Florida Homestead Law and Creditor Protection

What Is the Homestead Law in Florida?

Florida homestead law protects a Florida resident’s primary home from judgment creditors. Article X, Section 4 of the Florida Constitution states that a judgment creditor cannot force the sale of your home to satisfy a creditor’s money judgment. A recorded judgment does not attach to or become a lien on a debtor’s Florida homestead property.

Courts have liberally expanded the reach of Florida homestead protection to include more than just a single-family house. Condominiums, mobile homes, and manufactured homes are all afforded homestead protection from judgment creditors in Florida.

How the Florida Homestead Law Works

The Florida homestead is the most protected asset in the entire country. The law protects unlimited amounts of value in the debtor’s Florida homestead property. Some judgment debtors living in other states will move to Florida to purchase a Florida homestead to protect their hard-earned money from collection by a creditor.

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 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.

What Is Homestead Property?

Florida homestead property is a natural person’s principal residence in the state of Florida of no more than one-half acre of contiguous land in a municipality or 160 acres in an unincorporated county. All contiguous property is included in homestead, even if the contiguous property has separate legal descriptions and tax numbers.

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.

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.

Exceptions to Homestead Protection

There are a few exceptions to what a homestead protects you from in Florida. The constitution states that a Florida homestead is not protected from the following debts:

• Liens on the homestead voluntarily given to secure a loan, such as a mortgage to purchase your home or a home equity loan.
• Mechanics liens for goods and services provided to build, repair, or improve your homestead.
• Liens recorded prior to homestead acquisition to secure payment of homeowner association dues and special assessments.
• Property taxes, state taxes, and IRS tax liens.

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 the homestead protection.

Florida Homestead Exemption Rules

The Florida homestead exemption has three rules:

1. Primary Residence. You must intend for the home to be your primary residence.
2. Occupancy. You must live in the home.
3. Legal Title. You must own the home or have a beneficial interest.

1. Primary Residence

The Florida homestead protection only applies when a person intends for the property to be their primary, permanent residence.

There is no time requirement to form this intent. A person could form an intent to maintain the property as their permanent residence immediately upon moving into the property.

A person can only have one permanent homestead. Therefore, 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.

Homestead protection covers more than just traditional single-family homes. The homestead law protects not only real estate, but also condominiums, stationary houseboats, co-ops, and even long-term leases as long as the property constitutes the debtor’s primary residence.

2. Occupancy

A person must occupy and reside in the property in order for it to qualify for homestead protection. In other words, the person must move in with their principal belongings.

This does not mean a person cannot temporarily reside elsewhere. If that were the case, a person would never be allowed to stay in a hotel,  attend school, or stay at a second home for a season. But no matter how long the temporary absence from the property, the owner must intend to return to the homestead as their home.

In the case of a pending judgment, the actual occupation of the property with the intent to maintain it as a primary, permanent residence must occur before a judgment is recorded in the county where the property is located. Otherwise, the judgment could become a lien on the property before the property becomes an exempt homestead.

Do not confuse the Constitutional homestead protection with the homestead tax exemption. Tax exemption rules require you to occupy your home on January 1 and file papers with the county tax assessor or property appraiser. These tax exemption requirements are irrelevant to asset protection of the homestead. Florida residents do not have to file any documents to qualify for homestead protection from judgment creditors.

In addition, there are state income tax principles that require some people to live in Florida more than 180 days per year to avoid income taxation in another state. Florida homestead law does not have a minimum amount of time as an annual residency requirement.

3. Legal Title

A person must hold legal title to the property or have a beneficial interest to qualify for the Florida homestead protection. Title can be held in your personal name or in the name of your revocable living trust.

A property that is owned by an LLC, corporation, irrevocable trust, or other legal entity cannot qualify for the Florida homestead exemption. This is true even if you are the sole owner of the company.

What Is the Florida Homestead Exemption?

The Florida homestead exemption is a property tax break that reduces the assessed value of a home by $50,000 and limits annual increases in property tax assessments. Unlike the constitutional protection from creditors, the Florida homestead tax exemption requires an initial filing with the county. The property owner must reside in the home as of January 1 of the calendar year to qualify for the exemption.

The Florida homestead exemption caps the increase in the assessed value of the homestead equal to 3% or the annual Consumer Price Index (CPI), whichever is less. This cap is otherwise known as the Save Our Homes benefit.

How to Qualify for the Homestead Tax Exemption

There are four ways to qualify for the Florida homestead tax exemption:

1. You must be the property owner.
2. The property must be your permanent residence.
3. You must have lived in the property as of January 1 of the calendar year for which you want the exemption to apply.
4. You cannot have rented out the property for more than 30 days in the calendar year.

Florida Residency

You must be a Florida resident to qualify for the Florida homestead tax exemption. Residency is a matter of intent. You must occupy a Florida property with the intent to make it your permanent residence.

One common way of establishing intent is to record a Declaration of Domicile with the clerk of the court. The declaration of domicile is evidence of Florida residency, but it alone is not conclusive proof.

Required Documentation for Homestead Tax Exemption

Here are the documents you will need to submit when applying for the homestead tax exemption in Florida:

• A valid Florida driver’s license.
• A copy of the recorded deed or tax bill.
• Vehicle registration.

Waiting Period for Florida Homestead Protection

There is no waiting period for protection under Florida homestead law. The protection attaches the day of occupancy with the intent to make it the permanent Florida homestead.

Facts showing intent to occupy a homestead permanently, such as your driver’s license and vehicle registration addresses, are more important than a declaration you sign or file with the court.

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Proceeds from the Sale of Florida Homestead

Proceeds from the sale of your homestead are protected after the sale if you demonstrate an intent to reinvest the proceeds in a replacement homestead.

You must show that you are actively looking for a new home. Evidence of an active home search includes a record of online searches, property inspections, and using a buyer’s real estate broker.

You also should not co-mingle the homestead proceeds with funds from other sources. However, you may spend money from this account on any item or reason during your home search.

Fraudulent Conversions of a Florida Homestead

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.

Homestead Bank Account

A homestead bank account refers to segregating sale proceeds into a new and separate bank account. These accounts are often referred to as “homestead accounts.” The term homestead account is a convenient description of a segregated account, but there are no official bank account designations with that name.

There is no time limit on investing homestead proceeds in a new Florida homestead. Courts have found a timeframe of four months to be reasonable, and even one or two years to be reasonable in particular cases. However, courts have also found four years and ten years to be too long.

Frequently Asked Questions