Alabama Vacation Timesharing Plan Broker/Salesman Bond

What Is the Purpose of the Alabama Vacation Timeshare Plan Bond?

The Alabama Real Estate Commission (AREC) mandates sellers and brokers of timeshare plans to file a surety bond as part of their license. Surety companies are tasked with providing the bond as a form of financial security for the AREC should the licensee’s actions cause damage. 

List the bond alternatives that exist and the benefit or downfall of them. Items may include letters of credit, accreditation with specific associations, dedicated accounts, classification, etc.

What Do Surety Underwriters Need to Know About the Vacation Timesharing Plan Broker or Salesman Bond?

Claims come from the Real Estate Commission for prohibited acts of Title 34, Chapter 27, Article 3 of the Code of Alabama, 1975

If the final judgment against the licensee occurs due to violations of the above Chapter, their license will be automatically suspended. The final judgment is only considered after the appellate courts of Alabama have deemed it necessary. The suspended licensee can request a hearing to give reasoning as to why the license should not be revoked. Any person may also bring a civil suit against the licensee. At any time during these court hearings or civil actions, the bond may be used for reimbursement to the affected person(s).

The bond limit is $5,000 for sellers and $10,000 for brokers. Either bond can be cancelled at any time with a 30-day written notice. With the low bond limits, the ability to cancel the bond, and the involvement from the AREC and courts, the risk of losses on this bond are generally low.

It is recommended that surety underwriters perform a credit check of each applicant to evaluate risk.

What Do Surety Claims Handlers Need to Know About the Vacation Timesharing Plan Broker/Salesman Bond?

Claims generally come from the AREC, but any person can bring a civil action against the licensee which can also lead to a claim. Example claim: a seller of vacation time-sharing plans fails to refund any payments made by the buyer within 20 days of receipt of notice of cancellation, and the buyer has not received benefits stated in the contract. Basically, the failure of the contractor to abide by contracts may result in a bond claim.

Although there is no specific timeline for claim handling for surety companies in Alabama, insurance carriers must acknowledge receipt of a claim within 15 days of receiving notice and deny or accept the claim within 30 days of receiving the proof of loss.

Can a Timeshare Plan Seller or Broker Avoid the Bond Requirement?

No; the bond is the only option for vacation timeshare plan brokers and sellers. 

How Much Does the Vacation Timesharing Plan Broker/Salesman Bond Cost?

The typical price range is 1-10% of the bond limit, starting at $100. The licensee’s credit will help determine an appropriate rate.

How Is the Alabama Vacation Timesharing Plan Broker/Salesman Bond Filed?

The bond form needs signatures from the licensee and the surety company, in addition to the surety company’s seal. All documentation must be sent to the following location:

State of Alabama Real Estate Commission
1201 Carmichael Way
Montgomery, AL 36106

Can the Timeshare Plan Bond Be Cancelled?

The bond can be cancelled with a formal written notice from the Surety to the Real Estate Commission. The AREC keeps the bond on file for 30 days. If the bond is being cancelled early and a refund is available to the licensee, the surety company should calculate the 30-day cancellation period into the refund amount.

Are Alabama Vacation Timesharing Plan Broker/Salesman Bonds Renewable?

Yes; the bond is to be in place for the duration the seller or broker is offering vacation timeshare plans. Bonds are generally offered in 1-, 2-, and 3-year terms and remain active with a new bond, continuation certificate, or renewal payment.