Homestead Protection

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In Florida, our home is truly our castle, a castle that is impenetrable by creditors. Article X, Section 4 of the Florida Constitution exempts homestead property from levy and execution by judgment creditors. This means that a creditor cannot force the sale of your homestead to satisfy a judgment. Florida courts have liberally expanded definitions of homestead property to include more than just a single family house. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection. The Constitution defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres in any county in Florida. Contiguous property may include lots with separate legal descriptions and separate tax numbers.

To qualify for homestead protection, a debtor must be a permanent Florida resident, and the homestead property must be his primary place of residence.  Property purchased as a future residence is unprotected until the property is occupied as a principal residence.  A second home or investment property cannot be considered a Florida homestead.  Only “natural persons” quailfy for homestead protection, so properties titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships will not qualify.  Property owned by a living trust can be homestead property. A newly-enacted Florida Statute provides that property owned by a land trust may be homestead property.

What makes Florida’s homestead protection such a powerful asset protection tool is its unlimited monetary protection. A Florida resident can invest millions of dollars in large estate homes and farms and protect the full value of these luxury residences under Florida’s homestead law.  Under a Florida Supreme Court ruling, a person can transfer unprotected, non-exempt assets to her homestead at any time by either buying a new home or reducing the principal balance of an existing mortgage and protect this money under the homestead umbrella, even if the asset transfer was clearly designed to hide money from creditors. There are limited exceptions to this general rule pertaining to money obtained by deceit, fraud, or other egregious means.

There is no waiting period for homestead protection. The protection attaches the day you first occupy the property with the intent to make it your permanent Florida homestead. There are no papers to file, no forms to fill out. There is a Florida statute pertaining to a “declaration of domicile” which may be filed with a court, but this declaration is not required in order to qualify for homestead asset protection. Your intent to occupy a homestead is more important than any declaration you sign or file.

Co-ownership of a homestead can jeopardize the homestead exemption when one of the co-owners does not reside on the property. A judgment creditor of the non-resident co-owner can force the property to be sold. For example, assume a married couple puts their child on the title to their homestead for “estate planning” purposes so that the child is a one-third owner. If the child resides elsewhere in his own residence, he is not entitled to homestead protection of the parents’ residence. A judgment creditor of the child can levy upon the child’s one-third ownership share of the parents’ house and force the house to be sold at auction.

Exceptions To Homestead Exemption From Creditors

There are important exceptions to Florida’s homestead protection. Florida Constitution does not protect homestead property against tax liens, homeowner association  mechanic’s liens associated with labor or materials to repair or improve the homestead property, and voluntary liens including mortgages and homeowner association liens. For example, a contractor can place a lien on your homestead to enforce payment for labor and  materials furnished to your house, and your membership in a homeowner association subjects your homestead to liens for dues or assessment.

If a civil judgment is recorded in the county of your residence before you occupy your homestead, your subsequent occupancy will not protect the home from the pre-recorded judgment lien. Therefore, you should not purchase a homestead in any county where a creditor has previously recorded a judgment. The prior judgment will take precedence over your purchase and occupancy of a homestead in that county.

Florida’s constitutional homestead provision does not apply to a moblile or modular home situated on a leased lot. However, Florida Statute 222.05 protects mobile homes from judgment creditors. The statute provides that mobile home owners and occupants whose home is on leased land may claim the mobile home as their homestead exempt from levy and forced sale.

The asset protection benefits of homestead should not be confused with the homestead tax exemption

The tax exemption and creditor exemption are similar, but different rules apply to each. For example, the homestead tax exemption requires that you occupy your home on January 1 and that you must file papers with the county tax assessor or property appraiser.  These tax rules are irrelevant for asset protection of the homestead.

Homestead Exemption In Bankruptcy

Homestead protection may not apply if the debtor files bankruptcy.  Under the new bankruptcy law, homestead protection is available in bankruptcy up to $146,450 unless the debtor occupied her current Florida homestead property and previous Florida homestead properties for a continuous 40-month period. Joint bankruptcy debtors can protect $292,900 of a jointly-owned homestead. Also, a debtor’s transfer of cash into his homestead within 10 years of filing bankruptcy that is intended to defraud creditors may be challenged by the bankruptcy trustee if the transfer was intended to defraud creditors.  The new bankruptcy law has no effect on Florida’s unlimited homestead protection outside of bankruptcy.

Jon Alper

About Jon Alper

Jon is an attorney focusing on bankruptcy and asset protection in Orlando, Florida.