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One Hat at a Time: Ethical and Legal Boundaries in Real Estate Practice

In Philippine real estate practice, a professional may wear multiple hats: appraiser, broker, consultant, or property manager. With these roles come distinct legal obligations and ethical expectations. Among the most critical distinctions is the contrast between the appraiser’s duty of independence and the broker’s duty of agency. Understanding this distinction—and reconciling it—is essential to preserving public trust and professional credibility in the real estate industry. This article explores how the ethical and legal foundations of real estate practice, as rooted in the Civil Code, the Revised Penal Code, and the Real Estate Service Act of the Philippines (R.A. 9646), guide practitioners in navigating these complex but complementary roles.

A real estate appraiser is a professional whose primary obligation is to render an independent, objective, and evidence-based opinion of value. The appraiser must act with impartiality, applying market data, sound valuation methodology, and professional judgment. The role demands a non-advocacy stance—the appraiser is not to promote the interests of any party, even the client. By contrast, a real estate broker functions under a legal agency relationship. As an agent, the broker owes a fiduciary duty to the client, which includes loyalty, obedience, diligence, full disclosure, confidentiality, and accountability. A broker is expected to promote and protect the client’s interests, even as they observe fairness and ethical conduct in dealings with others.

These differing roles raise a central ethical concern: how can a real estate professional reconcile the objectivity demanded of an appraiser and the loyalty expected of a broker, especially when licensed to perform both? The answer lies in the principle of professional role separation and ethical discipline. Each role must be exercised independently, with clear disclosure and without overlap that compromises impartiality or fiduciary duty. When acting as an appraiser, the practitioner must distance themselves from any client advocacy. When acting as a broker, they must zealously represent their client, but always within the bounds of the law and truthfulness. This ethical discipline—“wearing one hat at a time”—is crucial to maintaining credibility, avoiding conflict of interest, and upholding public trust.

First and foremost, the Real Estate Service Act of 2009 (R.A. 9646)  formalizes the ethical obligations of appraisers, brokers, and other real estate professionals. Section 39 mandates that all practitioners be guided by a Code of Ethics and Responsibilities as adopted by the Professional Regulatory Board of Real Estate Service. This affirms the legal requirement to observe integrity, objectivity, confidentiality, transparency, and public accountability in all aspects of professional practice. Violations of these ethical mandates can result in administrative sanctions such as license suspension or revocation, in addition to possible civil or criminal liability.

The ethical standards expected of real estate professionals are enshrined further in Philippine civil law. Chapter 2, Book I of the Civil Code, on Human Relations, provides the normative foundation for conduct in both personal and professional spheres. Article 19 mandates that “every person must, in the exercise of his rights and the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.” This provision is the cornerstone of professional ethics, requiring appraisers and brokers to act not merely within legal bounds, but with moral integrity, fairness, and honesty. Article 20 states that “every person who, contrary to law, willfully or negligently causes damage to another shall indemnify the latter for the same.” A real estate professional may thus be held civilly liable for losses caused by misrepresentation, bias, or negligence, such as inflated valuations or failure to disclose material facts. Furthermore, Article 21 provides that “any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.” Even in the absence of a specific law or contract violation, acts against professional ethics or public trust may be actionable under this general clause on moral damages.

The Revised Penal Code supplements civil liabilities with criminal sanctions for unethical conduct that involves deceit, falsification, or breach of public trust. Article 171 on falsification of public documents and Article 172 on falsification by private individuals provide penalties for those who falsify data, signatures, or reports, particularly when such documents are submitted to government agencies for purposes such as taxation, loan application, or litigation. A real estate professional, acting dishonestly in the preparation or authentication of a report, may thus face criminal liability. Similarly, Articles 315 and 318, which address estafa and other deceits, penalize professionals who mislead clients or third parties for financial gain. This includes concealing defects, inflating values, or misrepresenting the true nature of a property transaction. These laws underscore that professional misconduct is not merely unethical—it can be criminal.

