(Philippine legal context; general information article)

1) Why this issue comes up

In Philippine real estate transactions, it’s common for a broker to ask for a commission “paid in advance,” sometimes upon signing an Authority to Sell, an Exclusive Listing, a Reservation Agreement, or even after the broker introduces a prospective buyer. Problems arise when:

the sale/lease never pushes through, yet the broker keeps the full advance commission;
the broker was paid on an assumed price, but the final price is lower (or the deal structure changes);
the broker’s participation was limited, yet a full “closing commission” was collected;
more than one broker claims commission and the client ends up paying too much;
the broker turns out to be unlicensed (or acted beyond authority);
the written agreement is vague, silent, or inconsistent with what actually happened.

The legal question is usually: Was the broker legally entitled to what was paid? If not, what theory and procedure allows recovery of the excess?

2) Commission is contractual—start with the written agreement

2.1 The broker’s right to commission depends primarily on the parties’ contract

Brokerage is typically treated as a kind of agency/service arrangement. The governing idea is simple: commission is earned only if and when the parties agreed it is earned. In practice, documents may include:

Authority to Sell / Authority to Lease
Exclusive Listing Agreement
Open Listing Agreement
Buyer’s Brokerage Agreement
Side letters, text/email confirmations, vouchers/receipts

2.2 Key clauses that determine entitlement (and whether “advance” is refundable)

To evaluate whether an “excess” exists, look for these provisions:

When commission is earned Common formulations:
- “upon consummation/closing” (often tied to Deed of Absolute Sale, payment of price, and transfer)
- “upon production of a ready, willing, and able buyer” (sometimes enough even if seller backs out—depends on wording and facts)
- “upon signing of a contract to sell/reservation/lease” (earlier trigger)
- “non-refundable retainer” vs “advance commission subject to adjustment/refund”
Commission base
- gross selling price? net to seller? inclusive/exclusive of VAT?
- for leases: total contract value or one-year rent?
Commission rate and caps
- fixed percentage, tiered, or negotiated amount
If the deal fails
- who bears the risk if buyer/seller defaults?
- is there a “break-up fee,” partial commission, or reimbursement of marketing costs?
Exclusivity and protection period
- whether commission is owed even if the owner sells directly during the term or within a protection period after termination

Practical point: Many disputes happen because parties used a template with “advance” language but no clear refund/adjustment rules. If the contract is unclear, courts look at the parties’ acts, communications, and fairness-based doctrines (discussed below).

3) What counts as “excess commission” in real cases

“Excess” can mean different things legally. Typical categories:

A) Overpayment because the final price/base changed

Example: You paid 5% based on ₱20M (₱1M), but the property sold for ₱18M and the contract pegs commission to actual selling price. The potential excess is the difference.

B) Full “closing commission” paid even though closing never occurred

If the agreement says commission is earned upon closing/consummation, then a full advance payment can become recoverable if the condition never happens—unless the contract clearly makes it non-refundable.

C) Duplicate or overlapping commissions

You paid Broker A, then also paid Broker B (or a salesperson) for the same transaction due to unclear authority/arrangements.

D) Commission claimed without the required causal link

A broker may have introduced a name, but the final deal resulted from independent negotiations or another agent’s work, and the agreement requires the broker to be the “procuring cause” (or similar standard).

E) Payment to an unlicensed broker (or prohibited practice)

Under the Real Estate Service Act (RESA), real estate brokerage is regulated. If the person collecting “broker’s commission” is not properly licensed/authorized for the service claimed, enforceability and recovery issues become sharper—often framed as public policy/illegality, plus restitution principles.

F) Misrepresentation, hidden markups, or “commission padding”

If the broker induced advance payment through deceit (e.g., false buyer offers, fake urgency, invented competing offers), recovery may be pursued not only as a refund but also as damages—sometimes even criminal complaints depending on facts.

4) Legal grounds to recover excess advance commission

A claimant typically pleads one or more of these Philippine-law theories:

4.1 Enforcement of the contract (most straightforward)

If the brokerage agreement clearly sets:

the correct rate/base, and
when the commission is earned, and
refund/adjustment rules,

then recovery is a simple contractual claim: you paid more than what the contract authorizes, so the broker must return the excess.

