USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Dow, Dentons
As a general rule, the larger the project, the more likely it is for an owner to require more expensive security on a project. Public works are required to be bonded (see Section 39-1-1), but there is no requirement for any security or bonding to be posted by a contractor on private work. The most common method is for the owner to require both a payment and a performance bond from a repu - table surety. Other layers of security may be negoti - ated into the relevant contract if risk is increased. 7.6 Liens or Encumbrances in the Event of Non-Payment Any party who contributes work to the property that improves the property is eligible for a materialman’s lien (Section 35-11-210 et seq). The work provided must be a lasting improvement, not temporary. For example, an architect’s work in providing plans would be lienable, whereas a surveyor’s work would not; Wilkinson v Rowe , 98 So 2d 435 (Alabama 1957). If the lienor’s work is commenced prior to the “crea - tion” of a mortgage on the property, the lien will take priority over the mortgage; otherwise, the lien will be junior to the mortgage (Section 35-11-211). Liens may be removed from the property by transferring the lien to a bond using the statutory framework found in Sec - tion 35-11-233. 7.7 Requirements Before Use or Inhabitation Each governmental jurisdiction has a building inspec - tor’s office, which must issue a certificate of occu - pancy prior to the project being inhabited, and which establishes standards for construction in its respec - tive jurisdiction. Inspections are typically required to be conducted, and passed, prior to each phase of the work.
is USD0.50 per USD500 (rounded up) of value for the property conveyed. The obligation to pay the record - ing tax is on the buyer. However, the parties do commonly negotiate the eco - nomic burden in real estate sales contracts. Under Alabama law, a deed or other instrument conveying such property must include a Real Estate Sales Vali - dation Form (RT-1) provided to the county probate court at the time the instrument is presented to the probate court for recording. This form must include either proof of the actual purchase price (if the prop - erty is being sold) or the actual value of the property (which may be evidenced by a licensed appraisal or the assessor’s current value for the property). Income Tax Alabama imposes an income tax on the gain from the sale of real property (Section 40-18-1 et seq), at a maximum rate of 5% for non-corporate taxpayers and 6.5% for C corporations. Alabama does not provide a preferential rate for long-term capital gains. Withholding of Income Tax Alabama requires withholding of income tax on sales by non-resident taxpayers (Section 40-18-86), unless the seller provides an affidavit confirming Alabama residency (AL Form NR-AF1). Certain limited types of transactions are exempt from non-resident withholding under Section 40-18-86 (AL Form NR-AF3). If the seller is not an Alabama resident, and if the transaction is not an exempt transaction, the buyer is generally required to withhold either 3% (where the buyer is an individual) or 4% (where the buyer is an entity) of the purchase price. However, if the gain recognised on the sale is less than the purchase price, and the seller provides an Affidavit of Seller’s Gain (see AL Form NR-AF2), the buyer may withhold 3% or 4% of the amount of the gain. If the amount to be withheld, as based on the purchase price or the gain, is greater than the net pro - ceeds of the transfer, only the net proceeds need to be withheld and remitted by the purchaser. Generally, the net proceeds of the sale are the net payments to the transferor as shown on the closing statement, though
8. Tax 8.1 VAT and Sales Tax Recording Tax
Alabama imposes a recording tax upon the filing of a deed or similar instrument conveying an interest in real estate with the county probate court where the real property is located (Section 40-22-1 et seq); the tax
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