Homestead Law in Florida

What Is the Florida Homestead Law?

The Florida homestead law protects a Florida resident’s primary residence from judgment creditors. The law exempts an unlimited amount of equity in their homestead property. It prevents the forced sale of the homestead to satisfy debts, ensuring that individuals do not lose their homes

The protection is limited to 1/2 acre or less if the homestead is located inside the city limits or up to 160 acres in an unincorporated county.

The homestead law is the most important asset protection tool in Florida. To qualify for the homestead protection, you must (1) own the home, (2) reside in the home, and (3) intend for the home to be your primary residence.

Florida Homestead Protection

The Florida homestead is the most protected asset in the entire country. Some judgment debtors living in other states move to Florida and purchase a Florida homestead to protect their hard-earned money from collection.

Because the homestead law is found in the Florida Constitution, it is more enduring than any of Florida’s statutory protections that are subject to political changes and legislative repeal. It is harder to convince voters to repeal an important constitutional benefit than to change a state statute through legislation. Additionally, future laws enacted by the Florida legislature cannot override or diminish exemptions provided by the Florida Constitution.

The law protects all types of homes, including single-family homes, condominiums, mobile homes, and manufactured homes.

The protection from civil creditors in Florida is not limited by the value of the homestead, only by the size of the lot. The transfer of money into a Florida homestead cannot be attacked as a fraudulent conveyance so long as the money used to purchase or improve the home was not originally obtained through fraudulent conduct.

Types of Homestead Exemptions

There are two types of homestead exemptions in Florida: (1) exemption from judgment creditors and (2) exemption from property taxes. Both types require you to own and reside in the home.

You don’t have to apply for the exemption from creditors, but you do need to file for the tax exemption.

Homestead Property in Florida

Homestead property is real property owned and used by a person as their primary residence.

It must be 1/2 acre or less if located within city limits, but 160 acres or less if located outside a city.

All contiguous property counts as homestead, even if the contiguous property has separate legal descriptions and tax numbers.

Family Use

Homestead property is best protected if the owner’s family uses the property.

For example, maintaining children’s playthings or a storage shed on adjacent property improves its protection.

Size of the Home

No matter whether the homestead is in the city or the county, there is no restriction on the square footage of the physical residence or the value of the property.

If your homestead is on a lot that exceeds the ½ acre or the 160-acre size limitations, then the homestead protection will be allocated pro-rata to the total property value.

Cannot Have More Than One Homestead

A person can only have one permanent homestead.

A person who still lives primarily in another state or country cannot form the required intent to qualify for the Florida homestead protection.

A person may maintain a second residence in another state as long as the Florida house is their primary home.

Florida Homestead Exceptions

There are five exceptions under Florida homestead law:

• Mechanics liens
• Mortgages
• Liens prior to homestead acquisition
• Property, state, and IRS taxes.
• Property acquired fraudulently

Other Exceptions

There are no other exceptions to the homestead exemption listed in the Florida Constitution. In addition, because the state constitution only allows these exceptions, the Florida legislature cannot create additional exceptions to homestead protection.

Qualifying for Florida Homestead

Step 1: Establish Legal Title to the Property

The first requirement for homestead protection is to have legal title to the property. This means you must be the property owner, either solely or as a co-owner. Here’s what’s involved:

• Officially Recorded Title: Your name must be on the deed as the homeowner, and the deed must be filed with the county’s public records.
• Equitable Title: In some cases, possessing a beneficial interest under a contract or trust may also qualify.

Step 2: Establish Florida as Your Permanent Residence

To qualify for homestead protection, you must first establish that your primary residence is in Florida. This involves demonstrating your intent to permanently reside in Florida. Here are some actions that can establish your residency for homestead purposes:

• Obtain a Florida Driver’s License: Switching your driver’s license from another state to Florida is a clear indication of residency.
• Register to Vote in Florida: Voter registration in the state further demonstrates your intent to make Florida your permanent home.
• Declare Florida as Your Legal Residence: Filing a Declaration of Domicile in the county where you reside can legally document your intention to maintain your primary and permanent home in Florida.

Step 3: Occupy the Property

To qualify for homestead protection, you must physically occupy the home and it must be your primary place of living. This means you actually live in the house and consider it your main residence.

To qualify for Florida homestead protection, you must intend for the home to be your primary residence, you must live in the home, and you must own the home or have a beneficial interest.

Waiting Period

There is no waiting period for the Florida homestead exemption.

It applies as soon as you move into the home. There are no papers to file or forms to fill out.

Proceeds from Sale of Florida Homestead

If you sell you homestead property, the proceeds will be protected as long as they are segregated and you intend to invest them into a new homestad property.

You must show that you are actively looking for a new home.

