Call Us Today (256)350-4100

FAQs

Is an oral contract to purchase real estate enforceable?

As a general rule, a contract to purchase real estate in Alabama must be in writing in order to be enforceable.

When I purchase a home, is there a period of rescission during which time I can change my mind or back out of the deal?

While some states place the closing of a purchase transaction in “escrow” for a period of time in order to give a buyer an opportunity to change his or her mind, this is not the law in Alabama. In Alabama, once closing documents are executed and the deed delivered, the transaction is officially closed, and the buyer does not have the right to change his or her mind. A three (3) day period of rescission does apply to the refinance of a person’s primary residence, but not to purchase transactions.

What can I do if my air conditioning system stops working after I close or there are repairs that need to be done that I did not notice prior to closing?

In Alabama, previously occupied homes have no warranties regarding their condition. Existing homes are sold in their existing condition. This is called “caveat emptor” or “buyer beware.” It is the responsibility of the buyer to have any inspections he or she feels necessary in order to determine the condition of the property prior to closing. Once the transaction closes, the seller has no responsibility for the property or for any repairs or maintenance items. 

An exception to the “caveat emptor” or “buyer beware” rule relates to “latent defects,” or defects or conditions on the property which could not be reasonably discovered through an inspection of the premises. These conditions must be disclosed by the seller, since a buyer could not be expected to discover these defects through an inspection of the premises. Routine repair and maintenance, which many homebuyers experience soon after a purchase, do not fall within this exception.

There are several companies which sell warranties on existing homes. Most real estate agents have access to these companies and the cost ranges from $300.00 to $400.00 per year. Because the deductibles and coverages vary, it is important to investigate before making a purchase of a warranty. 

The “caveat emptor” rule does not apply to new homes. Alabama has an implied warranty of habitability on new construction; however, most builders offer a one year limited new home warranty, during which time the builder agrees to be responsible for all workmanship and materials incorporated into the home. The written warranty is in lieu of the implied warranty. There are certain items which are excepted from the areas covered by the written warranty, and it is advisable to make sure that your builder provides you with a copy of the warranty he offers at the time of the execution of your purchase agreement in order in assure yourself that there are no surprises at closing. Most builders do, however, provide customers with a copy of the warranty at the time of the execution of the purchase agreement and the warranty is incorporated into and becomes a part of the purchase agreement. For those builders who do not follow this practice, it is advisable to request a copy of the warranty, and it is further recommended that the warranty be incorporated into the purchase agreement. The standard new home limited warranties offered by builders who are members of the State Homebuilder’s Association, contain an arbitration provision, and this provision is a customary provision in Alabama. With regard to the air conditioning compressor on a new home, the limited new home warranty does not cover the compressor. However, all appliances and the air conditioner compressor have their own warranties, and these warranties transfer to the homebuyer at closing.

When are property taxes assessed in my name and what is a homestead exemption?

The ad valorem property tax year in Alabama runs from October 1 to September 30 of each year, and taxes are paid in arrears. For example, the 2005 ad valorem tax year runs from October 1, 2004 to September 30, 2005 and the taxes are due on October 1, 2005 and delinquent after December 31, 2005. The tax status of a property is determined on October 1 of any given tax year; therefore, if the property is rental property on October 1, 2004, it will be taxed at the commercial rate for the 2005 tax year.
A buyer is required to assess property in his or her name during the tax year in which the property is purchased. For residential property, this is accomplished at the same time a buyer claims his homestead exemption. A homestead exemption is a special reduction in the annual ad valorem property taxes on the primary residence of the owner. Commercial and rental properties do not qualify for this exemption and an owner is entitled to claim only one primary residence. In order to qualify for a homestead exemption, the owner must actually occupy the property as his or her primary residence on October 1 of a given tax year. For example, if a property is a rental house on October 1, 2004 and the new owner closes on October 2, 2004 and moves into the house on that date, the property does not qualify for the homestead exemption for the 2005 tax year, and the taxes will be more than double what they would be with the homestead exemption. If that same person closed on September 30, 2004 and moved into the house as their primary residence on that date, the property qualifies for the homestead exemption for the 2005 tax year, which begins on October 1, 2004, and the taxes would be approximately one-half (½) of the rate of an investment property. 
In order to claim the exemption, the owner must take his or her recorded deed to the Office of the Tax Assessor in the county in which the property is located and sign an instrument claiming the property as his or her primary residence, thereby claiming the homestead exemption. The owner must do this in person and it cannot be done by the closing attorney or by a realtor. A person must claim the exemption before December 31. For example, a homeowner who purchased a home on September 30, 2004, must claim the homestead exemption for 2005 prior to December 31, 2004, in order to qualify for the 2005 exemption. A failure to sign up for the exemption prior to December 31, 2004 will disqualify the homeowner for the exemption for the entire year, even though the homeowner would have qualified for the exemption. The disqualification applies even if the owner signs up for it during the 2005 tax year, but after December 31, 2004. A person qualifying for the 2006 tax year, from October 1, 2005 to September 30, 2006, must claim the exemption prior to December 31, 2005.