The real estate profession is grounded not only in technical competence but also in ethical clarity and legal responsibility. The roles of appraiser and broker may be different, but both demand honesty, fairness, and accountability. Whether providing an objective valuation or advocating for a client in a sale, the real estate professional must be guided by the legal duty to act with justice, good faith, and respect for others’ rights. Ultimately, the integrity of real estate transactions—and of the profession itself—depends on each practitioner’s ability to uphold their role with clear boundaries and an unwavering commitment to ethical conduct. In doing so, they not only comply with the law but also protect the public, the profession, and the value of their word.

Consultant Gus Agosto at the World Congress of Resort Properties

Consultant Gus Agosto delivered an insightful presentation at the prestigious World Congress of Resort Properties held in Pattaya, Thailand. His talk focused on the integration of valuation and planning practices in the context of Lapulapu City, Philippines—a city renowned for its vibrant tourism and resort industry.

In his speech, Agosto emphasized the importance of leveraging advanced valuation methodologies to complement sustainable planning efforts. He remarked, “The exploitation of various methodologies in valuation, coupled with the principles of highest and best use and feasibility analysis, can yield more reliable estimations. These, in turn, align closely with the goals of sustainable and responsible urban planning.” His insights underscored the critical role of integrating economic, environmental, and social considerations in developing resort-based real estate projects.

The Congress featured distinguished speakers from various countries, including Nepal, India, Indonesia, Malaysia, Vietnam, Thailand, the Philippines, Brunei, the Maldives, and others. It served as an invaluable platform for global participants to exchange experiences and insights into real estate practices focused on resorts and hotels.

Agosto highlighted how both the indoor seminars and on-site study visits provided participants with hands-on learning opportunities. He noted that these activities offered a deeper understanding of innovative approaches and strategies in real estate development, which would significantly enhance the professional practices of attendees.

Pattaya, Thailand, was a fitting venue for the event, being globally recognized as a premier resort city. Its reputation as a hub of hospitality and tourism added a dynamic layer to the Congress, enriching discussions and case studies with real-world examples of successful resort property development. Agosto concluded that the knowledge shared at the event would undoubtedly elevate the standards of real estate practice among the participants, fostering innovation and collaboration in the global resort property sector.

Consultant Gus Agosto to Speak at World Congress

The world of resort properties is rapidly evolving, and industry leaders from across Southeast Asia will come together to share insights and strategies at the World Congress on Resort Properties, happening from December 1-3, 2024, in Pattaya, Thailand. Among the distinguished speakers is Consultant Gus Agosto, a renowned expert in real estate valuation and development, who will contribute his expertise alongside speakers from Malaysia, Vietnam, Maldives, Brunei, Cambodia, Laos, India, the Philippines, USA and Thailand.

The World Congress on Resort Properties will serve as a pivotal platform to explore the dynamic sector of resort real estate, which encompasses seaside resorts, mountain retreats, rural-style accommodations, pool villas, hotels, and wellness-focused developments. As the demand for unique and luxurious vacation experiences continues to rise globally, resort properties are increasingly becoming a prime investment choice.

Topics That Matter

With its theme focusing on “How to Plan, Value, Manage, Buy, and Sell Resort Properties,” the congress aims to provide actionable insights to investors, developers, real estate professionals, and industry stakeholders. Attendees can expect to learn about:

  • Strategic Planning: Understanding market trends and consumer preferences to create sustainable and profitable resort developments.
  • Valuation Techniques: Key factors influencing the market value of resort properties and tools for accurate valuation.
  • Effective Management: Strategies for managing operations while enhancing guest experiences.
  • Investment Opportunities: Insights into buying and selling resort properties, with a focus on long-term profitability.

As the global tourism industry continues to recover and thrive, resort properties are playing an increasingly significant role in boosting economies and creating employment opportunities. This congress will foster dialogue on how to address emerging challenges, seize new opportunities, and embrace innovation in the sector.

