Florida's Homestead Exemptions
We are asked very often by our clients about property that is exempt from seizure by creditors, or about homestead exemptions in the State of Florida and whether or not banks, courts, and creditors may take your home to pay debts or satisfy judgments.
Florida's homestead exemption provides broad protection to debtors to protect their assets from forced sale or seizure. Florida's homestead exemption is provided for in the Florida Constitution (Art. X, Sec. 4, Fla. Const.). Since the homestead exemptions are provided in the Constitution, no state statute or local law may lessen the protection that the Florida Constitution offers.
The law exempts certain assets from forced sale under process of any court, and also provides that no judgment, decree, or execution shall be a lien thereon except in certain circumstances such as the payment of taxes, mortgages, and construction liens.
The property the law exempts includes one home or property which is the owner's primary residence so long as it is one-half acre or less if the property is located in a municipality, or less than 160 acres if the property is located outside of a municipality. Additionally the law exempts up to $1,000 of personal property such as cash or other assets that are not real estate. This law begs the question if a resident who owns a homestead in Florida may transfer property that is not exempt by law into a form of property that is exempt by law. For example, take a homeowner who owns a homestead property and $2,000 of personal property. This homeowner's homestead and $1,000 of their $2,000 in personal property would be exempt under the Constitution, however, the second $1,000 would be capable of being seized by creditors. But what if the homeowner takes that second $1,000 and adds on a $1,000 countertop, patio, super fancy toilet or other fixture to their home and now only has $1,000 personal property? Under the Florida Constitution the homeowner's second $1,000 is now a fixture and real property and therefore exempt. Now they only have $1,000 of personal property so that is also completely exempt.
The question is whether this type of transfer of assets is fraud. Chapter 726 of the Florida Statutes provides remedies to creditors of debtors who transfer property in this manner in order to hinder, delay, or defraud their creditors. However, since the homestead exemptions are provided in the Constitution, Florida Statutes may not limit what is provided by the Constitution. See In re Clements, 194 B.R. 923, 925 (Bankr. M.D. Fla. 1996). This same question was the issue of a recent Florida Supreme Court case, Havoco of America, Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001). In Havoco, the Court concluded that the transfer of non-exempt assets into an exempt homestead, even with the intent to hinder, delay, or defraud creditors, was not an exception to the constitutionally provided homestead exemption. See Id. at 1030.
The law exempts certain assets from forced sale under process of any court, and also provides that no judgment, decree, or execution shall be a lien thereon except in certain circumstances such as the payment of taxes, mortgages, and construction liens.
The property the law exempts includes one home or property which is the owner's primary residence so long as it is one-half acre or less if the property is located in a municipality, or less than 160 acres if the property is located outside of a municipality. Additionally the law exempts up to $1,000 of personal property such as cash or other assets that are not real estate. This law begs the question if a resident who owns a homestead in Florida may transfer property that is not exempt by law into a form of property that is exempt by law. For example, take a homeowner who owns a homestead property and $2,000 of personal property. This homeowner's homestead and $1,000 of their $2,000 in personal property would be exempt under the Constitution, however, the second $1,000 would be capable of being seized by creditors. But what if the homeowner takes that second $1,000 and adds on a $1,000 countertop, patio, super fancy toilet or other fixture to their home and now only has $1,000 personal property? Under the Florida Constitution the homeowner's second $1,000 is now a fixture and real property and therefore exempt. Now they only have $1,000 of personal property so that is also completely exempt.
The question is whether this type of transfer of assets is fraud. Chapter 726 of the Florida Statutes provides remedies to creditors of debtors who transfer property in this manner in order to hinder, delay, or defraud their creditors. However, since the homestead exemptions are provided in the Constitution, Florida Statutes may not limit what is provided by the Constitution. See In re Clements, 194 B.R. 923, 925 (Bankr. M.D. Fla. 1996). This same question was the issue of a recent Florida Supreme Court case, Havoco of America, Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001). In Havoco, the Court concluded that the transfer of non-exempt assets into an exempt homestead, even with the intent to hinder, delay, or defraud creditors, was not an exception to the constitutionally provided homestead exemption. See Id. at 1030.