 

Why am I still receiving a tax bill on the property I sold?

The ad valorem tax year begins on October 1 of each year, although taxes are paid in arrears on October 1. That is the date that the tax rate for which the coming year is determined based on how the owner used that particular property, i.e., commercial, rental, or primary residence. The property is actually “assessed” in the name of the owner on October 1 of that tax year. For example, if the owner is E. A. Presley on October 1, 2004 and it is his primary residence, the tax bill for 2005, which will be published for payment beginning October 1, 2005, will be in the name of E. A. Presley, and the notice will be sent to him at the address shown on the tax bill. This does not mean that Mr. Presley or Col. T. Parker, his financial officer, are required to pay the bill, but that the assessment was in his name for the 2005 tax year.

Most borrowers are required by their lenders to pay money into an escrow account for taxes, and property taxes are actually paid by the mortgage company each year from his or her escrow account. Therefore, neither the seller nor the new buyer are actually required to pay the taxes if the new buyer has a lender requiring a tax escrow, even though a tax notice is sent to the address of the property. The notice is a routine document sent to every property owner, owning property on October 1 of a given tax year, and it is routinely sent to the property address. 

 

How are taxes prorated and why can’t “my part” be paid at closing?

Ad valorem property taxes are paid once per year and are due and payable between October 1 and December 31 of each year. They cannot be paid in partial sums or at any time prior to October 1. For that reason, property taxes are prorated at the time of the sale and are deducted from the seller on Line 511 of the HUD-1 Settlement Statement and credited to the buyer at line 211 of the HUD-1. The portion of the taxes for which the seller is responsible on the date of closing (the portion due from October 1 of the previous calendar year to the date of closing) is deducted from his or her proceeds at line 511 and that same sum is credited to the buyer at line 211. Even though the seller’s portion of the taxes are not “paid,” the seller has no further responsibility for them, since the sum “owed” by the seller has been paid over to the buyer. The buyer, or in most cases the buyer’s lender, will then pay the taxes when they come due for the entire year using the money from the seller, with remaining balance paid by buyer (buyer pays from the date of closing to the end of the ad valorem tax year -September 30), or buyer's lender if there is an escrow account. Should the seller get a tax notice, it should be forwarded to the buyer. Should the buyer get a tax notice in the seller’s name, the buyer should forward this notice to his or her lender, or, if the buyer paid cash, the buyer should pay the taxes.

 

Why can’t I prepare my own deed, power of attorney or other documents needed for my closing?

This is a frequently asked question and is becoming more common as more clients attempt to use information they obtain on the Internet. There are many generic forms on the internet and in form books at office supply and book stores. Unfortunately, the forms provided in these books are not generally acceptable in Alabama. Every state has its own particular requirements as to what is necessary for a legal document to be a valid and enforceable instrument in that state. Certain substantive requirements, such as granting clauses, habendum clauses, proper notary acknowledgments, etc., usually cause these generic forms to be legally defective and usually cause marketability problems if they are used. Most deeds and powers of attorney contained in these form books do not comply with Alabama law and a knowledgeable real estate attorney will not allow their use. Further, many lenders do not allow the use of a power of attorney and the ones that do require that they contain very specific verbiage relating to the particular transaction for which the power of attorney is being used. Generic forms do not contain this verbiage and do not contain the proper notary acknowledgment. None of these powers of attorney that this writer has seen specifically authorize the execution of a deed and none of them conform with Alabama law.

