USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Dow, Dentons
2.7 Soil Pollution or Environmental Contamination
2.10 Taxes Applicable to a Transaction The deed tax is triggered by any real estate convey - ance and is typically allocated to the purchaser, unless otherwise agreed by the parties. The purchase of an interest in a property-owning company is not consid - ered a conveyance of real estate and, therefore, does not trigger the deed tax. The deed tax is USD0.50 for every USD500 (rounded up) of the conveyed prop - erty’s value. If a mortgage is recorded simultaneously with the deed, a credit is provided by statute, such that the deed tax due is calculated on the value of the real property not securing the mortgage only (Section 40-22-1 (c)). For example, if a property is purchased and sold for USD2 million and the deed is recorded simultane - ously with a mortgage of USD1.5 million secured by the property, the deed tax would be calculated only against the USD500,000 portion of the property’s val - ue not already subject to the mortgage tax. Statutory deed tax exemptions exist for certain instru - ments made for agricultural purposes (Section 40-22- 4), farm loans (Section 40-22-5) and certain convey - ances by religious organisations (Section 40-22-5.1). 2.11 Legal Restrictions on Foreign Investors Under Alabama law (in addition to FIRPTA), upon the sale of any real property, 3% (if the buyer is an indi - vidual) or 4% (if the buyer is an entity) of the purchase price must be withheld; or, if the gain recognised on the sale is less than the purchase price and the seller provides the buyer with an Affidavit of Seller’s Gain (see Alabama Department of Revenue (ADOR) Form NR-AF2), the buyer may withhold 3% or 4% of the amount of the gain (Section 40-18-86). Transferors may be exempt from these withholding requirements under Section 40-18-86 (d) (see 8. Tax ). The Alabama Property Protection Act (APPA) prohibits foreign principals (as defined in the APPA) from China (excluding Taiwan), Iran, North Korea and Russia from owning: • agricultural and forest property; or • property within ten miles of a military installation or critical infrastructure facility.
Alabama’s laws generally conform to federal environ - mental laws. Because environmental statutes often hold the current owner strictly liable for the costs of remediation, commercial real estate buyers and sell - ers may contractually allocate environmental liability. Buyers and sellers will negotiate the terms of any “as is” language, indemnification for environmental mat - ters, and any release of environmental claims between the parties. Negotiated terms vary between contracts, with sellers favouring caps on their liability and buyers preferring a complete indemnification from sellers. Addition - ally, many buyers wish to limit their liability by satis- fying the requirements for the “innocent landowner defence” against CERCLA liability (discussed further in 3.8 Lenders’ Liability Under Environmental Laws ). 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law An interested buyer can request a zoning verifica - tion letter from the applicable jurisdiction’s planning department. Some departments will include state - ments of compliance or non-compliance, but many counties in Alabama do not have the staff capacity to do so. In those cases, if a buyer or its lender requires a compliance certificate, consultants are available who will provide such a compliance report or certificate for a fee. Local municipalities may enter into a develop - ment agreement to facilitate a specific project use, depending on the municipality and project type. 2.9 Condemnation, Expropriation or Compulsory Purchase Governmental taking of property by eminent domain and condemnation actions may occur if the property is taken for a “public use” and payment of “just compen - sation” is made (Alabama Constitution of 1901, Arti - cle XII, Section 235). In addition to state and federal constitutional limitations, Alabama has adopted the Alabama Eminent Domain Code, which sets proce - dures for eminent domain cases (Section 18-1A-1 to -311). If a landowner rejects an offer to purchase from the state, the state will file a complaint for condemna - tion with the probate court for the county where the relevant property is located.
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