THE NEW AGE IN PHILIPPINE REAL ESTATE SERVICE – Part I

As all licensed real estate brokers probably know, Republic Act No. 9646, popularly known as the “Real Estate Service Act of the Philippines” (RESA) was signed into law last June 29, 2009. Subsequently, it was published on July 15, 2009. I read a copy of the law in the Business section of the Philippine Daily Inquirer (page B10 to be exact). Hence, pursuant to Section 45 of the law, RESA became effective last Thursday, July 30, 2009.

But what does this exactly mean for us REALTORS®[1]?

Simply put, most of the provisions of the law are now operational. However, absent the promulgation of the Implementing Rules and Regulations (IRR) some of the provisions of RESA cannot be fully implemented.

But, while waiting for the IRR to be promulgated, what can we expect of this piece of legislation that took more than a decade to be passed into law by Congress? Will it really professionalize the ranks of real estate service practitioners? Will it discipline rogue practitioners?

In anticipation of the effectivity of RA 9646, the Department of Trade and Industry (DTI) has already suspended its accreditation of entities that will conduct the Comprehensive Real Estate Seminar and Review (CRESAR) after July 30, 2009. It knows that upon the effectivity of RESA, DTI loses its regulatory powers over the practice of real estate service practitioners.

Furthermore, Section 41 mandates the DTI-Bureau of Trade Regulation and Consumer Protection (BTRCP) to “transfer all pertinent records, documents and other materials to the Professional Regulatory Board of Real Estate Service” on or before October 28, 2009 – counting ninety (90) days from the effectivity of the Act.

Ordinarily, it should be expected that by October 28, 2009 the Professional Regulatory Board of Real Estate Service (Board) has already been constituted and discharging the powers and functions outlined in Section 5 of RESA. However, this expectation is not a certainty considering that Section 42 has provided a much longer period for the preparation of “the necessary rules and regulations… needed to implement the provisions of this Act.” More on this point in Part II of this article.

I have to be honest with you, my motivation in wanting to be a licensed real estate broker is embodied in Section 20 of RESA. I don’t know how tough the licensure examination will be once the Professional Regulation Commission (PRC) takes over the supervision of real estate service practitioners. So, I took my chances last May 31, 2009.

After passing the examination, I applied for my license with the DTI and joined the Muntinlupa Realtors Board (MUNREB) of PAREB. I knew that once I am a licensed real estate broker and engaged in the active practice as real estate broker on the day of the effectivity of RESA I will be exempt from taking the licensure examination to be given by the Board in the future.

Under RESA, I am what is known as a “qualified applicant for registration without examination”. As such, I am required (1) “to take an oath before any member of the Board or any officer of the Commission duly authorized by the Commission to administer oaths prior to entering into the practice of real estate service in the Philippines” and (2) “to post a professional indemnity insurance/cash or surety bond” pursuant to Sections 25 and 26 of RA 9646, respectively.

Section 26 tells us that the insurance/cash or surety bond is renewable every three (3) years, in an amount to be determined by the Board, but in no case shall be less than Twenty Thousand Pesos (Php 20,000.00), without prejudice to the additional requirement of the client.

This boldfaced and underlined clause in Section 26 is a quandary. I think this clause is misplaced, to say the least. What if the a client of mine requires me to put in escrow for one (1) year my commission just to be sure that the transaction is above board and to answer for any damage that will result if and when fraud is discovered? This may be an absurd requirement but such absurdity is not far-fetched. Furthermore, different clients will have different requirements. There should be a standard for me to follow and not be at the mercy of someone else. And whose client are we talking about here? Is it the client of the buying broker or selling broker? Why would the law allow a third person to give additional requirements as a prerequisite to carrying out my profession?

Moreover, if we are to be strict in the interpretation of the law, Section 25 requires me to take an oath before a pre-determined individual “prior to entering into the practice of real estate service in the Philippines.” Does this mean that I am disallowed to be a real estate service practitioner in the country until I have taken my oath before the person named in Section 25?

Remember, the law allows a period of six (6) months for the IRR to be prepared and promulgated. It is good if the IRR will be promulgated tomorrow. But that is wishful thinking. In the meantime, what will I do while waiting for the Board to be constituted and its Chairman and members appointed? I certainly should be allowed to perform my service to my clients. Sadly, this matter was not covered in the transitory provision of the law.

Certainly, every real estate service practitioner should know by heart Section 3 (g) of RESA. It defines who we are and what we do. Section 27 states that any single act or transaction within the purview of Section 3 (g), when performed by real estate service practitioner, shall constitute an act of engaging in the practice of real estate service.