Another common error relating to the above instruments prepared by non- real estate attorneys and/or clients is the improper execution of a document using a power of attorney. Assuming that the power of attorney is in proper form and is properly executed and acknowledged, the instrument being signed by the attorney-in-fact must actually be signed as follow; “ Archie Leach by Marion Morrison, his attorney in fact,” and the notary acknowledgment on the instrument must contain specific verbiage relating to this authority. Signing “Marion Morrison” on a signature line with the authoritative verbiage typed under it is insufficient. An instrument, such as a deed, which is not executed in exactly this manner and/or does not contain a notary acknowledgment in substantial conformity with Section 35-4-29, Code of Alabama , is defective and will create a “title problem,” thereby effecting the marketability of the property.

It is never a good practice for a person to prepare his or her own legal documents.

 

What is title insurance?

An insurance policy protecting against loss should the condition of title to land be other than as insured. IE- Unpaid or unstaisfied mortgages, someone claims to own an interest in your home.

 

Why do I need title insurance?

When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for.

What if I have a problem? Do I have to lose my property to make a title insurance claim?

Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. The Title Agent will have insurance company representative to contact your immediately. Title insurance includes coverage for legal expenses which may be necessary to investigate, litigate or settle an adverse claim.

 

What does title insurance cost?

The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once (for owner's insurance), then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. However, a lenders policy which protects your lender only and insures only the mortgage or that specific loan.

If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?

The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest, and, in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain.

Can you be a little more specific about the types of claims, or risks, covered by title insurance?

First understand there are basically three different levels of coverage: Standard coverage, extended coverage, and our most comprehensive "EAGLE Policy" coverage.

Standard coverage handles such risks as:

  • Forgery and impersonation;
  • Lack of competency, capacity or legal authority of a party;
  • Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner);
  • Undisclosed (but recorded) prior mortgage or lien;
  • Undisclosed (but recorded) easement or use restriction;
  • Erroneous or inadequate legal descriptions;
  • Lack of a right of access; and
  • Deed not properly recorded.

An extended coverage policy may be requested to protect against such additional defects as:

  • Off-record matters, such as claims for adverse possession or prescriptive easement;
  • Deed to land with buildings encroaching on land of another;
  • Incorrect survey;
  • Silent (off-record) liens (such as mechanics' or estate tax liens); and
  • Pre-existing violations of subdivision laws, zoning ordinances or CC&R's.

Subject to availability in your locale, First American's EAGLE Policy covers all of the risks listed above, plus:

  • Post-policy forgery;
  • Forced removal of improvements due to lack of building permit (subject to deductible);
  • Post-policy construction of improvements by a neighbor onto insured land; and
  • Location and dimensions of insured land (survey not required).

For a more detailed list of covered risks, visit "70 Something Ways to Lose Your Property" elsewhere on the above First American Corporation website. And for some true "horror stories," from actual First American claim files, check out "Claims Chronicles.” Copyright c 2005-The First American Corporation

Data relating to Stewart Title Guaranty Company title insurance products may be found on the Stewart Title Guarantee Company Web site at www.vuwriter.com.

Why do I need title insurance if I have an abstract of title?

An abstract of title is not title insurance. As explained in detail later, an abstract of title or abstracted title certificate is a summary of the “chain of title” or the history of the ownership of a tract of real estate and is not a guarantee that the title to the property is “clear.” A title insurance policy is an insurance policy which guarantees that the title to the property is “clear,” subject to any exceptions shown therein. J. Calvin McBride & Associates, P.C. is an issuing agent for First American Title Insurance Company and Stewart Title Guaranty Company and copies of policies issued by these companies, as well as information regarding what is covered by these policies, can be seen at: www.firstam.com and www.vuwriter.com. The purchase of Owner’s Title Insurance is always recommended by this writer.

