The Language Of Real Estate
By Atty. REY D. CARTOJANO, EnP, REC, REA, REB
Arguably one of the most lucrative and promising professions in the country, real estate practice remains less understood if not misunderstood. Too many Filipinos, real estate practice is just synonymous with buy and sell of properties, and it seems there is no significant brain power needed to close a deal. Very few know that real estate practice in the Philippines is now composed of basically three distinct professions as broker, appraiser and consultant all regulated under the law.
Before Republic Act No. 9646, otherwise known as the Real Estate Service Act (RESA) of 2009, real estate practice in the Philippines was considered a trade or industry regulated by the Department of Trade and Industry (DTI). RESA transformed real estate practice into a profession and transferred its regulation to the Professional Regulation Commission (PRC). Before one can be a real estate professional, RESA mandates completion of a 4-year Bachelor of Science in Real Estate Management (BSREM) degree course, in addition to passing the separate licensure examinations in real estate brokerage, appraisal and consultancy.
The common stereotype real estate professional is the broker, mistaken by most as that well-dressed guy or very pleasing lady manning real estate booths in the malls. To the surprise of many, these persons manning the booths are most likely real estate salespersons, and there is a low probability that they are actually brokers. So how do we distinguish a broker from a salesperson?
A real estate broker is a licensed professional who earns his fee or commission from the sale, exchange, mortgage, lease or joint venture of real estate transactions. He is technically the agent in a real estate deal who is authorized by law to offer, advertise, solicit, list, promote, mediate and negotiate the meeting of the minds between a seller and buyer. Again, to be a real estate broker, the law now requires completion of a 4-year course in BS in Real Estate Management and passing the PRC board examinations in real estate brokerage administered by the PRC.
A salesperson, on the other hand, is one who performs service for and in behalf of a licensed real estate broker for or in expectation of a share in the commission, fee, compensation or other valuable consideration. A salesperson is not given professional license by the PRC, but instead they are given accreditation by PRC to practice under the license of a real estate broker. In short, without the license and supervision of a real estate broker, a salesperson cannot practice.
Can an owner of the property do brokerage acts without engaging the services of a licensed real estate broker? The answer is a resounding YES, but a resounding NO in case the owner is a property developer where the law requires sale of subdivision or condominium properties to be coursed through licensed real estate brokers. The Chamber of Real Estate Builders Association (CREBA) questioned the constitutionality of this ‘unequal’ distinction against property developers before the courts, but the Supreme Court upheld the distinction prohibiting property developers to sell their own properties the reason being that public interest is better protected if licensed real estate brokers will do the selling.
What about those multitudes who are not property owners posting in the social media offering real properties for sale? The short answer is that, unless they are licensed real estate brokers, or salespersons under the supervision of licensed real estate brokers, they can be prosecuted for illegal practice of real estate service for which they can be arrested and imprisoned.
Next to the brokers, we have the real estate appraisers who are trained to perform property valuation. We see them mostly in the banks and financial institutions. Real estate appraisers are presumably experts on real estate values, and their opinions are rendered in acceptable written forms called appraisal reports. Real estate appraisers working in government are called real estate assessors who are basically tasked to perform appraisal and assessment of real properties, including plants, equipment and machineries, essentially for taxation purposes.
The highest form of real estate professional practice in the country is done by real estate consultants, now numbering only around 200 to date. Real estate consultants renders or offers professional advice and judgment on the acquisition, enhancement, preservation, utilization or disposition of land or improvements, as well as the conception, planning, management and development of real estate projects.
Real estate development project means the development of land for residential, commercial, industrial, agricultural, institutional or recreational purposes, or any combination of such including, but not limited to, tourist resorts, reclamation projects, building or housing projects, whether for individual or condominium ownership, memorial parks and others of similar nature.
To be a real estate consultant, one must have at least ten (10) years of experience as licensed real estate broker, or five (5) years of experience as licensed real estate appraiser, in addition of completing the 4-year BS in Real Estate Management (REM) degree course and passing the PRC board examinations in real estate consultancy. With the multi-billion consulting agreements involving infrastructure and real estate projects, the practice of real estate consultancy should be an attractive culminating point in the careers of many experienced real estate professionals.
In all the three basic real estate professions, the law requires that real estate professional practice must be done by individuals or natural persons. The law is worded clearly disallowing corporate practice of real estate service unless the persons authorized to act for the corporation or partnership are all duly licensed real estate brokers, appraisers or consultants.
Divisions or departments of partnerships and corporations engaged in marketing or selling any real estate development project in the regular course of business must be headed by full-time registered and licensed real estate brokers. Branch offices of real estate brokers, appraisers or consultants must be manned by a duly licensed real estate broker, appraiser or consultant as the case may be.
Frequent question being asked is how many salespersons can be accredited by a licensed real estate broker. The most obvious answer is supposedly twenty (20), apparently in reference to Section 20(a) of RESA. One interpretation is that the 20-limit rule applies only to corporate practice of real estate service, in particular reference to the subject matter of Section 20 which is corporate practice of real estate service. Since there is no provision under RESA restricting to 20 the number of salespersons under an individual licensed real estate broker, it is presumed that there is no limit as to the number of salespersons that a licensed individual real estate broker can accredit otherwise the law could have categorically stated the restriction.
Another favorite question for those taking professional real estate board exams is the meaning of the ‘grandfather clause’ under RESA. The grandfather clause means that those real estate brokers, appraisers and consultants licensed by the Department of Trade and Industry (DTI) before RESA took effect shall be issued certificate of registration and professional ID by the PRC without need of taking the board exams, after complying with seminar and certification requirements. This privilege granted to the old practitioners under DTI expired sometime last 2011, or two years after RESA.
Is there an imprisonment or penal provision in the illegal practice of real estate service professions? RESA stipulates for 4 years of imprisonment and/or P400,000 fine, at the discretion of the court, in case the offender is unlicensed, while licensed practitioners are meted with half at 2 years of imprisonment and/or P200,000 fine. Until now, or after almost 11 years since the law took effect, we have to see ‘colorums’ that are haled to court and eventually see the insides of prison cells.
The author holds three professional real estate licenses as broker, appraiser and consultant, and this year passed the environmental planner board exams. He is the National Chairman for 2016, Senior Vice President for 2017 and the incoming National President for 2018 of the Philippine Association of Real Estate Boards (PAREB), Inc., the country’s largest and oldest professional real estate association. A graduate of the University of the Philippines College of Law, he is a topnotcher in the real estate appraiser and consultancy board exams administered by the Professional Regulation Commission.
Cartojano & Associates Law Office, ACLC Complex, Magsaysay Avenue, General Santos City, Philippines www.cartojanolaw.com