HB410 Alabama 2015 Session

Summary

Primary Sponsor

Randy Davis

Republican

Session

Regular Session 2015

Title

Uniform Condominium Act, define terms, required in state escrow agent, withdrawals limited, written notice required, Sec. 35-8A-410 am'd.

Summary

HB410 updates Alabama's Uniform Condominium Act to regulate deposits, require in-state escrow, allow letters of credit, and set strict rules for using deposits to pay construction costs with purchaser protections.

What This Bill Does

It defines key terms used in condo contracts, such as hard costs, qualified purchaser, and substantially completed. It requires deposits to be held in escrow in-state by specified professionals or institutions and allows a letter of credit to replace part or all of the deposit. It lets the declarant withdraw deposits to cover hard construction costs under certain conditions, with bond protections for purchasers and mandatory contract and offering statement notices about when deposits may be used. It also outlines how interest on deposits is handled and imposes restrictions on how withdrawn funds can be used, plus adds clear legends in contracts offering this option.

Who It Affects

• Purchasers (buyers) of condominium units: their deposits are held in escrow in-state and may be protected by bonds if deposits are withdrawn for construction; they must receive clear written notices and legends about deposit use.
• Declarants (condo developers) and escrow agents: declarants may withdraw deposits for hard costs under defined conditions and must obtain bonds; escrow agents must keep deposits in-state and maintain proper accounting; contracts and offerings must include required legends.

Key Provisions

• Defines terms: hard costs (construction-related costs but not financing, architect/engineer fees, or marketing) and qualified purchaser (based on income or net worth).
• Escrow deposits must be held in-state in designated accounts by authorized professionals (licensed title insurer, attorney, licensed real estate broker, or insured institution) until closing, purchaser default, or refund; deposits generally earn interest for the principal holder; letters of credit may replace part or all of the deposit.
• Allows declarant to withdraw deposits for hard costs under certain conditions, including (i) after cancellation period if project isn’t substantially completed and at least 10% remains on deposit, or (ii) after a state-licensed surety bond is issued in favor of the purchaser; bond amount cannot be exceeded and must name the purchaser as beneficiary; withdrawn funds may not bear interest and cannot be used for salaries, commissions, or advertising.
• If using the bond option, the declarant may use one or more blanket bonds for multiple purchasers; special legends must appear on contracts and offering statements to inform buyers about construction-use deposits.
• Limits and conditions for additional withdrawals under the construction-use provision, including requirements that the purchaser is a qualified purchaser, land is acquired, and certain cancellation and timing conditions are met; the bond mechanism protects purchasers.
• Additional legends required on contracts and offering statements when deposits may be used for hard costs, and the face amount of any letter of credit is considered when determining deposit thresholds.
• Effective date provision: the act becomes effective on the first day of the third month after passage and governor approval.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Condominiums