What is an attorney's role in real estate transactions? 

The purchase and subsequent sale of your home will more than likely be the largest, most important financial transaction of your life.
In order to guarantee the smooth and proper handling of your purchase and/or sale, you should select an attorney to assist you in completing this transaction. Before you actually retain an attorney, it is important that you understand the fundamental steps of a real estate transaction and how an attorney assists you in completing it.

When purchasing a home, it is important to know that the Seller has marketable title to the property being sold to you. Your attorney's first responsibility is to examine an abstract of title or the public land records to determine the condition of the Seller's title to the property. This examination will disclose:

a. whether the Seller is in fact the legal owner of the property;
b. the presence of unpaid mortgages, judgments or other liens which must be satisfied before "clear" title can be conveyed to you;
c. restrictions, easements or rights of way for roads, alleys, and utilities, and other encumbrances which may limit your rights even though you will own the property; and
d. the status of property taxes and other public or private assessments.

It is also important for the Seller to be aware of the condition of the title to the property being sold, because it is customary in Alabama for the Seller to give the Purchaser a "Warranty Deed" to the property upon closing the transaction, which guarantees "clear" title to the property being sold. An attorney, aware of any title defects, should be able to "cure" them prior to the closing, avoiding the necessity of any litigation concerning the title to the property.
Title Insurance insuring the lender against defects in the title to the property is required by the lender, and Owner's title insurance insuring that the Purchaser is acquiring "clear" title to the property may also be purchased by the Purchaser.

Very few lenders require that a survey showing the location of the dwelling, other structures and fixtures (such as fences) be furnished, although at one time all lenders required a survey. While a survey is recommended so that an attorney is able to examine it to determine that there are no "encroachments,"it is no longer customary. Should you desire a survey, this should be addressed at the time of the execution and negotiation of the contract and is normally paid by the Purchaser.

Most lenders generate their own closing documents and email them to the attorney. An attorney will be responsible for examining and completing all of these documents and preparing all other paperwork necessary to complete the transaction. These documents include the Deed, HUD-1 Settlement Statement, Note, Mortgage, and other lender required documents.

The final settlement, or closing, of the transaction will be conducted by the attorney of your choice. The attorney who closes the loan represents the mortgage company or lender, although the attorney's fee is charged to the Purchaser or Seller as a cost of closing. The attorney will, however, make sure that all parties are protected because most attorneys who close real estate transactions do not take an adversarial position. At the closing, all parties will assemble at the attorney's office at a time most convenient to everyone. The closing documents will be explained and executed, and all matters relating to the transaction will be approved by the parties prior to disbursing the proceeds from the sale. Any funds owed by the Purchaser must be in a cashier’s check or other certified funds.

An attorney's job does not end at the closing. Details such as recording the deed and mortgage in the Probate Records, mailing all executed closing documents to the lender, correcting errors at closing, and issuing the title insurance policies extend beyond the date of closing.
An attorney's role in a real estate transaction, therefore, may include consultation prior to the signing of a contract, the preparation or approval of a contract, the examination of title, the preparation of closing documents, the conducting of the closing, and the supervision of the post-closing details. All of this work is done in cooperation with the Purchaser, Seller, lender and realtor(s).

Real estate closings have become very complicated due to the overwhelming number of governmental and lender regulations. Because many attorneys today are specialized, it is imperative that the attorney you hire to conduct your closing be familiar with current real estate practices and all lender and government requirements. J. Calvin McBride & Associates, P.C. has this expertise.

 

Can I obtain title insurance from my homeowner’s insurance carrier?

No. Title insurance is written and underwritten by companies that deal specifically in insuring the title to real estate. Homeowner’s insurance carriers and property and casualty insurance carriers are unable to write title insurance policies. Some property and casualty companies have created a product that is promoted as a “title” product, but it is not title insurance. In many areas, your closing attorney is an authorized issuing agent for at least one title insurance carrier, or, if you live in an area where attorneys do not issue title insurance, your attorney maintains a relationship with a title insurance agent. J. Calvin McBride & Associates, P.C. can provide all necessary title services relating to your closing, including the title examination and the issuance of title insurance.