This is important because Section 29 prohibits any person from engaging in the practice of real estate service unless he or she is a licensed real estate service practitioner and registered in the roster of real estate service practitioners prepared and maintained by the Board.

Before one gets to be a licensed and registered real estate service practitioner under RESA, a person must (1) have passed the licensure examination or be exempt from it under Section 20; (2) be a holder of a valid certificate of registration and professional identification card (pursuant to Section 17) or a valid special/temporary permit (pursuant to Section 23); and (3) have paid the required bond pursuant to Section 26, in case of real estate brokers and private appraisers.

If a person is engaged in the practice of real estate service absent all these requirements abovementioned, then he or she is in violation of RA 9646 and under Section 39 shall be meted the penalty of a fine not less than Two Hundred Thousand Pesos (Php 200,000.00) or imprisonment of not less than four (4) years, or both upon the discretion of the Court. For other violations of the provisions of RESA the penalty is only One Hundred Thousand Pesos (Php 100,000.00) or imprisonment of not less than two (2) years, or both upon the discretion of the Court also.

As with other statutes, when a violation is committed “by a partnership, corporation, association or any other juridical person, the partner, president, director or manager who has committed or consented to or knowingly tolerated such violation shall be held directly liable and responsible for the acts as principal or as co-principal with the other participants, if any.” (Last paragraph of Section 39)

Kindly note that the prohibition against the unauthorized practice of real estate service is not absolute and allows for several exceptions found in Section 28 of RESA. First, a person – natural or juridical – may perform the acts mentioned in Section 3 (g) with reference to his/her or its own property only, with the exception of real estate developers. Second, any receiver, trustee or assignee in bankruptcy or insolvency proceeding is exempt from the coverage of the law.

Third, an executor or administrator in estate proceedings and a guardian in guardianship proceedings are some examples of exempt individuals acting pursuant to the order of any court of justice. Fourth, a person who is duly constituted attorney-in-fact for purposes of sale, mortgage, lease or exchange, or other similar contracts of real estate, without requiring any form of compensation or remuneration does not violate the provision of RA 9646. And lastly, court sheriffs and registrars of deed are few illustrations of public officers who are exempt under Section 28 in the performance of their official duties and functions, with the exclusion of government assessors and appraisers.

Once a person becomes a licensed and registered real estate service practitioner, he or she is mandated by Section 33 to “establish and maintain a principal place of business and such other branch offices as may be necessary.” It may be a simple home office or a fancy corporate office in a commercial/business district, the law does not specify. What is important is that as professionals we have a respectable place where we can conduct official business. Section 33 further mandates the conspicuous display of the original and/or certified true copies of the practitioner’s certificate of registration as well as the certificates of registration of all real estate service practitioners employed in such office.

In addition, Section 38 requires real estate service practitioners to indicate the certificate of registration, professional identification card, privilege tax receipt (PTR) number and the Accredited Professional Organization (APO) receipt number, and the date of issuance and duration of validity on the documents he/she signs, uses or issues in connection with the practice of his/her profession.

These requirements are very much similar to the ones lawyers are required to indicate when affixing their signatures in all pleadings to be submitted to the court. The Certificate of Registration is our Roll of Attorney Number; the APO receipt number is our Integrated Bar of the Philippines (IBP) receipt number. I guess this is to be expected when a majority of our current legislators in both Houses of Congress are lawyers.

RESA also provides the supervision of real estate salespersons. Under Section 3 (g) (5), they are duly accredited natural persons who perform service for, and in behalf of real estate brokers who are registered and licensed by the Professional Regulatory Board of Real Estate Service for or in expectation of a share in the commission, professional fee, compensation or other valuable consideration. That is their legal definition according to RA 9646.

But for licensed real estate brokers, they are the extra pair of eyes, ears and brain that assists in broadening the network of the broker and getting more things done in usually half the time. In the world of Robert Kiyosaki, author of the famous book Rich Dad, Poor Dad, that is called leverage. It is the ability to do more with less. Your real estate salesperson is your leverage.

