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Florida’s Homestead Exemption – A Double-Edged Sword

Florida’s Homestead Exemption

Part 1 – Protection from the Claims of Creditors

Every year, many people from across the country move to Florida to take advantage of its broad homestead protection laws.  Here, our home is our castle, and these laws are arguably the most protective in the United States.  

Article X, Section 4 of the Florida Constitution exempts homestead property from levy and execution by most judgment creditors.  This means that a creditor cannot place a lien against or force the sale of your homestead to satisfy an obligation or monetary judgment. 

To qualify for homestead protection, the debtor must be a permanent resident of Florida and the homestead property must be owned by the debtor and remain his/her primary residence. With the exception in certain bankruptcy cases, the homestead protection is effective immediately upon establishing a permanent and primary residence in Florida.    

Article X, Sec. 4(a)(1) limits the protected homestead to one-half (1/2) acre if it is located within a municipality (town or city) or 160 acres if it is outside a municipality. This geographical area of protection is one of the broadest in the United States. The value of the property protected is unlimited. Consequently, a debtor may purchase and improve a parcel of property within these acreage parameters up to any amount, with the resulting improvements and land being protected from creditors. Florida’s homestead protection is such a potent asset protection tool because of its unlimited monetary protection. Florida residents may invest millions of dollars in lavish estate homes and farms and still protect the full value of these luxurious residences.

Article X, Sec. 4(b) extends these exemptions to the surviving spouse and related heirs of a deceased homeowner. Thus, upon a homeowner’s death, the surviving spouse and related heirs may receive the homestead free and clear of any creditor’s claim. To legally establish the protected homestead, a benefitted party (spouse or related heir) should file a petition to determine homestead in an estate administration proceeding.      

However, there are exceptions to Florida’s homestead protection law. Article X, Section 4(a) does not protect homestead property against tax liens, mortgages, assessment liens, and mechanic’s liens related to that specific property. For example, a mortgage of homestead property or a lien resulting from the failure to pay a contractor for materials for your home are not protected from creditor’s claims. Such non-exempt liens will also result in a title issue that may prevent the sale or refinancing of your home.  

Additionally, certain types of co-ownership (such as tenancy in common and joint tenancy with rights of survivorship) of a homestead may jeopardize the homestead exemption when one of the joint owners does not reside on the property. In such a case, a judgment against one co-owner not residing on the property may result in that co-owner’s interest being levied against, which would force a judicial sale of the homestead property (in which case the other protected co-owner would be entitled to their portion of the sale proceeds).

In summary, Florida homestead laws are significant and warrant consideration by homeowners and prospective homeowners.  Should you have questions or wish to discuss the homestead issues you are facing, do not hesitate to contact Scot B. Copeland.   

Part 2 – Restrictions on transfers of homestead property to follow.