Are all title insurance premiums the same?

No. All companies do not offer the same rates. Title insurance is a regulated industry in most states and is regulated in Alabama. All companies doing business in Alabama are required to publish their rates. This firm issues title insurance underwritten by First American Title Insurance Company and Stewart Title Guaranty Company, both of which are highly rated companies with rates that are on the lower end of the spectrum.

 

What doesn’t title insurance cover?

Like all types of insurance, title insurance does not cover every conceivable problem that might arise. Title insurance is based upon an examination of Probate records, and will not cover problems arising from unrecorded documents or other facts outside of the recorded chain of title. Boundary line issues, which would be revealed by a survey (i.e. your fence or your neighbor’s fence being located two feet over the property line). Unrecorded mechanic’s liens and unpaid public utility bills are other examples. However, First American Title Insurance Company offers a policy known as the Eagle policy, which covers certain mechanic’s liens that might be filed after a purchase. Stewart Title Guaranty Company offers a similar product. Your closing attorney should be able to give you information about this policy, if he is an agent for this company. The title insurance policy will describe the situations it does not cover. These same limitations will generally be found in an attorney’s title opinion. A qualified and experienced real estate attorney can assist in helping a buyer understand the limitations of a title policy.

 

What is a lien?

A lien is any legal claim on real estate that can act as security for the payment of a debt or other obligation on the property. If the debt or obligation is not repaid, the lienholder can execute upon or foreclose upon its claim and force a public sale to pay or satisfy the debt.

The most common form of lien is a mortgage. While all mortgages are considered liens, not all liens are mortgages. Other commonly encountered liens include recorded judgements resulting from the entry of a final decree from a court of competent jurisdiction, mechanic’s liens resulting from unpaid improvements to the property and liens for unpaid taxes or municipal utilities. Often a divorce decree will provide an ex-spouse with a lien on the couple’s property which is to be paid at the time of the sale.

 

What is a mechanic’s lien?

Mechanic’s and materialmen’s liens are designed to provide collection rights to businesses which provide services such as carpentry, plumbing, painting, and the like, as well as to anyone who supplies building materials and supplies for a project. The general contractor, subcontractor, lumberyard and other suppliers will have mechanic’s lien rights.

Laws relating to mechanic’s liens vary greatly from state to state. The contractor, commonly, has the right to serve the owner of the property with a notice of claim of lien and record it in the probate records, or county land records when payment is not made. If the lien is not paid, the contractor or supplier can commence a court proceeding to enforce the lien and sell the property in satisfaction of the obligation. In some states, the contractor is required to file a notice of lien or to provide the owner with notices relative to the possibility of a lien, prior to commencing work on the property or supplying materials. Usually the time for filing a mechanic’s lien is short. In Alabama, the lien must be recorded and the suit to enforce the lien filed within six (6) months of the last day of work on the property provided by the claiming contractor or the last day supplies were provided by a supplier.

Mechanic’s liens are of special concern because they can often result in an owner paying twice for a service or material. This problem can be avoided by obtaining lien waivers from all suppliers and subcontractors prior to full payment to the general contractor. Some title insurance companies offer a special insurance policy designed to protect a buyer against mechanic’s liens filed after a closing for work or supplies provided prior to closing.

 

What is an abstract of title or abstracted title certificate?

An abstract or abstracted title certificate is a summary of the legal history of a parcel of real estate. It is often used by attorneys and title insurance companies as the basis for issuing title insurance and as the basis to conclude that “clear title” exists. An abstract it not a legal document. It is simply a summary of the ownership of the property. It is prepared by an “abstractor,” who reviews all of the records on file probate records, with the county recorder, or title recording office relating to a particular parcel. The abstractor prepares a short summary of each transaction or provides a complete copy of each instrument, arranged in chronological order, identifying the instruments (deeds, mortgages), names of the parties to the transactions, the dates of execution and recording and recording information. This sequence is called the chain of title, and this chain is summarized by the abstract.