This invitation to the World Congress is a testament to Consultant Gus Agosto’s growing influence in the real estate industry, particularly in hotel and resort valuation and consulting. Just a few months ago, Gus was invited to speak at the prestigious FIABCI Thailand Congress 2024 Asia Pacific Real Estate Convention & Property Prix d’Excellence Awards held on August 30-31, 2024, at the Amari Bangkok Hotel. His presentation at that event focused on key trends shaping real estate markets across the Asia-Pacific region, further solidifying his reputation as a sought-after speaker and consultant.

Legal Consequences of Practicing Beyond Professional Scope

Public trust and professional integrity are safeguarded through strict regulations governing the practice of various professions. These laws not only define the scope of each profession but also impose penalties on individuals who operate beyond their authorized expertise or practice without proper credentials. Such provisions ensure that only qualified professionals render services, protecting the public from unqualified practitioners.

For real estate practitioners, the Real Estate Service Act (RA 9646) serves as the primary regulatory framework. Individuals who practice real estate services without a valid license or perform tasks outside their professional scope face severe penalties. These include fines ranging from ₱100,000 to ₱5,000,000 and/or imprisonment of two to four years. This law underscores the importance of licensing in real estate services, ensuring that only accredited professionals appraise properties and guide clients through transactions.

In the field of agriculture and engineering, the Agricultural and Biosystems Engineering Act (RA 10915) regulates the work of agricultural and biosystems engineers (ABEs). Unauthorized practice under this law can lead to penalties of ₱100,000 to ₱500,000 or imprisonment of six months to five years, or both. This highlights the critical role ABEs play in ensuring the safe and efficient development of agricultural systems and infrastructure.

Similarly, the Philippine Mechanical Engineering Act (RA 8495) protects the mechanical engineering profession from unauthorized practice. Violators face fines between ₱50,000 and ₱200,000 or imprisonment of six months to six years, or both. Mechanical engineers handle critical tasks such as designing industrial machinery and evaluating technical systems, which require specialized skills.

For architects, the Architecture Act (RA 9266) prescribes fines ranging from ₱100,000 to ₱5,000,000 or imprisonment of six months to six years for practicing without proper licensure or exceeding the defined scope. The same is true for electrical engineers under the Electrical Engineering Law (RA 7920), which penalizes violations with fines of ₱10,000 to ₱50,000 or imprisonment of six months to five years or both.

These penal provisions serve as a warning to professionals and non-professionals alike. Practicing outside the bounds of expertise and licensure can have serious legal consequences. The overlapping and specialized nature of modern industries—such as real estate, engineering, and agriculture—demands that professionals adhere strictly to their defined roles. Collaboration among experts in their respective fields ensures comprehensive and credible outcomes without compromising public welfare.

By staying within the bounds of their profession, licensed practitioners not only avoid hefty fines and imprisonment but also contribute to upholding the credibility and standards of their industry. For the public, these laws provide assurance that they are engaging with qualified professionals, fostering trust and confidence in professional services across sectors.

Traveler Trends Analysis

The tourism industry is one of the most dynamic sectors, influenced by changing traveler preferences, economic conditions, and regional characteristics. For hotel and resort operators, understanding traveler demographics is crucial for shaping strategies that enhance guest experiences, optimize operations, and drive profitability. In this post, we analyze the data of various traveler segments across key regions to help investors and developers explore and achieve better decisions.

Traveler Demographics and Their Impact

The traveler data analyzed here were released by the Department of Tourism and includes categories such as foreign travelers, overseas Filipinos, and domestic travelers across different regions and popular tourist destinations. Let’s break down these insights by key areas:

1. Regional Insights: Understanding the Market

  • National Capital Region (NCR): With over 7 million total travelers, NCR stands out with a significant portion of foreign travelers (2.36 million) and domestic visitors (4.67 million). This makes NCR an attractive location for large-scale hotels and resorts that can cater to diverse preferences—from high-end international tourists to local families seeking weekend getaways.
  • Boracay (Malay): Known for its white sandy beaches, Boracay continues to attract a healthy balance of foreign travelers (422,201) and domestic tourists (1.66 million). This balance offers a lucrative opportunity for resorts to tailor services to both international visitors and local vacationers, ensuring broad appeal.
  • Palawan: Another prime destination, Palawan caters to a diverse range of travelers, with over 540,000 foreign visitors. The El Nido area, in particular, shows high foreign tourist activity (283,471) compared to domestic guests (262,983), signaling the potential for more exclusive and international-oriented resorts.

