Florida Homestead Law
Florida homestead law protects a Florida resident’s primary home from levy and execution by their judgment creditors through Article X, Section 4 of the Florida Constitution and asset protection planning. Due to Florida homestead exemption laws, a judgment creditor cannot force the sale of your home to satisfy a money judgment. A recorded judgment does not attach to a debtor’s Florida homestead. For the Florida homestead exemption, 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 in Florida.
The homestead provision of the Florida Constitution, sometimes called the Florida Homestead Act, defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres outside a municipality. Contiguous property may include lots with separate legal descriptions and separate tax numbers.
The text of the Florida homestead law provides as follows:
- There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person: a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family.
Florida Homestead Protection
The protection of the Florida homestead is one of the strongest asset protection tools in the country. The law protects unlimited value so long as a judgment debtor invests in his Florida home. Some judgment debtors that do not live in Florida even move to Florida to protect their hard-earned money from collection by a creditor.
The Florida homestead protection against a judgment is especially strong compared to other states because it stems from the state constitution itself, rather than a state statute. It is much less likely that a constitutional provision would ever be changed than a state statute. In addition, future laws enacted by the Florida legislature cannot override the protection provided by the state constitution.
Florida Homestead Qualification
To take advantage of the Florida Homestead exemption, 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 qualify for Florida homestead protection, so properties titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships will not qualify as homestead property. Property owned by a living trust can be homestead property according to several court rulings, and a Florida Statute provides that a land trust may own homestead property.
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 co-owner. If the child resides elsewhere, he is not entitled to homestead protection of the parents’ residence. A judgment creditor of the child in that situation can levy upon the child’s ownership share of the parents’ house and force the house to be sold at auction. The auction proceeds would be allocated between the child’s creditor and the parents
There is no waiting period for protection under the Florida homestead law. 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. Facts showing intent to occupy a homestead permanently, such as your drivers license and vehicle registration addresses, are more important than a declaration you sign or file with the court.
Fraudulent Conversions to a Homestead
What makes the Florida homestead protection such a powerful asset protection tool is its unlimited monetary protection and its exemption from fraudulent conversion. 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 his homestead at any time by either buying a new home or reducing the principal balance of an existing mortgage. In this way, the person can protect this money under the homestead umbrella, even if the asset transfer was clearly designed to protect money from creditors.
However, there are special timing considerations you should first consider with an attorney that specializes in the Florida homestead law.
Exceptions to Protection
There is an exception to the fraudulent conversion rule when the debtor obtained the money by deceit, fraud, or other egregious means and then used the money to purchase or improve the debtor’s homestead. A creditor may impose and foreclose an equitable lien on a Florida homestead if the creditor can prove that the debtor obtained money fraudulently or in breach of a fiduciary duty and then subsequently invested the same funds in a homestead property.
Other exceptions are written in the Florida Constitution. The most notable exceptions include:
- Liens on the homestead voluntarily given to secure a loan such as the mortgage to purchase your home or a home equity loan.
- Mechanics liens for goods and services other provided to build, repair, or improve your homestead
- Liens recorded prior to homestead acquisition to secure payment of homeowner association dues and special assessments.
- Property taxes, state tax, and IRS tax liens.
A property is not exempt under the Florida Homestead Act just because you intend to occupy the property some time if the future. The homestead law requires that you must reside in then property as your primary residence to have homestead protection from creditors. If a civil judgment is recorded in the county where you own a lot upon which you are building a future home, the judgment lien will attach to the property. Your subsequent occupancy of the home will not erase the prerecorded judgment lien.
Therefore, you should not purchase a homestead in any county where a creditor has previously recorded a judgment without careful planning as the prior judgment may take precedence over your purchase and occupancy of a homestead in that county.
Judgment Lien on Homestead Property
If it is based on the above exceptions to the homestead protection, a creditor may be able to get a judgment lien on homestead property. With a judgment lien, a creditor can possibly foreclose on the home, meaning they could force the sale to the highest bidder at a court auction. The proceeds of the sale would be applied towards the judgment balance.
Mistake made in purchasing or building a new home sometimes lead to the attachment of a judgment lien, which defeats the homestead protection.
Florida’s constitutional homestead law does not apply to a mobile or modular home situated on a leased lot. However, you can protect the mobile home in other ways. 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 and exempt it from levy and forced sale.
Homestead Tax Exemption vs. Creditor Protection
The rules for homestead creditor protection can be very different than the rules for homestead tax exemption. For example, the homestead tax exemption requires that you occupy your home on January 1 and that you file papers with the county tax assessor or property appraiser. These tax exemption requirements are irrelevant for asset protection of the homestead.
In addition, there are state income tax principals that require some people to live in Florida more than 180 days per year to avoid income taxation in another state. Florida’s homestead law does not impose a minimum annual residency requirement.
Homestead in Bankruptcy
Florida homestead protection may not apply if the debtor files bankruptcy. Under bankruptcy law, homestead protection is available in bankruptcy up to $146,450 unless the debtor occupied his 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. These numbers increase from time to time so debtors must get the current limits from their bankruptcy attorney.
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. Bankruptcy law has no effect upon Florida’s unlimited homestead exemption in state court proceedings.
If you have questions about the Florida homestead law and want to know how your home is or is not protected from creditors, give us a call to schedule an asset protection planning session.