Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.
Condominium termination in Alabama is governed by Ala. Code § 35-8A-218, a provision of the Alabama Uniform Condominium Act (UCA), enacted in 1990 as Acts 1990, No. 90-551, and most recently amended by Act 2018-403. The statute closely tracks the Uniform Condominium Act promulgated by the Uniform Law Commission, and practitioners familiar with the ULC model act will recognize most of its provisions. But several features — particularly around lender consent, appraisal finality, and post-termination liability — warrant careful attention in Alabama-specific transactions and disputes.
Doctrinal Framing
Termination of a condominium converts a multi-ownership property structure — in which dozens or hundreds of individual fee-simple interests coexist with common-element ownership and association membership — back into a form of concurrent ownership or allows for outright sale. Because the fragmented ownership structure is fundamentally incompatible with standard property law, the termination process must address the interests of three constituencies simultaneously: unit owners (who lose their individual fee interests), lienholders (whose collateral changes character), and the association (which must wind down and distribute assets).
Alabama's § 35-8A-218 addresses all three. The dominant tension in termination litigation is between the 80-percent-supermajority rule — which allows a substantial majority to compel dissenting owners to accept termination — and the appraisal and distribution provisions that are intended to ensure dissenting owners receive fair value for their interests.
The 80% Threshold and Agreement Mechanics
Voting Requirement
Under § 35-8A-218(a), a condominium may be terminated "only by agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage the declaration specifies." Two modifiers are important:
- The declaration may require a higher percentage (e.g., 90 or 100 percent), but it may not require a lower percentage unless all units in the condominium are restricted exclusively to nonresidential uses.
- The 80 percent threshold is measured by voting interests, not by number of unit owners.
An 80-percent threshold means that a developer or institutional investor who has accumulated significant units can control the termination outcome. Conversely, a minority of approximately 21 percent of the voting interests can block termination entirely — at least until a sufficient supermajority is assembled.
Execution and Recordation
Under § 35-8A-218(b), the termination agreement must be:
- Evidenced by execution of a termination agreement or ratifications thereof "in the same manner as a deed" by the requisite number of unit owners;
- Time-limited: The agreement must specify a date after which it is void if not recorded;
- Recorded in every county where any portion of the condominium is situated.
The agreement is effective only upon recordation. This means the timeline between assembly of sufficient consents and recordation is a potential vulnerability: if the required percentage of unit owners who signed termination agreements later rescind or die before recording, the agreement may fail.
The Two Structural Alternatives: Sale vs. No Sale
The statute distinguishes between two types of termination based on the physical character of the condominium:
Condominiums with Only Horizontal Boundaries (§ 35-8A-218(c))
In condominiums where all units have horizontal boundaries — typically high-rise apartment-style buildings — the termination agreement may provide for sale of all common elements and units following termination. If real estate is to be sold, the termination agreement must set the minimum terms of the sale. This prevents the termination trustee from accepting a below-market purchase price without owner authorization.
Condominiums with Non-Horizontal Units (§ 35-8A-218(d))
Where some units do not have horizontal boundaries — typically attached townhomes or fee-simple-style condominiums where each unit occupies a defined ground-level footprint — the agreement may provide for sale of the common elements but may not require sale of the individual units "unless the declaration as originally recorded provided otherwise or unless all the unit owners consent to the sale."
This distinction is operationally significant for Alabama condo terminations, where many communities consist of low-rise or townhome-style structures: a forced sale of the entire property requires unanimous owner consent unless the original declaration anticipated it, but the common elements alone can be sold pursuant to the 80 percent supermajority.
Association as Trustee: Title and Authority
Under § 35-8A-218(e), if real estate is to be sold following termination, title vests in the association as trustee for all holders of interests in the units upon termination. The association thereafter has all powers necessary to effect the sale and continues in existence with all its prior powers until proceeds are distributed. This trust mechanism is critical for two reasons:
- It prevents a piecemeal dissipation of the property's value pending sale;
- It creates a fiduciary relationship — the association owes trust-law duties to unit owners and lienholders as the trust beneficiaries.
An association acting as termination trustee that accepts a sale price below the minimum terms set in the termination agreement, or that fails to market the property adequately, may be liable for breach of trustee duty. Unit owners have standing to challenge the trustee's conduct in circuit court.
Continued occupancy right: Until the sale is concluded, each unit owner (and successors in interest) retains an exclusive right to occupancy of the portion of the real estate that formerly constituted their unit. During that period, the owner remains liable for all assessments and other obligations. This means a delay in sale does not suspend the ongoing financial obligations of occupying owners — a practical consideration for dissenting owners who resist termination by trying to slow the process.
Distribution of Proceeds: The Appraisal Mechanism
Fair Market Value as the Baseline
Under § 35-8A-218(i)(1), the respective interests of unit owners in sale proceeds are measured by the fair market value of their units, limited common elements, and common element interests immediately before termination, as determined by one or more independent appraisers selected by the association.
The appraisal decision is distributed to all unit owners and becomes final unless disapproved within 30 days after distribution by unit owners representing 25 percent of the votes in the association. This 25 percent threshold for challenging the appraisal is relatively low; a coordinated minority of dissenting owners can force reconsideration of an appraisal they believe understates unit values.