2. The Power of Domestic Tourism

Regions like Batangas and CALABARZON, with high domestic visitor volumes, are ideal for short-term stays, family vacations, and weekend tourism. For hotels and resorts in these areas, understanding the local market’s preferences and creating affordable, family-friendly packages will be crucial in meeting demand.

In Bohol, with a mix of foreign travelers (325,499) and domestic tourists (3.61 million), resorts should focus on a combination of premium and budget-friendly offerings, ensuring that both international tourists and local visitors feel at home.

3. Niche Markets: Overseas Filipinos and The Rise of Staycations

Overseas Filipinos (OFWs) are an important market segment, especially in regions like Palawan (8,266) and Boracay (39,196). Resorts can tap into this by offering packages for Filipino families and groups visiting from abroad, capitalizing on the emotional connection many OFWs have to home.

Additionally, the trend of staycations (local vacations) has surged, making it essential for resorts to offer enticing packages for domestic travelers who may be looking for relaxing, nearby escapes without the hassle of international travel.

The ability to understand and respond to the unique needs of foreign travelers, domestic tourists, and overseas Filipinos gives hotels and resorts a competitive edge in a crowded market. By analyzing traveler data, aligning service offerings with market demand, and focusing on sustainable, community-driven initiatives, resorts can maximize their profitability and reputation.

Whether it’s a luxury resort in Palawan catering to international tourists or a family-friendly hotel in Batangas serving weekend vacationers, the key to success lies in identifying your target audience, refining your offerings, and adapting to the ever-changing tourism landscape.

Island Resort in Northern Samar

Hotel and Resort Valuation: Why Property Owners and Investors Need Expert Services

Valuing a hotel or resort property is a complex process that goes beyond simple real estate appraisal. In the Philippines, as in many parts of the world, it’s essential to distinguish between the valuation of the property itself and the business operations that drive its income. This dual approach – evaluating both real estate and business assets – is known as “business valuation.” Understanding this distinction is crucial because an accurate valuation can mean the difference between a successful acquisition or merger and a risky investment.

Understanding Hotel and Resort Properties

Hotels and resorts differ significantly in structure and operation. City hotels are often high-rise buildings that cater to business and urban travelers, while resorts tend to be located in popular tourist destinations and usually offer villas, lodges, and expansive spaces. The revenue generation capabilities of these properties also differ, as city hotels rely heavily on room bookings and catering services, while resorts may have additional revenue streams from activities, events, and outdoor experiences. For any hotel or resort valuation, it’s essential to consider vacancy rates, room rates, selling price, and income from various sources.

Our Portfolio in Hotel and Resort Valuation

At AA+ Appraisal & Consultancy, we have extensive experience appraising some of the Philippines’ most sought-after hotel and resort properties. Our portfolio includes a diverse range of locations, such as:

  • Islands Resort in Northern Samar
  • Fun Park & Resort in Dasmarinas, Cavite
  • Beachfront properties in Panglao, Bohol
  • Prime beach resorts in San Vicente and Puerto Princesa, Palawan
  • Hotel and Resort in Cordova, Cebu
  • Mountain Resort in Pinamungajan and Toledo Cebu
  • Exclusive beachfront sites in Punta Engaño and Tabogon, Cebu
  • Five-star hotels in Cebu City and other major destinations

Our team’s expertise in valuing these high-profile locations, which attract both local and international tourists, enables us to deliver accurate and reliable appraisals that reflect the true potential of each property.

