying “commission” disguised as reservation processing without clear terms.

For brokers

Use clear written authority and define “procuring cause” evidence.
Document introductions (viewing forms, emails, signed offers).
Align “earned” and “payable” triggers to reduce collection risk.
Keep co-broker splits internal unless the owner must consent.

14) Bottom line

In the Philippines, broker’s commission is primarily a matter of contract, with typical market ranges shaped by deal type (sale vs. lease, residential vs. commercial), size, and complexity. The single most important protection for both sides is a written agreement that precisely defines:

rate and basis,
when commission is earned,
when it is payable,
what happens if the deal fails, and
protection against circumvention and double-claims.

A commission clause that is short but incomplete is not “simple”—it is a dispute waiting to happen.