§ 34-27-31. Recovery Fund created; fees paid to fund; injured party's
recovery from fund; procedures, appeals, etc.; licensee to report any
legal action taken against him.

(a) The commission shall establish and maintain a Recovery Fund from
which an aggrieved party may recover actual or compensatory damages, not
including interest and court costs, sustained only within the State of Alabama
as a result of conduct of a broker or salesperson in violation of Article 1 or 2
of this chapter or the rules and regulations of the commission.
(b) Notwithstanding any other provision to the contrary, payments from
the Recovery Fund are subject to the following conditions and limitations:
(1) The fund shall not be obligated for the acts or omissions of a broker
or salesperson while acting on his or her own behalf or on behalf of his or
her child, spouse, or parent regarding property in which he or she or his or
her spouse, child, or parent has, or is attempting to acquire, an interest; or
for the acts or omissions of an inactive licensee; or for the acts or omissions
of a corporation, branch office, or partnership except through its licensed
salespersons and brokers as individuals. The fund shall not be obligated
for any judgment or settlement resulting from an act or omission of a
broker or salesperson committed in conjunction with the marketing or
development of a time-sharing project.
(2) Payments for claims based on judgments or settlements against any
one person shall not exceed fifty thousand dollars ($50,000) in the aggregate.
(3) Payments for claims arising out of the same transaction shall not
exceed twenty-five thousand dollars ($25,000) in the aggregate, regardless
of the number of claimants.
(4) The fund shall not be liable for payments to a licensee or bonding
company unless the licensee or bonding company was a principal party to a
real estate transaction on which the judgment was based.
(c)(1) When any person makes application for an original license as a
broker or salesperson, he or she shall pay, in addition to all other fees, a fee
of thirty dollars ($30) for deposit in the Recovery Fund. In the event the
commission does not issue the license, this fee shall be returned to the
applicant.
(2) Any salesperson licensee who has paid the additional fee and who has
attained a broker license and has paid the additional broker fee shall be
refunded, upon request, one of the additional fees and no other salesperson
licensee shall be required to pay an additional fee upon attaining broker
status.
(3) Payments made to the Recovery Fund in lieu of bond by a licensee
shall be paid only one time when he or she is originally licensed by the
commission.
(d) When the balance remaining in the Recovery Fund is less than five
hundred thousand dollars ($500,000), each broker and salesperson shall on
order of the commission pay a fee of thirty dollars ($30) per license for deposit
in the Recovery Fund. A licensee on inactive status shall not be required to
contribute to the fund at that time. A fee of thirty dollars ($30) shall be paid
at the time a license is activated.
(e)(1) When an aggrieved person commences an action for a judgment
which may result in collection from the Recovery Fund, the aggrieved
person shall notify the commission in writing, by certified mail, return
receipt requested, to this effect at the time of the commencement of the
action.
(2) When the commission receives the notice described in subdivision
(e)(1), it may enter an appearance, file pleadings and motions, appear at
court hearings, defend the action, or take whatever other action it deems
appropriate either on the behalf and in the name of the defendant, or in its
own name. The commission may also take any appropriate method of
review either on behalf and in the name of the defendant, or in its own
name. The commission may settle or compromise the claim. Any expenses
incurred by the commission in defending, satisfying, or settling any claim
shall be paid from the Recovery Fund.
(3) When an aggrieved person recovers a valid judgment in a court of
competent jurisdiction against a broker or salesperson on the grounds
described in subsection (a) above, which occurred on or after October 1,
1979, the aggrieved person may, on the termination of all proceedings,
including reviews and appeals in connection with the judgment, file a
verified claim in the court in which the judgment was entered and, on 10
days' written notice to the commission, may apply to the court for an order
directing payment out of the Recovery Fund of the amount unpaid on the
judgment.
(4) The court shall proceed on the application immediately and, on
hearing, the aggrieved person shall be required to show each of the
following:
a. He or she is not the spouse, child, or parent of the debtor, or the
personal representative of the spouse, child, or parent.
