Generally speaking, if you find a new house you want to buy, or build, you may sell your current homestead and protect the new sale proceeds in a bank account until you close on the purchase of a new homestead. A Florida client asked me if he could, instead of selling his current homestead, rent the property until the new homestead was available and sell the current homestead just before he closed on the new house. The question was whether the current house would lose its Florida homestead protection if it were rented for income.
I am not aware of any court decision directly on point. If a Florida resident moves out of his homestead, buys a new residence, and rents the former residence I think the former residence loses its homestead character. Where the person does not purchase a replacement homestead the issue is unclear and could be argued both ways. My best guess is that the answer to this person’s hypothetical facts is that the former residence, although rented temporarily, does not lose homestead protection
. Florida courts uniformly and historically have liberally construed Florida homestead protection in favor of debtor homeowners. If this client had sold his house pending purchase of the replacement homestead there is no question but that the proceeds would be protected. The fact that he chose to rent the house, possibly in order to gain further appreciation pending the new purchase, should not disqualify his protection. Even though the house is rented, I do not see an intent to abandon the homestead, especially since his replacement homestead is identified and is pending purchase. At least, that’s how I would argue this point on behalf of this client in a hypothetical creditor dispute.