Alabama Real Estate Practices
- Attorney Involvement
- Cancellation/Commitment Fee
- Certificate of Release (of Mortgage)
- Joinder of Spouses
- Mortgage Tax
- Payment Customs
- Policy Countersignatures
- Real Estate Taxes
- Search and Examination Fees
- Search Requirements
- Security Instruments (Deed of Trust vs. Mortgage)
- Standard Exceptions and Requirements
- State-specific Policy Variations
- Title Insurance Form and Filing Regulations
- Transfer Taxes
- Withholding Taxes
- Witness Requirements
Please describe any requirements under applicable state law for attorney, abstractor or other special professional involvement, for example, in the search, examination, opinion of title, signing, closing, disbursement, recording, preparation of documents, and/or policy-issuance.
All legal documents must be drafted by an attorney licensed to practice in the State of Alabama. Parties to a transaction can draft their own documents if they are doing so on behalf of themselves.
Title Opinions must be rendered by an attorney licensed to practice in the State of Alabama.
Searching, examining title, closing, and disbursing do not have to be handled by an attorney. Commencing 1/1/13, agents issuing commitments, policies and endorsements must be licensed and the signatory must be likewise licensed.
Does your state permit or require a cancellation fee or commitment fee upon cancellation?
Cancellation/Commitment fee is not prohibited in this state. It is customary to charge this fee.
Certificate of Release (of Mortgage)
If anyone other than the lender (such as a title agent, settlement agent, underwriter or attorney) has the authority to release the security instrument, please describe.
Under Alabama’s Residential Mortgage Satisfaction Act (to be effective 3/1/2013) an affidavit of satisfaction may be signed by a title insurance company or by a licensed attorney acting as its agent. See SB 347; Alabama Code Section 35 – New (codification is pending). However, the authorization of the mortgagor(s) in the mortgage for which release is being sought must be first obtained.
Please describe the kinds of deeds that are customary for commercial and residential transactions. Please describe the kinds of deeds that are generally not insurable.
General Warranty Deeds – commonly used in Alabama. Property can be conveyed to two or more Grantees as joint tenants with rights of survivorship or as tenants in common.
Statutory Warranty Deed – used in transactions in which the grantor desires to limit the warranty to the time in which the grantor has owned the property.
Quitclaim Deed – used only to clear any possible interest someone might have in the property. Alone, this conveyance does not create marketable/merchantable title and generally not insurable.
Joinder of Spouses
If a non-title holding spouse is required to join in the execution of a deed or a security instrument, please describe. Any analogous rights, such as those in a civil union or equivalent, should also be addressed.
A spouse not in title to the property must join in the conveyance/mortgage if the property is their homestead property.
Is there a mortgage tax in your state? If yes, is it uniform across the state or does it vary? If it is uniform, please describe.
Mortgage tax in Alabama is $1.50 per $1,000.00
Who customarily pays for:
(a) Owner’s Policy?
(b) Transfer Tax & Recording Fee?
(c) Survey Charges?
(d) Closing/Settlement Fees?
It is up to the buyer and seller through their contract negotiations.
Please describe any statutory or regulatory requirements for countersignatures in order to issue the policy (for example, residency requirements).
Alabama’s new title insurance requirements will take effect on 1/1/2013. Among the requirements are that the signatory must be a resident of the state and licensed by AL Department of Insurance; the issuing agent must also be licensed through the Alabama Department of Insurance and the business must have a physical place of business within the state. A title agent can be a sole proprietor who is a resident of the state. Agents who operate as an entity must be organized under Title 10A (or its predecessor, Title 10) of the Alabama Code.
Real Estate Taxes
Please describe the general tax year, due dates, and delinquency dates, including lien dates and payment cycle.
Real estate taxes are paid in arrears and become due October 1 of each year and become delinquent on January 1 of the following year. Tax sales occur in the spring, usually in April or May, but each county conducts their sales at different times.
Search and Examination Fees
Is it permissible and/or customary to charge a separate search and/or examination fee, and under what circumstances? If your jurisdiction is all-inclusive, please state that.
They are allowed in this state. Normally, the search and exam fee is combined into a single charge.
Is there a minimum period of time for a title search required: (a) by state law, (b) pursuant to marketable record title acts, or (c) by any other applicable title examination standards (e.g., state bar association)? Please respond to each category. If a minimum search period exists for any category, please state it.
There is no minimum period required by either (A), (B) or (C). However the long-standing customary search periods are: for loan policies, a minimum 30 year search, although circumstances can require a lengthier search; for owner’s policies, a minimum 60 year search, although circumstances may require a lengthier search.
Security Instruments (Deed of Trust vs. Mortgage)
Please describe the customary and permissible form(s) of security instruments used in your state.
Who can be listed as the trustee on the Deed of Trust (e.g., residency and/or natural person requirements, etc.)? Can an underwriter or title agent be designated as the trustee, and, if so, is it customary?
Alabama is a mortgage state.
Standard Exceptions and Requirements
Please identify the standard exceptions and requirements that are customarily used in your state.
Standard exceptions are:
1. Defects, liens, encumbrances, adverse claims, or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof but prior to the date the proposed Insured acquires for value of record the estate or interest or mortgage thereon covered by this Commitment.
2. All taxes for the year _________ and subsequent years, not yet due and payable.
3. Any encroachment, encumbrance, violation, variation, or adverse circumstances affecting the title that would be disclosed by an accurate and complete survey of the land.
4. Rights or claims of parties in possession not recorded in the Public Records.
5. Easements, or claims of easements, not recorded in the Public Records.
6. Any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not recorded in the Public Records.
7. Taxes or special assessments which are not recorded as existing liens in the Public Records.
9. Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records or listed in Schedule B. The Company makes no representation as to the present ownership of any such interests. There may be leases, grants, exceptions or reservations of interests that are not listed.
State-specific Policy Variations
If there are state-specific changes to the provisions in the ALTA policies (e.g., Arbitration, Minerals), please describe.
Title Insurance Form and Filing Regulations
Please describe the form and/or rate filing requirements, if any, related to policies and endorsements. Please describe any applicable rating bureau.
Policy forms and rates must be filed by each insurer with the Alabama Department of Insurance.
Is there a transfer tax in your state? If yes, is it uniform across the state or does it vary? If it is uniform, please describe.
Deed tax in the state is $.50 per $500.00. Withholding is also required in certain circumstances when the grantor is either not a resident of Alabama or is not deemed a resident.
Is usury coverage available?
Yes, usury coverage is available. Usury statute is Code of Alabama (1975) Section 8-8-1 et seq. However the statute does not apply to loan transactions secured by real property and there is no interest rate cap.
What are your state’s requirements, if any, with regard to withholding proceeds from a sale, similar to but not including FIRPTA?
If the seller is neither a resident or a deemed resident, and the sales price is $300,000 or more, 3 percent of the sales price is withheld and remitted to the AL DOR if purchaser is an individual. If purchaser is a business entity, then 4 percent of the sales price must be withheld and remitted to the AL DOR.
Are witnesses required on a deed or security instrument? If so, please describe.
Conveyances and mortgages must be in writing and attested to by one witness. If a party cannot write their name but makes their mark in the alternative, then two witnesses are required. In either case, one witness may be the notary.