Alabama Legislative Update

Real Estate Closing Lawyers Beware - The Alabama Property Protection Act of 2026 Impacts Your Liability

The Alabama Legislature has adjourned its 2026 Regular Session. Lawmakers considered over 1,000 bills this session and advanced several that are directly impactful to lawyers. AIM will address the more significant lawyer-related legislation over the next couple of newsletters, but this month we focus on perhaps the most important - The Alabama Property Protection Act of 2026 (HB 426 / SB 292). Attorneys involved in closings, title work or real estate settlement functions should pay close attention to this legislation and its potential effect on lawyer liability.

The act is an anti-title fraud law with the stated purpose of protecting property owners, strengthen verification requirements, and create remedies for fraud victims. The law targets seller impersonation schemes, fraudulent deed filings, online listing scams, and weak identity verification in closings (this is the part that affects real estate attorneys).  The law was signed by the governor on April 15, 2026, and is expected to take effect October 1, 2026.

The legislation makes some important changes potentially affecting the liability of lawyers who close real estate transactions.  Settlement agents (a term not defined in the act) are required to conduct identity document validation and identity verification of the seller of real property that is vacant or not owner-occupied and unencumbered by a security instrument. Such documentation constitutes an affirmative defense, the existence of which is to be determined as a question of law in a civil action brought under the act. The settlement agent must keep documentation demonstrating compliance for 5 years. There is a four-year statute of limitations from the date of the deed (the act does not specify whether from the recording or the date signed).

The act provides a civil penalty on the fraudsters of up to $100,000 per transaction. Title insurers, banks, credit unions and state and local governments are exempt from civil penalties. Settlement agents, regardless of how licensed, are not exempt, but can produce documentation as noted above, to assert an affirmative defense to any civil penalty. The Alabama Securities Commission has the authority to investigate claims and enforce the law with respect to all regulated conduct under the act. The act does not limit the right to bring civil or equitable actions that may lawfully arise under existing Alabama laws. The act also provides an expedited quiet title procedure for fraudulent title conveyance allegations.

In addition, the act provides rules for notaries. The notary must be within the state and the signatory must be physically present within the United States and in the physical presence of the notary at the time of acknowledgement (in person or by two-way audio-video communication technology recorded and maintained for seven years). The notary must positively identify the prospective signatory via personal knowledge or the examination of two forms of government-issued ID, at least one of which must include the face and signature of the signatory. The notary must verify the identity of the signatory through public or private data sources. The act contains numerous other requirements for notaries – lawyers should read the act, inform any notaries in their offices of these requirements, and develop procedures to ensure these requirements are followed.

The act is not a paragon of clarity and raises several questions of concern for lawyers aside from the lack of definitions – for example, how does it work vis-à-vis the Alabama Legal Services Liability Act, both in terms of the ALSLA specification that there shall only be one cause of action against a lawyer, and the 4 year statute of limitations in the act versus the 2 year statute in the ALSLA? Is a lawyer who fails to obtain the required identity verification subject to the $100,000 civil penalty as a “person who ha[s] committed the fraud” in Section 35-21-12?  

As we watch how implementation of the act unfolds, lawyers should familiarize themselves with its provisions and develop procedures to ensure compliance.