Common contractual remedies:

Demand for refund (performance of obligation to return)
Rescission/cancellation if the broker materially breached
Damages if breach caused loss (e.g., delay, failed closing, double payment)

4.2 Civil Code “quasi-contract” remedies (equity-based recovery)

When the contract is silent, unclear, void, or does not justify the broker keeping the money, clients often rely on quasi-contract principles:

(a) Solutio indebiti (payment by mistake / undue payment)

If you paid something not due, the recipient generally must return it. This is powerful when:

commission was paid though not yet earned and the earning condition never happened; or
you paid under a mistaken assumption (wrong base, wrong percentage, wrong person).

(b) Unjust enrichment

A broad principle: no one should unjustly benefit at another’s expense. If the broker keeps money that fairness and law do not allow, restitution may be ordered.

These theories are commonly paired with evidence that:

the broker didn’t deliver the agreed result; or
the payment exceeded entitlement; or
the retention is inequitable given what actually occurred.

4.3 Void/illegal contract or prohibited practice → restitution

If the arrangement is void for illegality or public policy (e.g., collecting a broker’s commission while not qualified to perform the regulated service, depending on the facts and how the service was represented), courts may refuse to enforce the commission claim—and the payor may seek return of what was paid, subject to rules on parties’ fault and public policy considerations.

4.4 Fraud or bad faith → refund plus damages (and possibly criminal exposure)

Where advance commission was obtained by deceit, recovery can include:

return of the amount, plus
moral/exemplary damages and attorney’s fees in appropriate cases, and
depending on the conduct, a potential criminal complaint (facts must show the elements; not every dispute qualifies).

5) The “earned commission” problem: when is a broker actually entitled?

This is the core battleground. Outcomes usually turn on the contract wording and who caused the deal to fail.

5.1 If the agreement says “commission upon consummation/closing”

If no closing occurred, the broker typically has no right to a full closing commission, unless:

the contract explicitly makes the advance non-refundable; or
the seller acted in bad faith to avoid paying after the broker produced a qualified buyer (depending on contract and proof).

5.2 If the agreement says “earned upon producing a ready, willing, and able buyer”

This language can favor brokers—even if the sale fails—but it still requires proof that:

the buyer met the seller’s stated terms, and
financing capacity/ability was genuine (not merely an expression of interest).

Also, if the transaction failed because the broker’s “buyer” was not truly able, a client can argue the condition was not met.

5.3 If the deal fails due to the client’s breach vs the buyer’s breach

Many agreements allocate risk:

If seller backs out without valid cause after the broker delivers a qualified buyer, broker may claim entitlement (full or partial).
If buyer backs out, some agreements give the broker partial commission, reimbursement of expenses, or nothing.

If the contract is silent, courts often weigh fairness: did the broker actually deliver what was paid for, and was the failure attributable to the payor?

6) Evidence checklist to prove “excess” and support recovery

To recover money, documentation matters more than rhetoric. Assemble:

Brokerage agreement(s): authority, listing, exclusivity, buyer representation
Receipts / acknowledgments / vouchers for all payments
Proof of payment: bank transfers, checks, remittance confirmations
Deal documents: reservation, offer to purchase, contract to sell, deed, lease
Communications: emails, texts, chat messages on commission terms and triggers
Timeline: when broker introduced, negotiations, why it failed
License/registration proof (if relevant): PRC ID details, accreditation claims, authority of salesperson
Computation sheet: show contract rate × correct base = amount due; compare with amount paid; identify excess precisely

7) Demand and dispute-resolution path (Philippine practice)

Step 1: Formal demand letter

A proper demand typically includes:

statement of facts and agreement terms
legal basis (contract/quasi-contract)
exact computation of excess
deadline to refund
bank details for return and request for written settlement

A demand letter is also useful later to show good faith and can affect claims like interest, damages, and attorney’s fees.

Step 2: Barangay conciliation (often required for individuals in the same locality)

Many money disputes between individuals must pass through the Katarungang Pambarangay process before filing in court, depending on parties’ residence and exceptions. If it applies and is skipped, the case can be dismissed for prematurity.

