Homestead Protection Denied For Rented Duplex

I had previously written a post about Florida homestead protection of a duplex where one half is owner occupied and the other unit is rented. The issue is whether the constitutional homestead protection includes a rental unit attached to the dwelling where the two units cannot be subdivided. The prior post cited precedent that the constitution protects dwellings and businesses located on the same property outside a municipality but that homestead properties within a municipality are limited to the actual dwelling unit. Other cases have protected dwellings and attached units used for business where the property could not be subdivided.

A recent bankruptcy decision in the Middle District of Florida dealt with the claimed exemption of a debtor’s duplex situated within a municipality . The two units are not legally divisible. The bankruptcy court denied homestead protection of the duplex. The court pointed out prior to 1968 the Florida Constitution protected the residence and business house of the owner, but a 1968 amendment deleted the reference to “business house.” Although a minority of prior bankruptcy decisions protected the entire duplex where the units were not divisible the majority of prior bankruptcy cases denied homestead protection to rental units attached to the residence.

The court recognized that this ruling may force the debtor to lose the house and speculated that the Florida Legislature may not have contemplated this unfortunate result when drafting and enacting the 1968 amendment to the Constitution. Nevertheless, the court found that denial of homestead protection of that part of the property rented for income is mandated by the law.

There ruling may have been different if the debtor’s duplex was located outside a municipality because, as stated above, courts have previously protected businesses on homesteads located in the county. Secondly, all the cases cited by the bankruptcy court were prior bankruptcy decisions, and state courts may reach a different conclusion when homestead protection of duplexes is considered outside of the bankruptcy context. This was a tough case to decide, and in my humble opinion, the decision was technically correct because the duplex was within a municipality.