USA - ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser and Katie Sinclair, Dentons
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
amount secured by the mortgage. Mortgages with open-end or revolving indebtedness have two options for paying the recording tax, as fol - lows. • 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 principal indebtedness, the taxpayer must: (a) pay a recording tax on the actual amount initially advanced; (b) annually report the amount of indebted - ness 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 multi - ple counties or states. Additionally, a nominal per-page recording fee will be collected upon recording. 3.5 Legal Requirements Before an Entity Can Give Valid Security Other than general contract law principles and granting a mortgage in proper form for record - ing, 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 recommended 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 prior - ity over subsequent liens granted on the prop - erty. Section 35-10-1 to -98 deals with state requirements for foreclosure. There is a home - stead exemption pursuant to Section 6-10-2 and
The acquisition of commercial real estate is gen - erally financed with indebtedness secured by a mortgage lien on acquired property. Depend - ing on the type of real estate, financing may be available through bank debt, conduit loans, or
government-sponsored enterprises. 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 agreement into the mort - gage (in addition to separate UCC filings made locally and in the borrower entity’s domicile state) to cover personal property attached to or used in connection with the mortgaged real estate and proceeds. Lenders can also collat - eralize (with additional 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 busi - ness 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 Ala - bama 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
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