In most areas, the abstract covers a period of forth (40) to sixty (60) years depending upon the county in which the property is located. The first entry is usually a Patent for the United States government by which the government first conveyed the property to a private party. A new abstract is not created every time a property is sold; however, at each sale the abstract is updated to add each new transaction since the last update. Each time the abstract is updated, the abstractor will search for judgments, tax liens, mortgages, deeds, or other instruments effecting the property. While an abstract can still be purchased in Morgan County, Alabama, the Morgan County Association of Realtors Real Estate Sales Contract, no longer provides that one be provided, and the provision of an abstract is no longer required by the parties.   The standard in all of the North Alabama counties surrounding Morgan County,  Limestone, Cullman, and Madison counties, is for the buyer and seller to equally divide the title insurance premium for both an owner’s and lender’s policy and the title commitment fee.  Who pays for the title insurance varies from county to county throughout the remainder of the State.  While an abstract is no longer required or requested in Alabama counties, an “abstracted title certificate, “ which is a shortened summary of the title, must be examined by the closing attorney.   This abstracted title certificate, which contains  all deeds and other instruments relating to the property in question for the period acceptable to the title insurance insurer, is examined by the closing attorney, and title insurance is issued at closing based upon this examination.   It is always recommended that an attorney with experience in title examinations and the issuance of title insurance be used for the closing or your real estate transaction for apparent reasons.  In a few counties, Morgan County and Montgomery County being two, if  your abstract is lost, it can be replaced at any time, but a new abstract can be very expensive to replace and could cost several hundred dollars depending upon the history of the property.  If you have an abstract, keep it in a safe, accessible place.  It is a very interesting piece of history.”

What is the difference between actual title and recorded title?

Actual title refers to who actually owns a parcel of real estate. However, title examiners and title insurance companies are governed by “record” title, which means who is the owner of the property based upon the instruments recorded in the probate records, or land title records. Under Alabama law, as well as the laws of many other states, a party interested in real estate is put on notice as to the “record” owner by a review of the instruments that are recorded in the probate records.

An example illustrates the difference. A buyer has a title examination performed and the examination shows an unpaid mortgage that the seller did not reveal. There are two possibilities. First, the debt secured by the mortgage is unpaid, and the debt will need to be paid at closing. Second, it is common for lenders to simply fail to properly satisfy a mortgage, although it might have been paid in full years ago. The seller’s actual title is good, in that the lender cannot foreclose on the property, but the record title is not good, because the real estate records show an unsatisfied mortgage. In both cases, the title is not marketable, and the situation would need to be corrected in order for the property to be sold.

Making sure that all proper steps are taken to ensure that the “record” title to property accurately reflects the actual ownership is an important service performed by an experienced closing attorney.

What is adverse possession?

Adverse possession is a right to use or own property that results from continued use and occupancy over a period of time, generally ten (10) to twenty (20) years depending upon the state and the circumstances. If a non-owner of property occupies and uses property without the permission of the actual owner, and does so in an openly adverse manner for long enough, the law will find that the actual owner has lost his or her rights to the property and ownership has transferred to the person in actual possession of the property. Whether the possession is actually “adverse” is a matter of fact based upon the circumstances. Since adverse possession results in the taking of property without payment, the principle is applied very carefully by the courts and only if certain specified conditions are met. The use must be open, notorious, hostile, without the permission of the owner, continuous, uninterrupted, and exclusive. Use of the property with the permission of the owner will never create a right of adverse possession and is considered “permissive.” A co-owner of a property can never adverse possess against the other owner or owners.

Adverse possession issues most often arise where an adjacent property owner encroaches on a neighbor. For example, your neighbor erects a fence three feet over onto your property and starts using the land to graze his cattle. As the owner, you would have the right to remove the fence, or you could simply approach your neighbor with an instrument allowing him to use the property “permissively” for a specified or indefinite period of time. This instrument is called an “easement.” If you do nothing, the neighbor could eventually own that portion of the property enclosed in his fence by adversely possessing it for the required number of years. For this reason, it is always advisable to inspect the property you are buying for encroachments and adverse uses. A survey is recommended and is the only way to know with certainty if there are encroachment issues and to know the actual location of the boundary lines.