Key Valuation Approaches for Hotels and Resorts

  1. Cost Approach: This method focuses on the cost of land and building improvements, plus the cost of materials and equipment used in hotel operations. This approach can provide a reliable baseline, but it may not fully capture a hotel’s revenue-generating potential, especially if the valuation excludes certain equipment or decorations.
  2. Market Approach: For properties with substantial market data, the market approach offers a more comparative valuation based on similar hotels or resorts. It’s critical, however, to have detailed information on comparable properties to perform an accurate market comparison.
  3. Income Approach: Since hotels and resorts are revenue-driven properties, their valuation often hinges on projected income and profitability. Factors like occupancy rates, average room rates, and food and beverage sales provide a clear picture of a property’s income-generating potential. Additionally, for properties managed by hotel chains, an understanding of management contracts and performance benchmarks is necessary for a comprehensive valuation.

Importance of Expert Valuation Services for Owners and Investors

Valuing a hotel or resort property is more than just a calculation – it requires a nuanced understanding of the market, operational revenue streams, and industry trends. Here’s why expert valuation services are indispensable:

  • Informed Decision-Making: A detailed and credible valuation report empowers owners and investors to make informed decisions. Whether developing a new hotel, investing in a resort, or expanding a portfolio, a well-researched valuation reveals a property’s true potential.
  • Credibility and Accuracy: Expert appraisers bring industry knowledge and experience to the table, ensuring that valuations are both credible and accurate. This is especially important for lenders and financiers who need reliable data to support refinancing or loan issuance decisions.
  • Tailored and Timely Reporting: Hotel and resort valuations often require tailored approaches due to the unique nature of each property. Professionals provide customized reports that are delivered on time, even for portfolios of various sizes and locations, allowing clients to move forward with confidence.
  • Market-Specific Insights: Changes in real estate markets, local regulations, and competitive landscapes affect hotel values. Professional appraisers stay informed about these shifts, using advanced methodologies and analysis to adjust valuations accordingly.

Required Documents for a Comprehensive Hotel Valuation

Accurate hotel valuations rely on a comprehensive set of documents, which may include:

  • Land ownership documents
  • Building permits and plans
  • Business licenses and occupancy rates
  • Financial statements of business operations over the past three years
  • Environmental Impact Assessments (for larger hotels)
  • Management contracts, where applicable

Partnering with Experienced Professionals

The valuation of hotels and resorts requires specialized knowledge and experience, as these properties are often more complex and financially dynamic than standard real estate assets. At AA+ Appraisal & Consultancy, our appraisers are experts in hotel and resort valuation, equipped with in-depth market insights and a commitment to delivering reliable, actionable results. Our services help owners, investors, and financiers achieve clarity and confidence, enabling them to pursue their projects and investments with a firm grasp of the property’s worth.

By leveraging our expertise, particularly in high-demand areas like Panglao, Palawan, and Cebu, you gain an edge in understanding the full value and potential of your hotel or resort property.

On BBM’s Right of Way Policy Proposition

President BBM’s recent proposition to return to a previous system for handling right of way issues, where the government would pay only 15 percent of the property value upfront and resolve any subsequent valuation disputes in court, has significant implications not only for landowners but also for the general public.

Key infrastructure flagship projects currently facing right of way (ROW) issues include the Cagayan de Oro Diversion Road Extension, the Davao City Bypass Construction Project, the Samal Island-Davao City Connector Bridge, the Light Rail Transit-1 Cavite Extension Project, and the EDSA Greenways Project.

One of the primary motivations behind President BBM’s proposal is to expedite infrastructure projects. Projects could proceed without delay by taking possession of the property with an initial 15 percent payment and allowing valuation disputes to be settled later. This could lead to quicker completion of essential infrastructure such as roads, bridges, and public utilities, benefiting the public by improving transportation, connectivity, and access to services.

However, this expedited process might come at a cost. The reliance on courts to resolve valuation disputes can increase the judicial system’s burden, potentially causing delays in other legal proceedings. Additionally, the cost of prolonged litigation could ultimately be borne by taxpayers, increasing public expenditure.

The public perception of the government’s commitment to fair and just practices could be affected. If the policy unfairly favors infrastructure development at the expense of property owners’ rights, it could lead to public dissent and erode trust in government institutions. Ensuring a transparent and fair process is crucial for maintaining public confidence.

