A caller said the local property appraiser took away her homestead tax exemption after neighbors complained the owner was renting rooms to tourist for short-term occupancy. The caller asks whether losing the tax exemption automatically deprives her home from homestead protection from creditors.
Generally, the homestead tax exemption need not always be consistent with homestead creditor protection. Many people have been denied homestead exemption in bankruptcy or state court even though they receive the homestead reduction from property tax. The rules for the tax exemption in many ways are the same as creditor protection, but in some ways the laws and rules diverge.
In this case, I told the caller that just because she does not receive the homestead tax reduction does not, in itself, expose her home to creditors. However, the short term rentals to tourists does jeopardize the creditor protection of the homestead. This owner has turned part of the homestead in to a commercial business. The policy of Florida’s generous homestead protection is to shield the debtor’s family from misfortune. This caller’s homestead is being used partially for the owner and family, but also for paying short-term tenants. This property is part residence and part hotel.
This property will almost certainly not get homestead protection is located in a city because the courts have denied protection for municipal dwellings used for a commercial purpose. Some courts might protect the home if located in a county where commercial use of homesteads is more permissive. The Constitution protects up to 160 acres of non-city homesteads in order to protect farmers who use most of their land commercially. In my opinion, a court would deprive this owner of homestead protection wherever the property is situated because the property is being used largely for people other than family members.
About the Author
Jon Alper is an expert in asset protection planning for individuals and small businesses.
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