AL Underwriting Summary

Search/Exam

• Minimum Search Requirements -- No statute 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.
• Plant or other search restrictions -- No
• Additional Requirements for REO Searches -- No
• Foreclosure Checklist -- N/A
• Special Searches Required (Code, HOA, Utilities)? -- None
• Survey Requirements
  • Purchase – not on platted residential
  • Refinance – not required

UPL

• 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 as agents and the signatory must be likewise licensed.

Vesting

• joint tenants with rights of survivorship. Right of Survivorship must be express on face of deed. Alabama Code 35-4-7
• Tenants in common, presumed absent statement of survivorship
• Tenants in common may have survivorship if expressly stated
  • "Where conveyance provides for concurrent ownership with survivor to receive fee, analysis of survivor's interest must begin with determining whether grantees took as tenants in common or as joint tenants; if they took as tenants in common, then estate created is characterized as tenancy in common with indestructible cross contingent remainders in fee to survivor; “indestructibility” means that such an interest may not be terminated by act of one cotenant." Durant v. Hamrick, 409 So.2d 731 (AL 1981); Johnson v. Keener, 425 So.2d 1108 (AL 1983)
• Tenants by Entirety & Community Property not recognized.
• Judgment liens against one joint tenant "attaches" to the undivided interest in the joint tenancy. However, a judgment lien alone does not sever a joint tenancy with the right of survivorship; only an executed judgment against a joint tenant will sever the joint tenancy. So if the debtor joint tenant dies before the judgment is executed upon, the lien ceases. Ex parte Arvest Bank Ala S.Ct. 2016

Property Tax

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.

DANGER AREAS

• There is a three year period for redemption of a tax lien Certificate of Purchase.
• Under Ala.Code 1975 §40-10-74, the purchaser at a tax sale and its assignees have a right of possession of the Land, and may maintain an action in ejectment to recover possession from the Insured. No coverage should be provided with respect to any loss of possession of the Land owing to unpaid taxes or unredeemed Certificates of Purchase.
• At the end of the three years, the holder of the Certificate of Purchase can apply to the probate court for a deed to the property which becomes final. This is a largely ministerial process and does not always result in a filed Lis Pendens, so search of court docket is required.
• Title is generally not marketable after tax deed without a Quiet Title Action
• Redemption price includes interest, excess bid amounts, and in some cases casualty insurance premiums paid and value of permanent improvements made by the lien holder Ala.Code 1975 s 40-10-122
• Answers are different if State is holder of lien certificate.
• After 3 year "administrative redemption" period, there is a separate period in which tax sale can be judicially redeamed. If tax deed buyer is not in adverse possession (eg vacant property) the judicial redemption period may continue indefinitely. [1]

More on Tax Deeds in Alabama

Mortgage/Transfer Tax

• Mortgage tax in Alabama is $1.50 per $1,000.00
• 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.

More Detail on AL Recording Fees and Transfer Tax

Spousal Joinder Requirements/Homestead

A spouse not in title must join in the conveyance/mortgage of homestead property. Ala.Code 1975 § 6-10-3.

Some very old cases suggest that spousal signature may not be required on a Purchase Money Mortgage however, WFG's Underwriting Position is that spousal joinder is to be required on any deed or mortgage of Alabama Property that is, or may be, or may become homestead property. Underwriting approval is required to waive this requirement as to a purchase money mortgage because the law has changed in ways that are not apparent on Westlaw, since many of these cases predate the statutory amendments and it tends to be a very fact specific analysis.

Alabama does allow the spouse to sign a separate consent to the mortgage or conveyance so as to not be bound by the terms of the mortgage/deed of trust or warranties of title. A suggested form for that is found here.

Construction Liens

• Mechanics/Construction lien relate back to first work without a filing.
• Most Subdivision infrastructure is lienable Work performed by clearing, grading or excavating real property is considered a permanent improvement and is, therefore, lienable. Mazel v. Bain, 133 So.2d 44 (1961). An architect who prepares drawings and supervises work is also permitted to claim a lien. Hughes v. Torgerson, 11 So. 209 (1892). But surveying, platting, and staking the community are not. Wilkinson v. Rowe, 98 So.2d 435 (1957)

Foreclosure Review

In Alabama, the redemption period for a foreclosed property depends on the type of foreclosure and the status of the property:

• General redemption period: The redemption period is usually one year after the foreclosure sale.
• Homestead properties: The redemption period is 180 days if:
  • The mortgage was taken out on or after January 1, 2016
  • A homestead exemption was claimed in the tax year of the sale
  • The foreclosing bank provided proper notice at least 30 days before the sale

There seems to be a “gotcha” scenario under the way the Alabama redemption price is calculated under Civil Practice 6-5-253

(a) Anyone entitled and desiring to redeem real estate under the provisions of this article must also pay or tender to the purchaser or his or her transferee the purchase price paid at the sale, with interest at the rate allowed to be charged on money judgments as set forth in Section 8-8-10 (as it is now or hereinafter may be amended), and all other lawful charges, also with interest as aforesaid; lawful charges are the following:

                *    *         *         *

If the redemption is made from a person who at the time of redemption owned the debt for which the property was sold, the redemptioner must also pay any balance due on the debt, with interest as aforesaid thereon to date.

As I’m reading this, the foreclosed owner can get a windfall in the scenario where the lender lets the sale close for less than the outstanding balance – unless the lender takes it back or assigns the mortgage/note to the buyer.

Who May Serve As Trustee On Deed Of Trust

Alabama is a mortgage state.

Time Limitations

• US Judgment Liens 20 years, renewable for 20 years
• State Court Judgment Liens 10 years
  • In Alabama, a judgment lien doesn't attach to property until a Certificate of Judgment has been recorded in the Land records (probate court). The 10 year time frame is measured from the entry of the judgment, not the filing of the certificate. AL Code 6-9-211
• Federal Tax Liens 10 years (+30 days); can be refiled
• State Tax Liens 10 years
• Estate Tax Lien Federal 10 years
• State Inheritance Tax Liens 20 years
• Mechanics Liens
  • The original contractor has 6 months after last work to file,
  • Journeyman and day laborers have 30 days after last work,
  • Everyone else has 4 months. AL Property Code 35-11-215.

• Financing Statements 5 years
• Mortgages
  • Conclusively presumed paid 20 years after maturity date shown unless subsequent recordings show continued activity. AL Code 35-10-20
• HOA Liens
• Condominium assessments - Lawsuit must be filed within 3 years for liens filed under 35-3A-316.

Odd Stuff

• Cancellation/Commitment fee is not prohibited in this state. It is customary to charge this fee.
• 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.
• 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.
• 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.
• Alabama recognizes Purchase Money Mortgage priority over existing liens. Sunshine Bank v. Key, et al., 631 So. 2d 965 (Ala. 1994)

Probate

• Alabama does not have a separate estate or inheritance tax. It does have a "pickup" tax which charges the maximum amount allowed as a state credit under the Federal estate tax. No state estate tax is due if no federal tax is due.
• Intestate succession statute
  • Must survive by five days
  • Complex Spousal Rules
  • Per stirpes as to descendants