Florida's Homestead Exemption: Required Reading for All Florida Debtors, and Creditors Thereof
This year, my firm has represented creditors and debtors in a multitude of commercial collections matters. In every case, Florida’s constitutional homestead exemption loomed large. For creditors, the homestead protection in Florida creates what at times amounts to an unfair advantage that allows debtors to hinder, delay and even defraud creditors. For Florida debtors, the constitutional homestead exemption ensures that families will not be thrown out of their homes merely because of an unaffordable debt, other than a voluntary mortgage debt. Because I’ve spent so much time briefing the homestead issue, I decided I would convert my memoranda to an informational blogpost for my website. If you are dealing with a debt collection matter but have not retained an experienced Florida attorney, contact my office today for a free consultation.
The Florida Constitution’s homestead exemption “protects the homestead against every type of claim and judgment except those specifically mentioned in the constitutional provision itself.” Osborne v. Dumoulin, 55 So.3d 577, 582 (Fla. 2011). When analyzing a claim of homestead, Florida courts are required to grant a liberal construction to the constitutional and statutory provisions in favor of the homeowner, and cast a restrictive eye towards exceptions to the homestead exemption. Havoco of America, Ltd. v. Hill, 790 So.2d 1018, 1021 (Fla. 2001). What makes Florida exceptional is that its homestead exemption protects a homestead acquired by a debtor using nonexempt assets – even when the acquisition was done with the actual intent to hinder, delay, or defraud creditors. The Florida Supreme Court reasons that such a transfer of nonexempt assets into an exempt homestead is not one of the three exceptions to the homestead exemption in art. X, § 4 of the Florida Constitution. Id., at 1028. Therefore, while fraudulent transfers can ordinarily be set aside or unwound, such transfers cannot be set aside if, after the transfer, the property is protected by the Florida constitutional homestead exemption. Id., at 1029.
This concept is so counterintuitive, even to some Florida attorneys, that I regularly have to disabuse creditor Counsel of their intuitive, but false, arguments. The following is an excerpt from one of my recent memoranda of law on this subject:
[The unnamed creditors] actually claim that “this Court has the authority to void any transfer of property contrived by a debtor to delay, hinder or defraud creditors.” This is confounding because the Florida Supreme Court used almost identical language to convey exactly the opposite statement of law:
The transfer of nonexempt assets into an exempt homestead with the intent to hinder, delay, or defraud creditors is not one of the three exceptions to the homestead exemption provided in article X, section 4. Nor can we reasonably extend our equitable lien jurisprudence to except such conduct from the exemption's protection. We have invoked equitable principles to reach beyond the literal language of the exceptions only where funds obtained through fraud or egregious conduct were used to invest in, purchase, or improve the homestead.
Havoco, 790 So.2d at 1028.
Although Florida’s homestead exemption is a bulwark against aggressive creditors, it does not insulate debtors in all circumstances. For example, Florida courts will not hesitate to ignore a claim of homestead when the funds used to purchase the homestead were acquired through fraud or other egregious conduct.
Another misconception about Florida’s homestead exemption is that its benefits are conferred only upon submitting a homestead application to a local government authority. “[U]nder Florida law a debtor need not claim the article X exemption to obtain its protections—the provision is self-executing.” 55 So.3d 577, 587 (Fla. 2011). The Florida Supreme Court explained, “When a person acquires property and makes it his or her home, the property is ‘impressed with the character of a homestead, and no action of the Legislature or declaration or other act on [the owner’s] part [is] required to make it [the owner’s] homestead, for it [is] already such in fact.’” Id. at 582-83 (brackets in original) (quoting Hutchinson Shoe Co. v. Turner, 100 Fla. 1120, 130 So. 623, 624 (1930) (citing Baker v. State, 17 Fla. 406, 408-09 (Fla. 1879))). To be clear, the homestead exemption described in this blogpost is distinct from the constitutional homestead exemption from tax found in Article VII, section 6 of the Florida Constitution.
What’s even more confounding for some creditor attorneys is that homestead property need not be titled in the property owner’s name. “In ascertaining the ownership interest (the nature of the title and the estate) that is necessary to claim the homestead exemption, we find guidance in decisions of rather ancient vintage which adopted the general rule that the individual claiming homestead exemption need not hold fee simple title to the property.” Southern Walls, Inc. v. Stilwell Corp., 810 So.2d 566, 570 (Fla. 5th DCA 2002) (citing Bessemer Props., Inc. v. Gamble, 158 Fla. 38, 27 So.2d 832 (1946)). “Thus ‘a one-half interest, the right of possession, or any beneficial interest in land gave the claimant a right to exempt it as his homestead’ and ‘[i]t was not essential that he hold the legal title to the land.’” Id. (brackets in original) (emphasis added) (quoting Bessemer Props., Inc., 158 Fla. 38, 27 So.2d at 833 (1946) (citing Morgan v. Bailey, 90 Fla. 47, 105 So. 143 (1925); Hill v. First Nat'l Bank, 73 Fla. 1092, 75 So. 614 (1917) (holding that a life estate interest is sufficient beneficial interest in property to qualify for homestead exemption)); see also Anemaet v. Martin-Senour Co., 114 So.2d 23 (Fla. 2d DCA 1959)).
The last remark I’ll make about the homestead exemption is that it confers benefits for property owners even when the property owner does live, or has never lived, in the homestead property. The Florida Constitution’s homestead exemption says, “the exemption shall be limited to the residence of the owner or the owner’s family.” Art. X, § 4(a)(1), Fla. Const. (emphasis added). In an oft-cited case from south Florida, a husband and wife were separated but never divorced. The wife lived with the couple’s one child in a home that, although owned by the husband, the husband never occupied as his residence. After the husband died, creditors sought to execute on the home that was occupied by the late husband’s wife and child. Much to the chagrin of the creditor, the trial court found that the home was the husband’s homestead. See Bayview Loan Servicing, LLC v. Giblin, 9 So.3d 1276, 1278 (Fla. 4th DCA 2009) (“The language of article X, section 4 is clear and unambiguous. Here, the decedent was a natural person who owned property occupied by his wife and child at the time of his death; thus the property is homestead.”). More recently, Florida’s Third District Court of Appeal observed that, “We have also acknowledged that article X, section (4)(a)(1) specifies that a homestead exemption is limited to the residence of the owner or the owner’s family and, ‘[a]ccordingly, ‘the Florida Constitution does not require that the owner claiming homestead exemption reside on the property; it is sufficient that the owner’s family reside on the property.’’” Grisolia v. Pfeffer, 77 So.3d 732, 734 (Beltran v. Kalb, 63 So.3d 783, 787 (Fla. 3d DCA 2011) (quoting Nationwide Fin. Corp. of Colo. v. Thompson, 400 So.2d 559, 561 (Fla. 1st DCA 1981) (emphasis added) (citing); Cain v. Cain, 549 So.2d 1161, 1163 (Fla. 4th DCA 1989) (“To show abandonment, both the owner and his family must have abandoned the property.”) (citing Nationwide Fin. Corp. of Colo., 400 So.2d at 561).
Florida’s constitutional homestead exemption is a powerful tool that debtors can use to protect assets and legally thwart the efforts of creditors. Note that this blogpost is for informational purposes only. It is not intended to be an exhaustive analysis of Florida’s Constitutional homestead exemption, and it is not intended to convey legal advice. Contact my office if you have any questions about Florida’s Constitutional homestead exemption or if you need the assistance of a Florida attorney who is familiar with Florida’s constitutional homestead exemption.