The real estate salesperson is under the direct supervision and accountability of a real estate broker. As such, a salesperson cannot by himself/herself “be signatories to a written agreement involving a real estate transaction unless the real estate broker who has direct supervision and accountability over them is also a signatory thereto.” Neither can he or she, “directly or indirectly, negotiate, mediate or transact any real estate transaction for and in behalf of a real estate broker without first securing an authorized accreditation as real estate salesperson for the real estate broker, as prescribed by the Board.” (Section 31, RA 9646)

No examination is necessary for real estate salespersons to be accredited by the Board. However, Section 31 provides further that they must “have completed at least two (2) years of college and have undergone training and seminars in real estate brokerage, as may be required by the Board.” In addition, a salesperson cannot “receive or demand a fee, commission or compensation of any kind from any person” except from the duly licensed broker who has direct control and supervision over him/her “for any service rendered or work done by such salesperson in any real estate transaction.”

Section 31 also provides that “a real estate broker shall be guilty of violating this Act for employing or utilizing the services of a real estate salesperson when he/she has not secured the required accreditation from the Board prior to such employment.” However, the same section also states that “no violation of this provision shall be a cause for revocation or suspension of the certificate of registration of the real estate broker unless there was actual knowledge of such violation or the broker retains the benefits, profits or proceeds of a transaction wrongfully negotiated by the salesperson.”

What does this mean to me as a professional? As a licensed and registered real estate broker I must abide by the dictates of the law. I must make it a point to cause the accreditation of all my salespersons that have helped me find properties or listings, clients and close deals. Having one, a few or a team of accredited salespersons helps me project an image of being a consummate professional. This requirement also assures my clients and the public in general that I am surrounded by highly competent people who are likewise responsible and respected. 

RESA also regulates the corporate practice of the real estate service. How? Under Section 32 (a), “no partnership or corporation shall engage in the business of real estate service unless it is duly registered with the Securities and Exchange Commission (SEC), and the persons authorized to act for the partnership or corporation are duly registered and licensed real estate brokers, appraisers or consultants, as the case may be.” Furthermore, these juridical entities are required to “regularly submit a list of its real estate service practitioners to the Commission and to the SEC as part of its annual reportorial requirements.”

Most important for these partnerships and corporations, RESA requires that “there shall at least be one (1) real estate broker for every twenty (20) accredited salesperson.” The ratio of 1:20 seems adequate for the purpose of creating a high level of professionalism among the ranks of the employed real estate service practitioners in big brokerage companies.

In the same spirit of creating a high level of professionalism, paragraph (b) of Section 32 requires that “divisions or departments of partnerships or 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.” Similarly, the “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.”

In case of resignation or termination from employment of a real estate service practitioner, the same shall be reported by the employer to the Board within a period not to exceed fifteen (15) days from the date of effectivity of the resignation or termination.

A corporation or partnership may hire the services of registered and licensed real estate brokers, appraisers or consultants on commission basis to perform real estate services and the latter shall be deemed independent contractors and not employees of such juridical entity, subject to the provisions of the Labor Code.

You may say that these provisions are very strict to the point of being burdensome. But the lawmakers may have felt that such strict requirements are what are needed to create a “corps of technically competent, responsible and respected professional real estate practitioners whose standards of practice and service shall be globally competitive and will promote the growth of the real estate industry.” (Section 2, RA 9646)

Finally, RESA not only regulates the private practice and corporate practice of real estate service practitioners but also regulates and supervises real estate service practitioners in the public sector. Section 30 provides that “within three (3) years from the effectivity of this Act, all existing and new positions in the national and local governments, whether career, permanent, temporary or contractual, and primarily requiring the services of any real estate service practitioner, shall be filled only by registered and licensed real estate service practitioners.”

“Assessors and appraisers, who on the effectivity of this Act, hold permanent appointments and are performing actual appraisal and assessment functions for the last five (5) years, have passed the Real Property Assessing Officer (RPAO) examination conducted and administered by the Civil Service Commission (CSC) in coordination with the Department of Finance (DOF), and have undertaken relevant CPE to the satisfaction of the Board” are likewise considered as “qualified applicant for registration without examination”. As such the assessors and appraisers in this category “shall file their application within two (2) years from the effectivity of this Act.”

What has been discussed so far are the provisions that are operational despite the absence of the IRR to fully implement all the provisions of RA 9646. In Part II of this essay, we shall discuss the rest of the provisions that are affected by the lack of the IRR at this time and how we can contribute to the drafting of the IRR of RESA.

 

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[1] The Philippine Association of REALTORS® Board (PAREB) was organized in 1960. It is the pioneer real estate organization in the Philippines with about 3,000 regular members and fifty 50 local constituent member boards nationwide. PAREB members are licensed real estate brokers authorized to use the patented designation REALTOR®.