Step 3: Choose the right forum

Your main options:

(a) Small Claims (for straightforward money recovery)

If the claim is within the small claims threshold and is essentially a demand for a sum of money (refund of excess commission), small claims can be faster and more document-driven. It is designed to be simpler, typically without lawyers appearing for parties (subject to rules and exceptions).

(b) Regular civil action

If issues are complex—fraud, rescission, multiple parties, injunction, significant damages, or need for extensive evidence—regular court action may be appropriate.

(c) Administrative complaint against the broker

If the broker is licensed (or falsely claimed to be), complaints may be lodged before the proper regulatory body for professional discipline/ethics violations. Administrative proceedings can:

pressure settlement,
penalize misconduct,
but do not always directly return money as efficiently as a civil refund case (though outcomes can support civil claims).

(d) Criminal complaint (only when facts fit)

If there is clear deceit or misappropriation meeting criminal elements, a criminal route may be considered. This is fact-sensitive and not a default response to a failed deal.

8) Common defenses brokers raise—and how claimants counter them

Defense 1: “Non-refundable retainer”

Counter: show the contract does not clearly say non-refundable, or show the clause is unconscionable as applied, or that the broker materially breached, or that the retainer was for deliverables never provided.

Defense 2: “I produced a ready, willing, and able buyer”

Counter: demand proof of ability (financing, proof of funds, bank approval) and show the buyer did not match seller’s terms.

Defense 3: “You canceled / you’re in bad faith”

Counter: show a legitimate reason (title defects, encumbrances, zoning issues, failed due diligence, buyer default) and that the contract ties commission to closing or other unmet condition.

Defense 4: “Customary practice is X% and payable upon reservation”

Counter: custom cannot override explicit contract terms; if contract is silent, custom may be considered but must still yield to fairness and actual performance.

Defense 5: “You agreed verbally to pay in advance”

Counter: present messages contradicting that, show the written document governs, and argue undue payment if not due.

9) Interest, penalties, and attorney’s fees

If a broker wrongfully withholds a refundable excess after demand, a claimant may seek:

legal interest (often argued from the time of demand or filing, depending on the nature of obligation and court rulings), and
attorney’s fees if allowed by contract or justified by bad faith and litigation necessity.

Exact entitlement depends on the contract wording, the characterization of the obligation (loan/forbearance vs damages), and the court’s assessment of delay and good/bad faith.

10) Practical settlement structures (often the best outcome)

Many commission disputes settle when parties propose a fair split tied to actual work done and outcome:

Refund excess minus documented marketing costs (with receipts)
Convert part of “advance commission” into a true retainer with defined deliverables (e.g., listings, viewings, ads)
Escrow arrangement: hold commission pending closing milestones
Tiered entitlement: small fee for buyer introduction; larger portion only upon closing

Settlement reduces risk on both sides—especially when the contract language is vague.

11) Prevention: how to structure “advance” commission safely

To avoid future disputes, “advance commission” should be written as one of these (clearly, not ambiguously):

Refundable advance credited to closing commission; refundable if no closing by a date or if conditions fail.
Non-refundable retainer for marketing/services, with a separate success fee upon closing.
Milestone-based payments: portion upon listing launch, portion upon accepted offer, balance upon closing.
Defined trigger + defined fault allocation: who pays what if buyer defaults, seller defaults, or due diligence fails.

Also specify:

base price definition (gross/net; taxes; inclusions),
protection period,
who can receive payment (broker vs salesperson),
and that all changes must be in writing.

12) A clean way to frame a refund claim

A well-framed claim is usually:

Identify the commission rule (contract clause or default fairness principle)
Show the triggering event did not occur (or occurred at a lower base)
Compute the correct amount due
Show what was actually paid
Demand return of the difference under contract and/or quasi-contract (solutio indebiti/unjust enrichment)
Add interest from demand and costs if justified

13) Important caution (scope and facts)

Recovery outcomes are highly fact-driven. Two cases that look similar can diverge based on:

exact wording of the brokerage agreement,
proof of the broker’s performance and causal role,
why the transaction failed,
and whether the payment was a true “retainer” or merely an advance against a success fee.

In short: excess advance commission is recoverable when it is not due under the agreement or under restitution principles—but entitlement hinges on the commission trigger and the reason the deal did not complete.