Destroyed Units
Under § 35-8A-218(i)(2), if any unit or limited common element is "destroyed to the extent that an appraisal of the fair market value thereof before destruction cannot be made," the interests of all unit owners default to their "respective common element interests immediately before the termination." This provision applies most naturally to casualty-driven terminations where physical damage makes individual-unit appraisal impossible — a common trigger for termination in coastal or flood-prone Alabama communities.
Lender Consent and Priority
Pre-Declaration Liens
Under § 35-8A-218(k), if a lien or encumbrance against a portion of the real estate has priority over the declaration, and the lien has not been partially released, the foreclosing party may record an instrument excluding that real estate from the condominium upon foreclosure. This provision can fragment a termination if different portions of the project are subject to different lien priorities — a common problem in phased-development condominiums.
Post-Termination Lien Treatment
Under § 35-8A-218(h), following termination, creditors of the association holding liens recorded before termination may enforce those liens in the same manner as any lienholder. All other association creditors are treated "as if they had perfected liens on the units immediately before termination." This deemed-lien treatment protects unsecured creditors of the association from being subordinated to unit owners in the distribution of termination proceeds.
The distribution priority is: (1) secured lienholders with pre-termination recorded liens, in order of lien priority; (2) all other association creditors (treated as deemed lienholders); (3) remaining proceeds to unit owners in proportion to their respective interests under the appraisal.
Owner Protections
No-Sale Option
For non-horizontal condominiums, the failure of the 80-percent majority to obtain unanimous consent for unit sales means that dissenting unit owners cannot be forced to sell their physical units — only the common elements can be transferred. This is a significant protection for owners in townhome-style condominiums who may not want to sell.
Occupancy Rights Pending Sale
The statutory right to continued occupancy pending sale under § 35-8A-218(e) — without loss of possessory rights — means dissenting owners are not immediately displaced by a termination vote. However, they must continue paying assessments and other obligations; a dissenting owner who refuses to pay post-termination assessments faces the same collection exposure as any other delinquent owner.
Appraisal Challenge
The 30-day/25-percent appraisal-challenge mechanism under § 35-8A-218(i)(1) is the primary procedural protection for dissenting owners who believe the association's selected appraiser has undervalued their units. Dissenting owners should retain independent appraisal counsel before the 30-day window opens; a counter-appraisal can be used both to mobilize the 25 percent disapproval vote and as evidence in any subsequent litigation over the fairness of the distribution.
Post-Termination Liability
Section 35-8A-218(g) provides that following termination, the proceeds of any sale, together with the assets of the association, are "held by the association as trustee for unit owners and holders of liens on the units as their interests may appear." The association does not wind down until the proceeds are fully distributed. Any association debt incurred after termination but before final distribution remains a valid obligation; the association's continued existence during this period — with all its governance and fiduciary obligations intact — is sometimes overlooked by board members who treat the termination vote as the end of their responsibilities.
Practice Notes
For dissenting unit owners: Act within the 30-day appraisal-challenge window. Organize a coalition of 25 percent of voting interests to formally disapprove the appraisal. Seek discovery of the appraiser's engagement letter, the comparable sales used, and any communication between the appraiser and the association about preferred outcomes.
For board and developer counsel: Ensure that the termination agreement specifies minimum sale terms that are consistent with the appraisal. An agreement that allows the termination trustee to accept less than the appraised minimum may expose the trustee to breach-of-trust claims. Confirm recordation in every county where any portion of the condominium is situated — an often-overlooked requirement for projects straddling county lines.
Lien priority mapping: Before terminating, conduct a title search for all pre-termination liens on the common elements and individual units. Lienholders with priority over the declaration are in a position to exclude their collateral from the condominium upon foreclosure; this can fragment the property and prevent a clean sale.
Lender consents: While § 35-8A-218 does not expressly require lender consent to a termination agreement, lenders holding recorded mortgages on individual units are lienholders whose interests are affected. As a practical matter, major institutional lenders often require notice and negotiation before releasing their lien interests. A termination plan that does not address lender cooperation may stall at the title stage.
Open Questions
Alabama has relatively few reported appellate decisions construing § 35-8A-218. The most significant open questions are: (1) what constitutes adequate marketing of the property by the association-trustee; (2) whether the 25 percent appraisal-disapproval vote triggers a new independent appraisal process or merely stays implementation pending negotiation; and (3) whether a developer who has acquired 80 percent of units through post-turnover purchases owes any heightened fiduciary duty to the remaining minority before initiating termination.
Closing
Alabama § 35-8A-218 provides a workable framework for condominium termination, but it is not self-executing. The appraisal mechanism, the distinction between horizontal and non-horizontal condominiums, the trustee obligations of the association, and the lien-priority analysis each require careful legal work before termination can close. For dissenting owners, the statute offers meaningful procedural protections — but most of them expire quickly. Owners who learn that a termination is underway must retain counsel immediately and preserve their appraisal-challenge rights.
Talk to Yates Anderson
If you are litigating a matter in this area — or weighing whether to — the working analysis above only goes so far. Request a case evaluation and a Yates Anderson attorney will respond within one business day.
Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.