One of my clients wanted to protect cash from a judgment creditor by buying a triplex outside of a city and living in one of the units. The question was whether rental of two units in a building located in the county would disqualify all or part of the building from the Florida homestead exemption.
The homestead exemption is liberally applied to combined residential and commercial use outside of a municipality. Debtors who operate a business on their homestead in the county have been afforded homestead protection by most courts. Courts have extended homestead protection to income producing structures located on the homestead when the commercial activity was the debtor’s means of support.
This client’s situation is different because he plans to derive income by permitting other families to reside on the property. The homestead exemption is designed to protect a debtor’s family. So long as the debtor’s commercial activity is operated primarily by the debtor and family and no one other than the debtor’s family resides on the homestead lands most courts will liberally apply the exemption. This client’s land will be used for residence of non-family members, and for that reason, I believe courts will not protect that part of the structure rented to non-family tenants.
I believe the likely result is for the court to order the forced sale of the entire property and grant the debtor an exemption for one-third of the net sales proceeds in proportion to the debtor’s occupancy of one of the three units in the triplex.