HB189 Alabama 2016 Session

Summary

Primary Sponsor

Randy Davis

Republican

Session

Regular Session 2016

Title

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

Summary

HB189 updates Alabama's Uniform Condominium Act to clarify deposits, require in-state escrow, allow letters of credit, limit withdrawals for hard costs, and require clear notices in contracts.

What This Bill Does

It defines key terms used in condo contracts (like hard costs, qualified purchaser, and substantially completed). It requires escrow deposits to be held in-state by approved entities and allows a letter of credit to replace part or all of the deposit. It sets rules for withdrawing deposits to pay hard costs, including limits and bond options, and requires clear written notices in contracts and offering statements about when deposits may be used for hard costs. It also specifies accounting and liability provisions for escrow agents and requires legends in contracts describing deposit use.

Who It Affects

• Purchasers/buyers of condominium units: their deposits must be escrowed in-state, with potential use for hard costs only under defined conditions and with required notices; interest rules may vary based on the contract.
• Declarants/developers: may withdraw deposits for hard costs under specified conditions (with or without a bond), face limits on withdrawals, must avoid using funds for salaries or advertising, and must provide required legends and notices.
• Escrow agents/escrow holders: must keep deposits in-state, maintain separate accounting for each purchaser, and are protected from liability for disbursements when proper certification is provided by the declarant.

Key Provisions

• Defines terms: HARD COSTS (construction-related costs), QUALIFIED PURCHASER (high-income/net-worth criteria), and SUBSTANTIALLY COMPLETED (occupancy certificate or equivalent).
• Escrow requirements: deposits must be held in-state in an escrow account by a licensed title insurer, attorney, licensed broker, or insured institution until closing, default, or refund; funds generally earn interest for the principal holder.
• Letters of credit: declarant may accept a letter of credit in lieu of part or all of the deposit.
• Withdrawal for hard costs: after the cancellation period expires and under specific contract terms, declarant may withdraw deposits for hard costs, with at least 10% remaining; bond options allow withdrawal of up to the full deposit under certain conditions.
• Bond option: if withdrawing beyond 10% or using a full bond, a surety bond must be issued naming the purchaser as beneficiary, with possible blanket bonds for multiple purchasers; withdrawal may be limited to the bond amount and must be used only for hard costs.
• Legends and notices: contracts and offering statements must include conspicuous legends informing that deposits may be used for construction/hard costs; the face amount and interest terms of certain instruments are considered in calculating thresholds.
• Use restrictions and accounting: funds used for hard costs cannot be used for salaries, commissions, or advertising; escrow accounts must separate records for each purchaser when multiple accounts are used.
• Liability protection: escrow agents are protected from liability for disbursements if they follow the declarant’s certifiable disbursement directives.

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