Also, you can’t co-mingle the homestead proceeds with funds from other sources. To keep homestead sale proceeds separate, many debtors deposit homestead money into a new and separate bank account. These accounts are referred to as “homestead accounts.”

Time Limits

There is no express time limit on investing the proceeds into a new Florida homestead. The Florida Supreme Court has only said that “whether funds received from the sale of a homestead are invested in another homestead within a reasonable time must be determined from the facts and circumstances of each case.” Courts have found in some cases for a timeframe of four months to be reasonable, and even one or two years to be reasonable given the facts of particular cases. However, courts have also found four years and ten years to be too long in some cases.

A debtor should be wary before transferring proceeds from a homestead into other exempt property. Courts in several cases have found that the transfer of proceeds from an exempt homestead into other exempt assets can constitute a fraudulent conveyance. But courts in other cases have suggested that such a transfer is not fraudulent.

Fraudulent Conversions Under Florida Homestead Law

A key feature of Florida homestead law is the homestead’s exemption from fraudulent conversion claims brought under Florida’s fraudulent conversion statute. Even after a lawsuit has been filed, a Florida resident can invest unlimited amounts of money in large estate homes and farms and protect the full value of these luxury residences under Florida’s homestead law.

According to a key Florida Supreme Court ruling, a person can convert unprotected, non-exempt assets to their homestead at any time by either buying a new home, improving the home, or reducing the principal balance of an existing mortgage. A Florida resident can always protect their money under the homestead umbrella even if the asset transfer was designed to protect the money from existing creditors.

There is an exception to the fraudulent conversion protection in cases where the debtor obtained money by deceit, fraud, or other egregious means and then used the money to purchase or improve the debtor’s homestead. A creditor may impose and foreclose an equitable lien on a Florida homestead if the creditor can prove that the debtor obtained money fraudulently or in breach of a fiduciary duty and then invested the same funds in a homestead property.

This does not mean that a monetary civil judgment for common law fraud supersedes the Florida homestead exemption. A debtor’s homestead is exempt from collection of a money judgment founded on fraud or deceit. The equitable lien exception applies only where fraudulently obtained funds were invested in a homestead property. The creditor must trace the funds from the debtor’s fraud into the debtor’s homestead to prevail.

A transferee, or recipient, of a judgment debtor’s fraudulent transfer of assets who subsequently invests the assets received into the transferee’s homestead may be denied homestead protection because the debtor’s transfer was intended as a fraud against creditors.

Martial Interests

A married person can maintain a legal homestead in Florida even if their spouse is not on the deed to the home. The property remains protected from creditors and the person can qualify for the homestead tax exemption.

Further, the non-owner spouse also has their own separate homestead interest in the property even though the spouse is not on the deed.

To transfer the homestead, the owner will need the signature of the spouse, whether or not the spouse is on the deed itself. The spouse can waive any homestead interest, allowing the property owner to complete the transfer.

Finally, upon the death of the property owner, the spouse residing in the home will have at minimum a life estate interest in the homestead. In other words, the non-owner spouse will have the right to reside in the homestead during their lifetime, even if they were never on the deed to the property.

Protection of Homestead Under Construction or Under Contract

A property is not exempt under Florida homestead law just because the property owner intends to occupy the property sometime in the future. Property reserved for a future residence cannot be homestead property until occupied. Future homes under construction are not exempt homestead properties. The homestead law requires that the debtor must reside in the property as a primary residence to have homestead protection.

If a civil judgment is recorded in the county where a person owns either a house that they intend to occupy or a lot upon which they are building a future home, the judgment lien will attach to the property. Subsequent occupancy of the home as a homestead will not erase the prerecorded judgment lien.

Therefore, you should not purchase a homestead in any county where a creditor has previously recorded a judgment without careful planning, as the prior judgment may take precedence over your purchase and occupancy of a homestead in that county.

Florida Homestead Protection in Bankruptcy

Florida homestead protection may not apply if the debtor files bankruptcy. Under bankruptcy law, homestead protection is available up to approximately $160,000 unless the debtor occupied their current Florida homestead property, plus any previous Florida homestead properties, for a continuous 40-month period. Joint bankruptcy debtors can protect approximately $320,000 of a jointly-owned homestead. These exemption limits increase from time to time, so debtors must get the current limits from their bankruptcy attorney.

Also, a debtor’s transfer of cash into their homestead within ten years of filing bankruptcy may be challenged by the bankruptcy trustee as a fraudulent conversion if the transfer was intended to defraud creditors. Bankruptcy law does not affect Florida’s unlimited homestead exemption in state court proceedings, including state court allegations of fraudulent conversion into a homestead.

FAQs About Florida Homestead Law