USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Dow, Dentons
See Section 35-1-1.1. A list of what qualifies as a criti - cal infrastructure facility is provided in Section 35-1- 1.1 (b)(2), and Section 35-1-1.1 (d) provides an excep - tion for existing owners. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate The acquisition of commercial real estate is generally financed with indebtedness secured by a mortgage lien on acquired property. Depending on the type of real estate, financing may be available through bank debt, conduit loans or government-sponsored enter - prises. 3.2 Typical Security Created by Commercial Investors A purchaser or developer of commercial real estate generally grants a mortgage to secure borrowed funds used to acquire and/or develop the real estate. Most commercial lenders also incorporate a security agree - ment into the mortgage (in addition to separate UCC filings made locally and in the borrower entity’s domi - cile state) to cover personal property attached to or used in connection with the mortgaged real estate and proceeds. Lenders can also collateralise (with addi - tional agreements and filings) the borrower’s entity interests or stock and/or deposit accounts. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Financial institutions that are not domiciled in Alabama may be required to qualify to do business in Alabama and may be liable for filing tax returns and payment of annual privilege tax (under Sections 40-14A-21 to 40-14A-29) and excise tax (under Sections 40-16-1 to 40-16-8) if the financial institution is doing business in Alabama within the meaning of the laws. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Under Section 40-22-2, mortgage recording tax is generally USD0.15 per USD100 of the loan amount secured by the mortgage. Mortgages with open-end or revolving indebtedness have two options for paying the recording tax, as follows.
• Paying the recording tax based on the maximum principal indebtedness stated in the mortgage, regardless of the cumulative amount advanced. • If the mortgage does not state the maximum prin - cipal indebtedness, the taxpayer must: (a) pay a recording tax on the actual amount ini - tially advanced; (b) annually report the amount of indebtedness secured by the mortgage; and (c) pay tax on additional advances made. There are mechanisms, such as obtaining tax orders from ADOR, for allocating recording tax for mortgages covering property in multiple counties or states. Addi - tionally, a nominal per-page recording fee will be col - lected upon recording. 3.5 Legal Requirements Before an Entity Can Give Valid Security Other than general contract law principles and grant - ing a mortgage in proper form for recording, with the required information included in the document, there are no specific legal rules or requirements applicable solely to entities. For most transactions, it is recom - mended to obtain a lender’s title insurance policy insuring the mortgage. 3.6 Formalities When a Borrower Is in Default A mortgage must be recorded to maintain priority over subsequent liens granted on the property. Sec - tion 35-10-1 to -98 deals with state requirements for foreclosure. There is a homestead exemption pursu - ant to Section 6-10-2 and a one-year statutory right of redemption under Section 6-5-248 (b). 3.7 Subordinating Existing Debt to Newly Created Debt Existing secured debt can be subordinated to newly created debt if the parties execute and record a sub - ordination agreement. 3.8 Lenders’ Liability Under Environmental Laws Unless the lender is deemed to be a partner in the transaction, it cannot be held liable under environmen - tal laws for merely holding security (ie, a mortgage) unless it directly causes the pollution or contamina - tion. Nonetheless, most Alabama lenders typically
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