Can Russian Oligarchs Protect Florida Homes from Federal Seizure by Using Homestead Law?
Many Russian oligarchs own homes in Florida. Even Vladimir Putin himself this week called out Russians “who have a villa in Miami or the French Riviera.”
A reporter called me this week and asked if Florida’s constitutional homestead protection could allow Russian oligarchs who own property in Florida to evade Federal seizure of real estate.
The Florida homestead is generally one of the strongest asset protection tools in the entire country, allowing judgment debtors to protect an unlimited amount of equity in their primary residence, even when making what would otherwise be a fraudulent conveyance.
However, I do not think Florida homestead law would protect against Federal seizure because:
- The protection is only against forced sale.
- Homestead must be owned by a natural person.
- A person must have an intent to permanently reside in the property to claim homestead.
- The homestead law may be preempted by the specific Federal law used to seize the home.
The Protection Is Only Against Forced Sale and Liens
Florida homestead law protects a person’s permanent residence from forced sale. It does not protect against seizure from the federal government.
The protection is derived from Article X, Section 4, of the Florida Constitution. The relevant portion includes:
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.
Therefore, if the seizure of the home by the Federal government does not involve the actual sale of the property, then arguably, the constitutional provision does not even apply. An oligarch sanctioned by the U.S. Treasury department may automatically have their assets, including real estate, frozen without any court orders required. The homestead law cannot protect against such governmental action.
Homestead Must be Owned by a Natural Person
While Russian oligarchs may enjoy owning Florida properties, they typically do not own the properties in their personal names. Instead, most properties owned by Russian oligarchs are shielded by shell companies, such as LLCs.
But the constitutional homestead protection only applies to homes owned by “a natural person.” An LLC is not a natural person, so an LLC cannot claim homestead protection over property it owns. This remains true even if the owner of the LLC permanently resides in the property.
Intent to Reside on Property as Permanent Residence
Claiming the Florida homestead protection requires the individual owning the home to have the intent permanently reside in the home. The key word is “permanently.” People who do not have the lawful right to reside in the United States permanently cannot intend to permanently reside in the home. Normally this requires either being a U.S. citizen or having a “green card.”
For example, in a recent bankruptcy case, an appellate court disallowed a debtor from claiming her Florida homestead as exempt even though she had lived in Florida for over 20 years because the debtor was not a U.S. citizen and did not have a green card. Similarly, no one in her family living in the home was a U.S. citizen or green card holder.
A Russian oligarch who is not a U.S. citizen and not a green card holder can therefore not avail himself of the Florida homestead protection.
In general, federal laws trump state laws. Unless the Federal government allows a state law or exemption to guard against an action of the Federal government, then the state law, even if in the state constitution, cannot prevent the Federal action.
For example, under Federal law, a debtor may generally use state exemptions in court against collection by federal agencies. However, the law does not allow a person to use state law exemptions against certain federal agencies, such as the IRS or the SEC, or for criminal restitution.
I do not know the exact laws that the Federal government would use to seize a Russian oligarch’s Florida property. Still, it is unlikely that federal law would allow an oligarch to use any state law exemptions against it. Even if they could, Congress could legislate the ability away.
About the Author
Gideon Alper specializes in asset protection planning for individuals and their families.
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