 

What is a variance?

Most local and state zoning ordinances operate under the premise that land uses within a given area should be uniform. However, there are occasions where exceptions to this rule are necessary or required. Depending on the need and the impact on the neighborhood or community as a whole, it may be possible to change the zoning on a particular property by obtaining a “variance.” A variance is permission to depart from the requirements of a zoning ordinance in one or more particular circumstances. Generally, a variance is granted or denied by administrative action and is usually handled through a panel known as a Board of Zoning Adjustment. Variances can be divided into area variances and use variances.

An area variance may be requested where the use is permissible, but does not quite fit the property. For example, if an owner wants to add a deck to his home which violates the minimum building setback or wants to build a two-story garage which exceeds a height limit, an area variance would be required. On the other hand, a use variance relates to a use of the property which is otherwise impermissible in the given zone. For example, if the owner wants to build a convenience store in a locality zoned exclusively for residential purposes, a use variance is required. Generally, use variances are more difficult to obtain than area variances. A landowner must generally show undue hardship that is not self-imposed and must demonstrate that the variance would not harm the public welfare, would not have an excessive impact on the general zoning plan, and would not adversely impact surrounding property values. The requirement that the condition not be self-imposed is designed to prevent an owner from building a nonconforming structure and then later seeking a variance on the grounds that it would be a hardship to tear it down.

 

What does it mean when something is said to be “grandfathered in” for zoning purposes?

One goal of zoning is to separate property uses into distinct zoning districts, such as residential, commercial, industrial, and to keep uses within each zone uniform. However, what happens to a business that existed and was in operation prior to the time that its location was zoned by a municipality for residential purposes? There is a constitutional prohibition against the taking of property without just compensation. If a use predates the zoning plan, it will be permitted to remain, because the local government lacks the power to simply close a business in a zone that becomes residential, or require a home in an industrial zone to be torn down, unless it is willing to compensate the owner for the loss. Such exceptions are called prior nonconforming uses. Commonly, the portion of the zoning statute allowing prior nonconforming uses is called a “grandfather clause,” and, thus, the use is considered “grandfathered in.” All nonconforming uses are not exempt from all zoning regulation. While property cannot be taken without compensation, the government is not required to allow them to change or expand. The use is generally limited to what existed when the zoning ordinance was adopted, and, if the nonconforming use is abandoned or ceases, the “grandfather” rights are lost. The nonconforming use cannot be restarted at a later date. Under many such laws, if a nonconforming structure is destroyed by fire or other cause, it may not be rebuilt so as to be nonconforming. The hope is that nonconforming uses will phase themselves out.

Why should I use an attorney to close my transaction?

Real estate law is a highly complex and specialized area of legal practice. Real estate is also an area in which consumers and businesses are well advised to seek legal counsel and advice. This is an area in which attempting to “do it yourself” can have serious long-term consequences, which can often be disastrous, for a number of reasons. First, problems with real estate title issues do not become apparent for many years. A mistake made at the time of a purchase, which could have been easily corrected at the time of purchase, may not make itself known until the time comes to sell the property many years later. By that time, it may be very difficult to correct the error because the appropriate person needed to sign a corrective deed or other instrument is either dead or cannot be located. Correcting the problem might then require that a court proceeding be undertaken at great expense. Second, real estate laws vary greatly from state to state. In many areas of the law, there is a trend to create laws that are more uniform from state to state in order to encourage interstate commerce and to foster interstate commercial transactions. Real estate, however, is immobile, and the laws in this area are very resistant to change and are resistant to trends toward uniformity. While all states, except Louisiana, share a common English law ancestry in the area of real estate law, each state has its own laws peculiar to that particular state. Real estate attorneys with concentrated expertise in this area are familiar with the laws of their state. It is important for anyone buying or selling real estate to retain the services of an experienced and knowledgeable real estate attorney to ensure that the transaction goes smoothly and that the interests of all parties are protected. 

I’ve heard about folks buying property at mortgage foreclosure and tax sales and then reselling them at a large profit. Should I do this?

