Alabama Private Real Estate School Bond

What Is the Purpose of the Alabama Private Real Estate Bond?

The Alabama Real Estate Commission (AREC) mandates private real estate educational institutions to be licensed through their administration. Under the Administrator license, the AREC requires the owner of the real estate school to obtain a $20,000 Private School Performance Bond (Real Estate), otherwise known as the Private Real Estate School Bond. These requirements act as tools to ensure that the owner of the school, and their instructors, will follow the regulations pursuant to Alabama Code 34-27-6, the rules pertaining to the Administrator license, and will fulfill all contractual obligations to students. The surety bond also acts as a fiscal guarantee for students who, as a result of the school committing violations, were financially harmed and in need of tuition fee reimbursement.

Which Educational Institutions Need the Alabama Private Real Estate School Bond?

Private real estate educational institutions that offer pre-license, post-license, and continuing education (CE) courses are required to obtain a $20,000 Private Real Estate School Bond in order to maintain Administrator licensure status and approval from the AREC to operate as a real estate school to the Alabama public. It is important to note that the surety bond provided by the owner of the school will also cover any branch schools named in the bond as well.

AREC approved schools that only offer pre-license and CE courses are exempt from the surety bond requirement. 

What Do Surety Underwriters Need to Know About the Private Real Estate School Bond?

Suretypedia has confirmed with industry experts that losses over the last ten years specific to this surety bond stand at an incredibly low rate. Underwriters are still recommended to complete a standard credit check of the applicant before offering bond rates. 

Individuals looking to open a private real estate education institution must first be approved by the Alabama Real Estate Commission, and then they can apply for an Administrator license. Licensure status can only be given to individuals who have acquired the required surety bond. If the applicant is granted a license, they will be expected to follow all rules and regulations pertaining to such and must fulfill the contractual obligations of their students. Failure to do so may result in the AREC inflicting fines onto the licensee, suspending or permanently revoking their license (suspension of a license can last up to two years), misdemeanor charges, and/or a damaged party pursuing a bond claim.

The Private Real Estate School Bond is considered a low risk due to claims only coming from past or present real estate school students. These claims will require civil action to be taken by the student and can be solved by the school simply reimbursing students for their unused prepaid tuition. 

What Do Surety Claims Handlers Need to Know About the Private Performance School Bond?

Private Real Estate School Bond claims will only come from a financially damaged real estate student. Under Alabama Code 34-27-6, a student may pursue a claim if they have incurred financial loss due to the school not fulfilling contractual education obligations and refunding all prepaid tuition or fees. This could occur if a school cancels courses or ceases operation completely due to financial hardship or a loss of license from the Alabama Real Estate Commission.

If the above scenario takes place, students may file a complaint with the AREC. While the AREC can fine the school large fees and suspend or terminate their license (if applicable), they cannot file a claim on behalf of the damaged student. If the complaint is found to be valid, the AREC will most likely recommend the student to take civil action against the owner of the school. In cases where the civil action is taken and the claim is proven to be justified by a state court, the bond will cover a full reimbursement of loss tuition and fees as well as an attorney’s fee fixed by the judge. 

How Much Does the Private Real Estate School Bond Cost in Alabama?

The Private School Performance Bond (Real Estate) is typically priced at 1 to 10% of the $20,000 bond limit. Rates can vary depending on the applicant’s credit score and the provided bond term options. For example, some surety companies offer annual, 2-, and 3-year bond terms. 

How Is the Private Real Estate School Bond Filed?

The Alabama Real Estate Commission requires the signed bond form to be filed with their office. The Private Real Estate School Bond must remain on file throughout the entirety of the institution’s operation.

The signed bond form should be sent to the following address:

Alabama Real Estate Commission
1201 Carmichael Way
Montgomery, AL 36106

For those initially applying for a license, the Administrator License application is available here and also must be sent to the AREC mailing address above. Additional school licensure information can be found here

Can the Private Real Estate School Bond Be Cancelled?

Yes, the bond may be cancelled by the surety provider upon their own accord or upon the principal’s request. The AREC will release liability within 30 days of receiving the bond’s cancellation notice. 

Is the Private Real Estate School Bond Renewable?

Upon the end of the bond term, the surety bond must be renewed by the principal in order to avoid a lapse in coverage for licensing. In the event that the school no longer has an active bond on file, the owner will be given 10 days to obtain a new bond to be filed with the AREC. Failure to do so will result in the immediate suspension of the school’s license.