Residential Real Estate Transactions.

Ala. Code tit. 8, ch. 42

in effect

Ala. Code § 8-42-1 Legislative Findings.

8-42-1. Legislative Findings. The Legislature finds and declares all of the following: (1) Wholesaling real property occurs when a buyer enters into a contract for purchase and sale of a single-family residential property with the seller of the property thereby creating the buyer’s equitable interest in the property, the buyer then finds a subsequent purchaser willing to pay a higher price for the property and then assigns its interest to the subsequent purchaser for a fee. (2) Certain unfair service agreements provide a real estate company with the right to market, list, or assist in selling a residential property for up to 40 years, binding homeowners and successors in interest through a recorded memorandum and penalizing the homeowner or successor in interest for breach of the agreement. (3) The practices of wholesaling residential real estate, and recording these unfair service agreements, pose a significant risk to Alabama homeowners if left unregulated. (4) The lack of any restrictions enables predatory practices against homeowners, especially those who have lived in a home for a long period of time, leading to financial loss and resulting in confusion for unsuspecting subsequent purchasers. (5) The Legislature concludes the following in the interest of protecting Alabama homeowners and home buyers: a. Disclosure of the limited interest, marketing, and assignment of the buyer’s equitable interest in the homeowner’s property should be required of buyers engaging in wholesaling. b. Unfair service agreements create clouds on the titles of Alabama homes and burden Alabama homeowners with false promises, are against the public interest, and constitute unreasonable restraints on the alienation of real property. EndFragment (Act 2023-201, §1.)

Ala. Code § 8-42-2 Assignment of Equitable Interest in Single-Family Residential Property; Disclosure Requirements.

8-42-2. Assignment of Equitable Interest in Single-Family Residential Property; Disclosure Requirements. (a) A person may acquire an equitable interest in a single-family residential property as the buyer under a contract for the purchase and sale of the property and then may assign or offer to assign the interest for a fee if the buyer discloses in writing all of the following: (1) To any potential subsequent purchaser or assignee, the nature of the buyer’s equitable interest. (2) To the seller of the property, the buyer’s intent to market its equitable interest prior to commencing any marketing of the property. (3) To the seller of the property, the effective date of any assignment of the buyer’s interest to a subsequent purchaser of the property at least three business days prior to the effective date of any assignment. (b) Written disclosure under subsection (a) shall be required for the intent to market and transfer an equitable interest in residential real property, as limited by subsection (d), whether by assignment, novation, or other similar method of transferring interest in real property. (c)(1) A violation of this section is a Class C misdemeanor. (2) In addition to criminal penalties, a person violating this section may be liable to the person to whom disclosure is required in an amount equal to three times the fee or amount received by the buyer pursuant to the assignment. (d) This section shall only apply to transactions involving single-family residential property and shall not apply to any other property. (e) This section shall not infringe on the right of the parties to otherwise agree by contract. (Act 2023-201, §2.)

Ala. Code § 8-42-3 Application of Chapter; Liens; Unfair Service Agreements.

8-42-3. Application of Chapter; Liens; Unfair Service Agreements. (a) For purposes of this section the following terms have the following meanings: (1) RECORDING. Presenting a document to a county judge of probate for official placement in the public land records. (2) RESIDENTIAL REAL ESTATE. Real property located in this state which is used primarily for a dwelling and contains one to four dwelling units. (3) SERVICE AGREEMENT. A contract under which a person agrees to provide services in connection with the purchase or sale of residential real estate. (4) SERVICE PROVIDER. An individual or entity that provides services to another party under a service agreement. (5) UNFAIR SERVICE AGREEMENT. A service agreement in which the services subject to the agreement are not performed within one year after the date upon which the agreement commences and provides any of the following: a. Purports to run with the land or to be binding on future owners of interests in the real property. b. Allows for assignment of the right to provide the service without notice and agreement of the owner of residential real estate. c. Purports to create a lien, encumbrance, or other real property security interest. (b) This chapter does not apply to any of the following: (1) A home warranty or other type of similar product that covers the cost of maintenance of a major housing system, such as plumbing or electrical wiring, for a set period of time from the date a house is sold. (2) An insurance contract. (3) An option to purchase or right of refusal to purchase real estate. (4) A maintenance or repair agreement entered into by a homeowners’ association in a common interest community. (5) Agreements to manage residential real estate. (6) A declaration of any covenants, conditions, or restrictions created in the formation of a homeowners’ association, a group of condominium owners, or other common interest community, or an amendment to the declaration. (7) A mortgage loan or commitment to make or receive a mortgage loan. (8) A security agreement under Alabama’s Uniform Commercial Code, relating to the sale or rental of personal property or fixtures. (9) Water, sewer, electrical, telephone, cable, or other regulated utility service providers. (c) This section does not impair the rights granted by a mechanic’s or materialman’s lien under Division 8 of Article 5 of Chapter 11 of Title 35 or by another judicially imposed lien. (d) If a service agreement is unfair under this section, it is unenforceable. (e) If a person enters into an unfair service agreement with a consumer, that agreement shall be deemed a deceptive act under the Deceptive Trade Practices Act, commencing with Section 8-19-1. (f)(1) No person shall record or cause to be recorded an unfair service agreement, or notice or memorandum of an unfair service agreement in the state. (2) If an unfair service agreement is recorded in this state, it shall not provide actual or constructive notice against an otherwise bona fide purchaser of the residential real property to which it pertains, or against a creditor with a security interest in the residential real property to which it pertains. (3) A service provider who records or causes to be recorded an unfair service agreement or notice or memorandum thereof in this state is liable to an affected party in the amount of ten thousand dollars ($10,000) in statutory damages. (g) If an unfair service agreement, or notice or memorandum of an unfair service agreement, is recorded in the state, any party with an interest in the residential real property to which it pertains may take either or both of the following actions: (1) Apply to the circuit court in the county where the recording exists to seek a court order declaring the agreement is void and of no effect. (2) In addition to the statutory damages described in subdivision (f)(3), recover actual damages, plus costs and attorney fees as may be proven against the service provider who recorded the agreement. EndFragment (Act 2023-201, §3.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026