Alabama Real Estate Commission proposes stricter rules on equitable interest disclosures

On March 5, 2025, the Alabama House introduced House Bill 397, aimed at enhancing the regulatory framework governing real estate transactions in the state. The bill seeks to address concerns regarding transparency and ethical practices among real estate licensees, particularly in the context of assignments of equitable interests in residential real estate contracts.

Under current law, the Alabama Real Estate Commission has the authority to investigate complaints against licensees and impose disciplinary actions, including license revocation or fines. House Bill 397 expands this authority by specifically targeting situations where a licensee sells or offers to sell an equitable interest in a contract without disclosing that the seller is not the deed holder. This provision aims to protect potential buyers from deceptive practices and ensure they are fully informed about the nature of the transaction.

Key provisions of the bill include requirements for licensees to provide written disclosure to sellers regarding a buyer's intent to assign an equitable interest in the property. Additionally, the bill mandates that licensees give prior notice of at least three business days before the effective date of any assignment and establishes that closing dates cannot be automatically extended. These measures are designed to foster greater accountability and transparency in real estate dealings.

The introduction of House Bill 397 has sparked discussions among stakeholders in the real estate industry. Proponents argue that the bill is a necessary step to safeguard consumers and uphold ethical standards within the profession. Critics, however, express concerns about the potential for increased regulatory burdens on real estate transactions, which could complicate the buying and selling process.

The implications of this bill could be significant, as it seeks to clarify the responsibilities of real estate professionals and enhance consumer protection. If passed, it may lead to a shift in how real estate transactions are conducted in Alabama, potentially influencing market dynamics and the behavior of licensees.

As the legislative process unfolds, stakeholders will be closely monitoring the bill's progress, anticipating debates and possible amendments that could shape its final form. The outcome of House Bill 397 could set a precedent for future regulatory measures in the real estate sector, reflecting the ongoing evolution of consumer protection laws in Alabama.