b. He or she has obtained a judgment, as described in subdivision
(e)(3), stating the amount of the judgment and the amount owing on the
judgment at the date of the application, and, that in the action, he or she
had joined any and all bonding companies which issued corporate surety
bonds to the judgment debtor as principal and all other necessary parties.
c. The following items, if recovered by him or her, have been applied
to the actual compensatory damages awarded by the court:
1. Any amount recovered from the judgment debtor.
2. Any amount recovered from bonding companies.
3. Any amount recovered in out-of-court settlements.
(5) The court shall order that the Recovery Fund pay whatever sum it
finds due under this section.
(6) Should the commission pay from the Recovery Fund any amount in
settlement of a claim or toward satisfaction of a judgment against a
licensee, all licenses of the licensee may be terminated by the commission.
The commission may refuse to issue a new license to the former licensee
until he or she has repaid in full, plus interest at the rate of 12 percent a
year, the amount paid from the Recovery Fund. A discharge in bankruptcy
shall not relieve a person from the penalties and disabilities provided in this
section.
(7) If the balance in the Recovery Fund is insufficient to satisfy a duly
authorized claim or portion of a claim, the commission shall, when sufficient
money has been deposited in the Recovery Fund, satisfy the unpaid
claims or portions, plus interest at the rate of 12 percent a year in the order
that the claims were originally filed.
(f) The sums received by the commission pursuant to this section shall be
deposited into the State Treasury and held in a special fund to be known as
the Real Estate Recovery Fund, and shall be held by the commission in trust
for carrying out the purposes of the Recovery Fund. These sums may be
invested by the State Treasurer in any investments which are legal for
domestic life insurance companies under the laws of this state. Any interest
or other income from investments of the Recovery Fund shall be deposited in
the Real Estate Commission Revenue Fund with one-half being transmitted to
the University of Alabama Real Estate Research and Education Center.
(g) The commission may transfer funds one time only from the Real Estate
Recovery Fund to the University of Alabama Real Estate Research and
Education Center. The amount of the transfer may not reduce the Real
Estate Recovery Fund below six hundred thousand dollars ($600,000).
(h) When, on order of the court, the commission has paid from the
Recovery Fund any sum, the commission shall be subrogated to all the rights
of the judgment creditor, and all his or her right, title, and interest in the
judgment, to the extent of the amount paid from the Recovery Fund, shall be
assigned to the commission. Any amount and interest recovered by the
commission on the judgment shall be deposited to the fund.
(i) The failure of an aggrieved person to strictly comply with all of the
provisions of this section shall constitute a waiver of any rights under this
section.
(j) Each licensee shall notify the commission within 10 days after notice to
him or her of the institution of any criminal prosecution against him or her,
or of a civil summons and complaint against him or her, if the subject matter
of the civil complaint involves a real estate transaction or involves the
goodwill of an existing real estate business. The notification shall be in
writing by certified mail and shall include a copy of the summons and
complaint. If a criminal charge is made, it shall include the specific charge
made against the licensee together with a copy of any indictment or information
alleging the charges.
(k) Each licensee shall notify the commission in writing by certified mail
within 10 days after he or she receives notice that any criminal verdict has
been rendered against him or her, or that a criminal action pending against
him or her has been dismissed, or that a civil action in which he or she was a
defendant and which involved a real estate transaction or the goodwill of a
real estate business has resulted in a judgment or been dismissed. The
notification shall be in writing and shall include a copy of the court order or
other document giving the licensee notice.

(Acts 1951, No. 422, p. 745, § 5; Acts 1963, No. 290, p. 734, § 1; Acts 1971,
No. 2485, p. 3966, § 5; Acts 1971, 3rd Ex. Sess., No. 310, p. 4599, § 1;
Acts 1975, No. 563, p. 1276, § 1; Acts 1979, No. 79-690, p. 1221, § 1;
Acts 1982, No. 82-231, p. 282, § 1; Acts 1983, No. 83-516, p. 781, § 1;
Acts 1984, No. 84-282, p. 472, § 1; Acts 1985, No. 85-750, p. 1204, § 1;
Acts 1988, No. 88-214, p. 315, § 3; Acts 1992, No. 92-177, p. 305, § 3;
Acts 1995, No. 95-679, p. 1483, § 1.)

Cross references

See RULE 790-X-2.02.