Trust Funds
A security deposit collected from a tenant by a property manager in Alabama must be:
APlaced in a federally insured trust account and kept separate from operating funds✓ Correct
BInvested in stocks for the benefit of the owner
CHanded directly to the property owner
DDeposited in any account the manager chooses
Explanation
Under the Alabama URLTA and AREC rules, security deposits must be held in a trust account at a federally insured financial institution, separate from the property manager's or owner's operating funds. Tenants must be notified of where the deposit is held.
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Key Terms to Know
Escrow
A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
State-Specific Concepts
Trust Account RulesAREC Regulation
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