The Alabama Real Estate Commission (“AREC”) held its sixth meeting of 2026 on June 18th in Montgomery, Alabama. All commissioners were present, except for Emmette Barran, James L. Dye, and Deborah Lucas Robinson. The Commission reported that 203 licenses were issued in May. It also conducted 23 company audits, two assistance visits, and six education audits during the same period. 

During the meeting, the Commission held a public hearing on a proposed rule addressing earnest money disbursement procedures. In addition, the Commission conducted four formal hearings, two of which involved similar allegations concerning trust account management.  

As required by law, AREC held a public hearing on a proposed rule addressing the disbursement of earnest money in terminated transactions. The proposal is intended to address situations where disputed earnest money remains in brokerage trust accounts for extended periods without resolution. It would require qualifying brokers to disburse earnest money to the buyer 90 days after the contractual closing date unless the parties reach a written agreement or the funds are subject to a court proceeding. 

For agreements entered into before the rule’s effective date, the timeframe would be extended to one year. The rule would also require a disclosure in purchase agreements notifying consumers of this process. Two public comments were presented, both acknowledging the need for regulatory action while suggesting alternative approaches for the Commission’s consideration. Written comments may be submitted to AREC until July 13, 2026, at 4:30 p.m. Click here to view the official proposed rule. 

Two formal hearings involved alleged violations of Alabama Code § 34-27-36(b)(8)(a) concerning the commingling of money belonging to others with a broker’s own funds. Both matters arose from audits of qualifying brokers operating property management companies. 

In the first case, AREC’s audit identified a significant overage in the property management trust account. Auditors were unable to independently determine the source of the excess funds based on the records provided. The qualifying broker testified that the excess funds consisted of management fees. They further explained that the account was reconciled monthly using software that tracked receipts and disbursements by property, allowing transactions to be tied to individual client accounts and reflected in owner statements. In discussion of the case, Commissioners emphasized the importance of maintaining strict separation of client and brokerage funds in trust accounts and noted that unexplained overages raise compliance concerns during audits, even where the funds are later asserted to be identifiable.  

In the second case, the audit revealed a shortage in the property management trust account. The qualifying broker testified that although monthly reconciliations were intended, the account was not consistently reconciled each month. They further stated that they could not determine the source or cause of the shortage and did not use software to assist with account reconciliation. Testimony also showed that certain office expenses had been paid directly from the property management trust account. 

In both cases, the Commission found the qualifying brokers and their companies guilty of violating Alabama Code § 34-27-36(b)(8)(a) for commingling money belonging to others with his or her own funds and imposed monetary penalties. These matters serve as a reminder that client funds must remain separate from brokerage funds. Brokerage funds should be kept in a separate operating account. 

If you have questions about these topics and are an Alabama REALTORS® member, please contact the Legal Line.