SB228INTRODUCED
Page 0
Q3ME11-1
By Senators Roberts, Givhan, Shelnutt
RFD: County and Municipal Government
First Read: 20-Apr-23
1
2
3
4
5 Q3ME11-1 04/20/2023 SLU (L)SLU 2023-1341
Page 1
SYNOPSIS:
Under existing law, a buyer may enter into a
purchase and sale contract with a homeowner without
disclosing to the homeowner his or her intent to
wholesale the property by marketing it to other
prospective purchasers willing to pay more than the
contract price for the property and to assign its
interest to one of those purchasers for a fee.
Under existing law, a real estate company may
enter into an agreement to list certain residential
real estate owner's property for a period up to 40
years and to record the agreement creating an
encumbrance on the property for the duration of the
agreement.
This bill would require a buyer of a
single-family residential property, who intends to
wholesale the property, to make certain disclosures
explaining to the homeowner and other prospective
parties to the transaction about the aspects of the
intended transaction.
This bill would deem unenforceable certain
long-term agreements between real estate companies and
certain residential real estate owners.
This bill would also provide certain civil and
criminal penalties for certain violations.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28 SB228 INTRODUCEDSB228 INTRODUCED
Page 2
Section 111.05 of the Constitution of Alabama of
2022, prohibits a general law whose purpose or effect
would be to require a new or increased expenditure of
local funds from becoming effective with regard to a
local governmental entity without enactment by a 2/3
vote unless: it comes within one of a number of
specified exceptions; it is approved by the affected
entity; or the Legislature appropriates funds, or
provides a local source of revenue, to the entity for
the purpose.
The purpose or effect of this bill would be to
require a new or increased expenditure of local funds
within the meaning of the amendment. However, the bill
does not require approval of a local governmental
entity or enactment by a 2/3 vote to become effective
because it comes within one of the specified exceptions
contained in the amendment.
A BILL
TO BE ENTITLED
AN ACT
Relating to residential real estate transactions; to
require buyers to make certain disclosures to homeowners and
other interested parties that the buyer intends to engage
aspects of a wholesale transaction; and to deem unenforceable
certain unfair service agreements purporting to establish a
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56 SB228 INTRODUCEDSB228 INTRODUCED
Page 3
long-term right to list between real estate companies and
residential real estate owners; and in connection therewith
would have as its purpose or effect the requirement of a new
or increased expenditure of local funds within the meaning of
Section 111.05 of the Constitution of Alabama of 2022.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. 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
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84 SB228 INTRODUCEDSB228 INTRODUCED
Page 4
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.
Section 2. (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
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112 SB228 INTRODUCEDSB228 INTRODUCED
Page 5
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.
Section 3. (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
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140 SB228 INTRODUCEDSB228 INTRODUCED
Page 6
which the services subject the agreement is not to be
performed within three years after the date upon which the
service commences 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 act 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
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168 SB228 INTRODUCEDSB228 INTRODUCED
Page 7
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 statute does not impair the rights granted by
a mechanic's or materialman's lien under Section 35-11-210,
Code of Alabama 1975, et seq, 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 Alabama Deceptive Trade Practices Act,
commencing with Section 8-19-1, Code of Alabama 1975.
(f) 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.
(1) Any probate office may, but is not required to,
refuse to accept for recordation an unfair service agreement.
(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 for ten
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196 SB228 INTRODUCEDSB228 INTRODUCED
Page 8
thousand dollars ($10,000) in statutory damage.
(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 probate 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
subsection (f)(3), recover actual damages, plus costs and
attorney fees as may be proven against the service provider
who recorded the agreement.
Section 4. Although this bill would have as its purpose
or effect the requirement of a new or increased expenditure of
local funds, the bill is excluded from further requirements
and application under Section 111.05 of the Constitution of
Alabama of 2022, because the bill defines a new crime or
amends the definition of an existing crime.
Section 5. This act shall become effective on the first
day of the third month following its passage and approval by
the Governor, or its otherwise becoming law.
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218