1.1 Alabama Real Estate Commission (AREC)
Key Takeaways
- AREC has nine members appointed by the Governor: seven are real estate licensees and at least one is a public/consumer member, serving staggered terms (Code of Alabama 34-27-7)
- AREC enforces the Alabama Real Estate License Law (Title 34, Chapter 27) and adopts the 790-X Administrative Code rules
- AREC can audit broker trust accounts at any time and discipline licensees up to license revocation
- The Recovery Fund pays a maximum of $25,000 per transaction and $50,000 aggregate per licensee for actual damages only (34-27-31)
- A salesperson must always work under a sponsoring qualifying broker and may never independently hold client funds
The Alabama Real Estate Commission (AREC) is the state agency that licenses, regulates, and disciplines real estate professionals in Alabama under the Alabama Real Estate License Law (Code of Alabama, Title 34, Chapter 27) and the AREC Administrative Code (Chapter 790-X).
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Commission Composition (Code of Alabama 34-27-7)
AREC consists of nine members appointed by the Governor with the advice and consent of the Senate. The breakdown tested on the state portion is:
| Member Type | Number | Notes |
|---|---|---|
| Real estate licensees (brokers/salespersons) | 7 | Long-time Alabama residents engaged in real estate |
| Public/consumer member | 1+ | At least one member who is not in the real estate business |
Members serve staggered terms so that the entire Commission is never replaced at once, preserving institutional knowledge. The seven industry appointees are chosen from nominees submitted by the trade association with the largest licensee membership, while the consumer member represents the public interest. The Commission elects its own officers and is supported by an Executive Director and staff who run day-to-day licensing and investigations.
Exam Tip: The number to memorize is nine total members, with the majority being active real estate licensees and at least one public/consumer member. Do not confuse AREC with the privately organized Alabama Association of Realtors (the trade group that publishes standard contract forms).
What AREC Does
| Function | What it means in practice |
|---|---|
| Licensing | Approves applications, sets exam eligibility, issues temporary and original licenses, handles renewals and reciprocity |
| Education | Approves schools, instructors, and courses; sets the 60-hour pre-license, 30-hour post-license, and 15-hour CE requirements |
| Enforcement | Investigates complaints, audits broker trust accounts (with or without notice), and issues subpoenas |
| Discipline | Holds hearings; can deny, reprimand, fine, place on probation, suspend, or revoke a license |
| Recovery Fund | Administers the Real Estate Recovery Fund that reimburses defrauded consumers |
| Rulemaking | Adopts the 790-X Administrative Code implementing the License Law |
The Alabama Real Estate License Law
The License Law is the statute; the AREC Administrative Code is the rules that carry it out. Together they define:
- Who must be licensed - anyone who, for compensation, lists, sells, buys, leases, auctions, or negotiates real estate for others.
- Exemptions - property owners dealing with their own property, attorneys performing legal duties, court-appointed persons (executors, trustees, receivers), and certain salaried on-site apartment managers.
- Broker vs. salesperson - a salesperson must always work under a sponsoring qualifying broker; a salesperson can never operate independently or hold client funds.
- Prohibited conduct and disciplinary grounds - misrepresentation, commingling, undisclosed dual agency, and unlicensed activity (covered in Chapter 4).
Recent law: Act 2025-59 and Act 2025-380 updated RECAD agency-disclosure procedures in 2025. AREC publishes statutory-change summaries on arec.alabama.gov; the state exam favors current rules.
The Real Estate Recovery Fund (corrected limits)
The Alabama Real Estate Recovery Fund compensates a consumer who suffers an unrecoverable loss because of licensee misconduct. It is funded by a $30 deposit every licensee pays at original licensure (and replenished when the balance falls below a statutory minimum).
Fund Limits - Code of Alabama 34-27-31
| Limit | Amount |
|---|---|
| Maximum per transaction (all claimants combined) | $25,000 |
| Maximum aggregate per licensee | $50,000 |
| Covers | Actual or compensatory damages only |
| Excludes | Interest, court costs, and punitive damages |
Accuracy correction: Earlier versions of many study guides list $50,000 per transaction and $100,000 per licensee. The statute's real figures are $25,000 / $50,000.
How a Recovery Fund Claim Works
- A consumer is harmed by a licensee's fraud, misrepresentation, or conversion in an Alabama transaction.
- The consumer sues and obtains a final court judgment against the licensee.
- The consumer is unable to collect the judgment from the licensee's own assets.
- The consumer applies to AREC and proves the judgment, the loss, and reasonable collection efforts.
- AREC pays actual damages up to the statutory caps.
- The paid licensee's license is automatically suspended/revoked until the fund is fully repaid with interest.
Key Point: The fund is a payer of last resort - a judgment plus failed collection must come first. The fund never pays a claim arising from the consumer's own dealings as a principal-licensee.
How AREC Fits Into Alabama's Real Estate System
It helps to see AREC alongside the other bodies a licensee deals with, because the state portion sometimes asks "which body does X."
| Body | Role | Licensee touchpoint |
|---|---|---|
| AREC | State licensing/regulatory agency | Licenses, rules, discipline, Recovery Fund |
| Alabama Legislature | Writes the License Law (Title 34, Ch. 27) | Source of AREC's authority and RECAD |
| County Probate Court | Records deeds and mortgages | Where title documents are recorded |
| Alabama Association of Realtors | Private trade group | Publishes standard contract/disclosure forms (not a regulator) |
| HUD / fair-housing agencies | Federal/state civil-rights enforcement | Fair-housing complaints |
Common trap: The Alabama Association of Realtors is a voluntary trade association, not a government regulator. Only AREC issues licenses and imposes discipline. Membership in a Realtor association is never required to hold an Alabama license.
The Executive Director and Daily Operations
The nine commissioners set policy, but an appointed Executive Director and staff carry out daily functions - processing applications, scheduling exams with PSI, fielding consumer complaints, conducting trust-account audits, and presenting investigation findings to the Commission. The Commission itself focuses on rulemaking and adjudicating disciplinary cases. Understanding this split clarifies why a complaint is first investigated by staff and only later decided by the Commission at a hearing - a sequence echoed in Chapter 4's disciplinary process.
How many members serve on the Alabama Real Estate Commission, and who appoints them?
Which of the following is the maximum the Real Estate Recovery Fund will pay in the aggregate against any one licensee?
Which document is the SOURCE of AREC's authority, as opposed to the rules that implement it?