For most people, the most valuable asset they own is their home. Particularly in the last few years, the rising values of real property have led to homeowners having hundreds of thousands of dollars in home equity.
If someone sues you, whether they can take your house depends on the laws of your jurisdiction and any applicable exemptions in place. In Florida, for example, the homestead exemption protects homeowners by prohibiting most creditors from seizing and selling the primary residence to satisfy a debt.
Florida Homestead Protection
Under Florida law, a person’s primary residence is completely protected from judgment creditors. A person who sues you cannot cannot take your house to satisfy a money judgment. The law protects an unlimited amount of equity in the homestead: even multi-million dollar homes can be fully exempt from judgment creditors. Here’s how the homestead protection works:
- Unlimited Monetary Protection: Unlike many other states that limit the amount of equity or the value of property that can be protected from creditors, Florida offers unlimited monetary protection. This means that regardless of the home’s value, as long as it falls within the size limitations (see below), it is generally protected from forced sale by general creditors.
- Size Limitations: The protection does come with some acreage limits. In a municipality (city), the homestead protection is limited to half an acre. Outside a municipality, the protection can cover up to 160 acres.
- Protection from Forced Sale: With some exceptions, the homestead exemption prevents the forced sale of a home to satisfy creditors. This means that general creditors cannot place a lien on a home and force its sale to pay off debts.
- Exceptions: There are specific types of debts that the homestead exemption does not protect against. These include:
- Mortgages secured by the property.
- Mechanic’s liens for work done to improve the property.
- Tax liens.
- Liens related to homeowner association dues or special assessments.
- Inheritance: Florida’s homestead law also protects the transfer of the home upon the death of the owner. The homestead does not become part of the probate estate and will pass to heirs or trust beneficiaries free and clear of any judgment liens.
What Counts as a Homestead?
Florida law protects homestead property up to 1/2 acre in a city or 160 acres in an unincorporated county. For properties in the unincorporated county, the protection is not limited to a single parcel. Contiguous parcels of land are protected so long as the homestead is located on one of the parcels.
Your home is protected only if you (1) own or have a beneficial interest in the property, (2) reside in the property, and (3) intend for the home to be your lawful, permanent residence. Vacation homes, temporary homes, and homes under construction are not protected. A property that you intend to make your homestead later on is not protected.
For example, suppose you go under contract to construct a new home on land you own. You intend to move into the home once construction is complete. During construction, a creditor sues and gets a judgment against you. The creditor could foreclose on the property because it is not your current homestead. However, if you move into a temporary home (such as a trailer) on the new property while the new home is being built, that could protect the new property from the creditor.
Suppose John, a resident of Florida, owns a house that he uses as his primary residence. He gets involved in a car accident and is found to be at fault. The other party, Sarah, sustains significant injuries and decides to sue John for $500,000 in medical expenses and damages. If Sarah wins the lawsuit and John doesn’t have sufficient insurance or assets to cover the judgment, Sarah might seek to collect by going after John’s assets.
However, because of Florida’s Homestead Exemption, even if Sarah has a valid judgment against John, she cannot force the sale of John’s primary residence to satisfy that judgment. This protection stands regardless of the house’s market value, ensuring that John’s most crucial asset, his home, remains shielded from this particular type of financial liability.
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