Buying property at a tax sales is very risky business. At a normal real estate purchase, the seller gives the buyer an opportunity to inspect the property and examine the title and provides the buyer with a warranty deed, guaranteeing clear and marketable title. These promises or guarantees can then be insured through a title insurance policy protecting the buyer. In the case of a tax sale, none of these safeguards exist. There is a period of three (3) years during which those entitled to redeem the property may redeem it, and at the end of this three (3) years, the buyer receives a Tax Deed, which contains no covenants, warranties, or representations of any kind, and the buyer has no recourse if there are problems with the ownership and title to the property. Title insurance companies will not insure the title to the property, even though the buyer has received a Tax Deed, unless a) the buyer obtains a deed from the owner of the property who lost the property due to failure to pay taxes or b) a lawsuit to "quiet title" is undertaken by the buyer, by which he sues the previous owner and any other fictitious person, persons, or entities, who could have a possible claim against the property, and the buyer obtains a Court Order directing that the buyer is the owner of the property in fee simple. Prior to the filing of this action, the buyer must be "in possession" of the property for an additional three (3) years following the receipt of the Tax Deed. Without a deed from the prior owner or a Court Order, a property purchased at a tax sale has "unmarketable title." Therefore, unless the buyer can find a person willing to purchase the property without warranties of title and does not require title insurance, the buyer will be unable to sell the property because a title insurance policy insuring the new buyer and the new buyer's lender cannot be obtained. 

 

With respect to property purchased at a mortgage foreclosure sale, there is a one (1) year period of redemption, commencing on the date of the foreclosure sale, during which time the property can be redeemed by the debtor, mortgagor, junior mortgagor, any judgment creditor, and by a transferee, spouse and/or children of the debtor, mortgagee, or transferee. After a purchaser at a foreclosure sale determines that he or she is desirous of selling the property purchased at foreclosure, there are other complications should the buyer attempt to sell the property before the one (1) year period of redemption has expired. For certain types of government insured loans there are federal government regulations relating to the sale of foreclosed property that limit the amount of profit that an investor can make on a transaction if the new purchaser is using one of these loan programs. If the sale is taking place within the one (1) year period of redemption, it might also be necessary for the investor to purchase a "redemption bond" in order to indemnify the new lender's title insurance company against redemption and to induce the company to insure the title without making exception for the right of redemption. A typical redemption bond premium is one and one-half (1 ½ %) percent of the new loan amount and can be very expensive. Should a person entitled to redeem redeem the property, the redeemer must pay the price paid at the foreclosure sale (or the amount of the debt to the foreclosing lender if the indebtedness is larger than the price paid at foreclosure), interest at the rate of 12%, plus reimbursement for all reasonable and necessary permanent improvements. While redemptions are very rare, a buyer of a property subject to the right of redemption should be aware of the potential risks involved.

With experience and the assistance of an experienced and knowledgeable attorney, a purchaser of foreclosed property can indeed acquire property at a bargain, but this should be left to those with a tolerance for a potential for financial risk

 

Disclaimer: The questions and answers provided above are not intended to serve as a substitute for  a consultation with a real estate attorney.  These FAQ’s are designed for general information and are not a substitute for appropriate legal advice.  Most legal issues should be considered on a case by case basis.

From our offices in Decatur, Alabama, we represent clients in Morgan, Madison, Cullman, Lawrence, and Limestone Counties, including the communities of Decatur, Huntsville, Madison, Hartselle, Cullman, and Athens.

Privacy Policy
Alabama State Bar rules require the following in every attorney advertisement:
“No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.”
AV Preeminent is a registered certification mark of Reed Elsevier Properties, Inc, used under in accordance
with the Martindale-Hubbell certification procedures, standards and policies.

The information you obtain on this website is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Copyright © 2012 by J. Calvin McBride & Associates, PC. All rights reserved. You may reproduce materials available on this website for your own personal use and for non-commercial distribution. All copies must include this copyright statement.

McBride Richardson, P.C. was originally incorporated as J. Calvin McBride & Associates, P.C. and was formerly known as J. Calvin McBride & Associates, P.C.  Both of these names relate to the same corporate entity.