Understanding The Benefits And Exceptions Of Homestead Creditor Protection
If you are unable to pay back a debt to a creditor, you can be sued so that your assets—including your real property—are sold to satisfy the debt. Fortunately, Florida is nationally renowned for its strong and generous homestead protections, which not only provide major savings on property taxes.
The Criteria for Homestead Creditor ProtectionUnder Article 10, Section 4 of the Florida Constitution, a homestead property is exempted from a forced sale by creditors if it meets the requirements:
- It is owned by a “natural person”— This means that properties owned by entities such as businesses, trusts, or other “legal persons” do not qualify.
- The owner is a Florida resident who has established the property as their primary residence—While you can submit a declaration of domicile to formally establish your residency in Florida, various other factors—such as a valid Florida driver’s license, attending a Florida college, or working in the state—can also qualify you as a residence. To establish a property as your primary residence, you must own and occupy it on January 1st of the year you claim the exemption.
- You must establish that you are the legal owner of the property—This is easily met with a recorded deed to the property.
- The property must meet certain size requirements—The homestead must be at least half an acre if it is in a municipality or 160 acres if outside a municipality (such as an unincorporated part of a county).
Generally, satisfying these aforementioned requirements will most likely protect your homestead from a forced creditor sale—but there are exceptions.
Exceptions to the Homestead Creditor ProtectionThe Florida Constitution also outlines certain creditors who are exempted from the state’s otherwise broad homestead protection. They include:
- State and federal tax authorities.
- Any organization that levies assessment, such as homeowners’ associations (HOAs)
- Liens by contractor or other parties to whom you owe money for improving the property.
Thus, if you owe money related to these circumstances, Florida homestead laws will not protect you.
How Homestead Creditor Protection Applies to SalesThrough judicial interpretations of the Florida Constitution, homestead protection, including against creditors, has also been extended to proceeds from the sale of the homestead. However, this too is also contingent on meeting several requirements, including:
- Demonstrating a “good faith” intention, both before and upon the sale of your homestead, to reinvest the proceeds in another homestead property within a reasonable time.
- The proceeds cannot be “comingled” with other funds.
- The proceeds must be held separately and retained solely for reacquiring another home.
Moreover, the exemption will apply only to the amount of proceeds needed to obtain a new home.
In theory, if you sell your homestead while you have creditor judgments entered against you, as long as you meet the above criteria, you may be able to protect the subsequent proceeds from the creditors. However, if these requirements seem unclear, or you are not sure whether they apply to your circumstances, you should seek out the expertise and guidance of a qualified real estate attorney.
Hire Experts on Homestead Creditor ProtectionJurado & Farshchian, P.L. makes it our business to keep up to date on the latest laws, regulations, and court rulings impacting our clients. Determining whether your homestead property or its sales proceeds are exempt from creditor claims is best done with the help of our real estate attorneys. Our firm specializes in a myriad of title and real estate services, including helping homeowners navigate Florida homestead laws. To learn more about our firm, contact me at 305-921-0440 or email me directly at [email protected]