A Florida homestead, once established, may be abandoned in which event the property’s homestead protection from creditors is lost. There are many Florida court cases which have discussed the tests of whether an owner has “abandoned” their homestead. Temporary absence or a forced absence from a homestead generally is not abandonment
January 3, 2010
/** */November 7, 2009
Child On Title To Parents’ Homestead: Can Child’s Creditors Levy Upon House?
/** * */An attorney asked me for my opinion about his debtor client who was put on the legal title to his parents’ house. His mother and father added the client, their only son, to their homestead deed as a joint tenant with rights of survivorship for estate planning purposes. When both parents die the title automatically passes to the surviving son.
August 20, 2009
Homestead Questions: Size Within City And Ownership Period For Bankruptcy
/** * */A client asked me two homestead questions which questions I have previously heard from other clients or email inquiries. This client owned a homestead with significant equity within a municipality. Homestead properties within a city up to ½ acre in lot size are protected under the Florida Constitution. The client said he intended to buy a ½ acre lot adjoining this existing homestead as an investment, and he wanted to know if the lot would be protected from creditors. My opinion is that the lot purchase would jeopardize the homestead protection of his existing house. Homestead includes the property upon which your residence is located as well as all contiguous land. If the client purchased the adjoining lot and took title in his own name the adjoining lot would be incorporated into his homestead and the size of his entire homestead would increase from ½ acre to a full acre. Thereafter, only 50% of the total homestead would be protected within the city limits. The client could not apportion protection to the original lot on which the house is situated. The purchase of the contiguous lot in his own name would forfeit protection of 50% of his house value. A better strategy would be to form a limited liability company and have the LLC purchase the adjoining lot. Because the client does not personally own the new lot it would not add to the size of his homestead. Land owned by entities, as opposed to natural persons, cannot be homestead property. The LLC would give some, although imperfect, asset protection.
July 6, 2009
Size Of Municipal Homestead Lot Partly Under Water
/** * */Your house in a municipality is homestead provided the lot is no larger than ½ acre. If the city homestead lot is greater than ½ acre the protection is applied pro rata. For example, for a lot 1 acre in size within a city only 50% of the equity is protected as homestead. This week I spoke with a man who lived on a lake front lot in the city. The lot was barely over ½ acre. The lot survey showed that the side lot lines extended several feet into the lake so that a significant part of the lot was under the lake. The dry land was less than ½ acre in size. The man asked me if the part of the lot under the lake counted toward the calculation of his homestead exemption. I have never seen this issue, and I’m not aware of any judicial decision dealing with the issue. My sense is that the land under the lake which is part of the lot’s legal description counts in the homestead calculation so that a portion of his equity is not homestead protected. I am not aware of any legal authority that a debtor can deduct from the acreage calculation parts of his residential lot that is not usable for some reason. If a portion of a city lot could not be used for building because it was wetlands, for example, I do not think the debtor could deduct the wetlands from the lot size to fall within the ½ acre limit. This man could ask a surveyor to segregate the dry land and the wet part of the lot on a new survey. He could then create an entity (LLC, partnership etc) and deed the land under the lake to the separate entity. This conveyance may increase real estate taxation, and it could bring objections from a homeowners association. Local laws which prohibited subdivision of the lot may not become a practical problem since he would not build on the conveyed lake property. Even though there could be legal issues, the conveyance would be of record, and it would prevent, or at least make more difficult, the forced sale of the homestead by a judgment creditor. posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
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Size Of Municipal Homestead Lot Partly Under Water
June 22, 2009
Court Protects Homestead Property Used For Debtor’s Commercial Business
/** * */Homestead protection applies to homes and land occupied by a debtor as his primary residence. Property used for commercial purposes or for the production of income generally does not qualify for homestead protection. A Florida bankruptcy court recently considered married joint debtors who used part of a homestead property for his residence and part of the same property for business and income production. The issue was whether the partial business use disqualified all or part of the debtors’ homestead protection from their judgment creditors. The two debtors owned a five acre parcel of land in the county. They built their residence on a minority portion of the land. The debtors had two more buildings on the same land. One building was a warehouse used exclusively for the debtors’ business. The third building was a second residence rented to an unrelated third party. In other words, two of the three structures occupying most of the property were used commercially. The bankruptcy court held that the entire land and all three structures were protected from the debtors’ creditors in his bankruptcy proceeding and were not subject to administration as part of the bankruptcy estate pursuant to the homestead exemption.. The court found that the Constitutional homestead clause does not disqualify a homestead because the owner uses the property commercially or for the production of rental income. The court said that, the “Debtors’ commercial use of the Building (rental) and the Warehouse does not preculd them from claiming the entirety of the Real Property as exempt.” The court recognized that other bankruptcy courts reached opposite conclusions in earlier cases. The case is: In re: Earnest , Case No. 08-4408-3F7. posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
