Florida Statute 201.02 provides that an excise tax known as document stamps or doc stamps is to be paid on deeds or other instruments which transfer property rights and interests. The tax paid is seventy cents per each $100 of the consideration paid for the transfer. Which normally means that, for example a house which sells for $200,000 would be taxed $1,400 ($200,000 / 100 x .70).

Recently the issue of document stamps has been a controversy in "short sale" situations. A "short sale" is a situation where a lender accepts less than full repayment of what is owed to them under an existing mortgage in order to allow the seller to sell their house for the current market value which is presently lower than the outstanding balance of the loan. For example, a home that was purchased and mortgaged for $250,000 may only be worth $200,000 currently. An owner facing foreclosure may negotiate with their lender to accept $200,000 to pay off the loan since that is all that the house is worth currently. The lender may then decide to accept this lower repayment or not. In situations where the lender accepts the lower amount the purchase price of this house, the consideration, would be $200,000, and that is the amount the title company or attorney closing the transaction would base the document stamps on.

However, the statutes define "consideration" not only as money paid, but also as debt forgiven. Therefore, in the above example the consideration which the document stamps are based on is not only the $200,000 purchase price, but also the $50,000of debt forgiven, so a total of $250,000. This has left many title companies and attorneys wondering which number to base the document stamps on at closing as were we here at Yesner & Boss, P.L.

In a letter from the Department of Revenue dated August 7, 2008, the Department addressed it's position on this issue. As per the Department, document stamps are to be collected based on the "total consideration" of both money paid and debt forgiven, so the document stamps for the deed on that house which sells for $200,000 is taxed based on the consideration of $250,000 which amounts to $1,750.

This article has been updated in a blog post on December 30th here.

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.

Foreclosure Rescue Fraud Prevention Act

We have been asked often lately by clients and other professionals in the real estate field about the "new foreclosure law." This new law entitled the Foreclosure Rescue Fraud Prevention Act, Fla. Laws ch. 2008-79, will go into effect on October 1, 2008. This law will become Florida Statute sec. 501.1377.

The purpose of this new law is to prohibit certain fraudulent schemes that many homeowners facing foreclosure end up being the victims of. Foreclosure rescue is not necessarily fraudulent or even harmful, however there are some individuals using rescue techniques to fraud homeowners and make often undeserved money. Many of our clients tell us they are constantly contacted by individuals or firms that claim they can help them avoid foreclosure.

The basic provisions of this law are to:

1. Provide the homeowner with the necessary information regarding the services offered and their rights;
2. Prohibit misleading representations and unfair contract terms;
3. Provide certain minimum requirements for any contracts including being in writing
4. Provide that the rescue consultant can not charge any fees until all the services listed in the contract have been completed;
   
5. Provide for a "cooling-off" period for the homeowner to cancel the contract or a transfer of their home; and to
   
6. Provide that all transfers to a rescue consultant involving a lease-back or sell-back provision creates a rebuttable presumption that the transaction is a loan transaction and the conveyance is a mortgage to the equity purchaser from the homeowner.
   

The law covers both foreclosure-related services agreements and foreclosure-rescue transactions. For a more detailed description of this law and it's goals and effects please see our article on The Effect of the Foreclosure Rescue Fraud Prevention Act.