USA - ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser and Katie Sinclair, Dentons
2.8 Permitted Uses of Real Estate Under Zoning or Planning Law An interested buyer can request a zoning veri - fication letter from the applicable jurisdiction’s planning department. Some departments will include statements of compliance or non-com - pliance, 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 cer - tificate, there are consultants available who will provide such a compliance report or certificate for a fee. Local municipalities may enter into a development 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 pay - ment of “just compensation” is made (Alabama Constitution of 1901, Article XII, Section 235). In addition to state and federal constitutional limitations, Alabama has adopted the Alabama Eminent Domain Code, which sets procedures 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 condemnation with the probate court for the county where the relevant property is located. 2.10 Taxes Applicable to a Transaction The deed tax is triggered by any real estate con - veyance and is typically allocated to the pur - chaser, unless otherwise agreed by the parties. The purchase of an interest in a property-owning company is not considered 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 property’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 simul - taneously 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 value not already subject to the mortgage tax. Statutory deed tax exemptions exist for cer - tain instruments made for agricultural purposes (Section 40-22-4), farm loans (Section 40-22-5), and certain conveyances by religious organiza - tions (Section 40-22-5.1). 2.11 Legal Restrictions on Foreign Investors See 1.3 Proposals for Reform regarding the APPA and Section 35-1-1.1. Under Alabama law (in addition to FIRPTA), upon the sale of any real property, the transferor must withhold 3% (if the buyer is an individual) or 4% (if the buyer is an entity) of the purchase price; or, if the gain recognized 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 ).
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