Efficient and timely infrastructure development can have positive economic impacts, such as stimulating investment, creating jobs, and boosting economic growth. Improved infrastructure enhances the overall business environment, making it easier for companies to operate and expand. However, if the process is perceived as unjust, it might deter investment, particularly in real estate and property development sectors, due to concerns about property rights and fair compensation.

The rapid acquisition of property for infrastructure projects can lead to community displacement. This has social implications, as displaced families and communities may face significant challenges in finding new homes, jobs, and adjusting to new environments. Ensuring that displaced individuals are adequately compensated and supported through the transition is essential to mitigate these impacts.

A system that prioritizes quick project completion over fair compensation may disproportionately affect vulnerable populations. Lower initial compensation could exacerbate the financial instability of low-income families and marginalized communities. Ensuring equitable treatment for all property owners, regardless of their socio-economic status, is critical for social justice.

Therefore, President BBM’s proposal to modify the right-of-way process has the potential to accelerate infrastructure development, benefiting the public through improved services and economic growth. However, it also raises significant concerns about legal and financial burdens, public trust, social impacts, and equity. A balanced approach that maintains fairness, transparency, and support for affected individuals is essential to ensure that the benefits of infrastructure projects are realized without compromising the rights and welfare of property owners and the broader community.

AA Consultants Expands Reach with Strategic Housing and Infras Development Engagements

AA+ Appraisal & Consultancy proudly announces the completion of its real estate consulting in Dipolog City and Batangas. The consultancy firm has been commissioned to conduct comprehensive studies on projects in Cebu, Dipolog City, Bohol, Leyte, Lapulapu City, and Batangas, demonstrating a proactive approach to addressing various challenges within the real estate sector.

A significant milestone for AA Consultants is their recent engagement as development consultants for an expansive housing project covering Dipolog City, Zamboanga del Norte. This upcoming 2.8-hectare development is strategically positioned to evolve into a vital subdivision, serving both urban and provincial populations due to its proximity to the city center. The consultancy firm has diligently undertaken feasibility and economic viability studies, laying the groundwork for a successful venture.

Recall that AA+ Appraisal & Consultancy was hired by the Japan International Cooperation Agency through its local counterpart to provide consulting services for the 19.8-kilometer Marawi City Ring Road -SP7. This project, which connects several towns in the province of Lanao del Sur, focuses primarily on residential and agricultural areas along the Marawi City Ring Road (SP7).

Gus Agosto, President, and Chief Executive Officer of AA+ Appraisal & Consultancy, expressed his enthusiasm about this new endeavor, stating, “We are truly excited to add yet another magnificent project to our portfolio of development consulting opportunities.”

Prior to this achievement, AA Consultants conducted a comprehensive feasibility study for a 50-hectare Agro-Industrial Farm in South Cebu, showcasing their commitment to diverse and impactful projects. Furthermore, the consultancy firm played a pivotal role in proposed subdivision developments in Batangas, Lapulapu City, Bohol, and Maasin, Southern Leyte, conducting highest and best-use studies and marketability studies to optimize the potential of these areas.

Beyond real estate, AA Consultants has extended its expertise to other crucial sectors, providing invaluable consultancy services for a water treatment facility delivering 20 million liters of water daily to the Metropolitan Cebu Water District. Additionally, the firm collaborated with the largest waste management company in Cebu, underscoring its commitment to contributing to sustainable and efficient solutions.

With these recent accomplishments, AA Consultants solidifies its position as a leading force in development consulting, showcasing versatility and excellence across various projects that positively impact communities and industries alike.

“AA+ Appraisal & Consultancy, along with its development consulting team, is driven by its purpose in nation-building, aiming to play a pivotal role in fostering sustainable development and progress across the country. AA+ Consultancy stands as a trusted and versatile partner, uniquely positioned to offer end-to-end solutions for a wide spectrum of development projects. Our development consulting work promotes sustainable, inclusive, and economically vibrant communities,” concluded Consultant Economist Agosto.