Florida’s Shrinking Homestead Protection

By: Jeffrey Lynne December 15, 2023 12:47 am

In recent years Florida has become a migration magnet as numerous out-of-state individuals have relocated.  And part of that process includes home transactions. Some of the homes being sold have been owned for decades with ownership pre-dating annexation into a municipality. The influx of residents coupled with prior expansion of municipalities through annexation results in a shrinking homestead protection for those with properties that exceed one half acre. This article discusses how this reduction in homestead protection occurs and its implications in the creditors rights, taxes, and inheritance arenas.

The Homestead & Creditor Protection 

Florida’s homestead exemption holds a unique place in the realm of asset protection. Preserved in Art. X Sec. 4 the of the Florida Constitution, it offers homeowners significant protection against creditors. Additionally, it provides substantial property tax benefits for homeowners. However, in Florida, a homestead is subject to certain size limitations. Homesteads are typically classified as a primary residence that is up to one-half acre within a municipality and up to 160 acres outside of a municipality. This protection extends to various forms of judgment debts including medical bills, credit card debt, and personal loans.

What is a Municipality?

In Florida, a municipality is a local government entity operating within a defined geographic area. Essentially, a municipality is a city, town, or village. They operate their own city government with elected officials, laws and regulations, and public buildings such as schools, and police departments. Thus, a municipality may choose to annex property. Annexation is the process through which a municipality expands its boarders. The municipality will have complete control over the laws and regulations of the newly annexed territory.

Effects of Annexation

If a homestead property is initially located outside of a municipality, and is later annexed into the  municipality, the property’s complete homestead status still applies, even if the property exceeds the one-half acre limitation for property held within a municipality. However, if one buys a piece of property larger than one-half acre post-annexation, they will not be afforded homestead status.  Therefore, all or part of the property may not be protected from creditors.  If a debtor homeowner does not have homestead status, a court can force the sale of the debtor’s property to satisfy debts owed to creditors. In re Kellogg, 197 F.3d 1116 (11th Cir. 1999). If a homestead is larger than on half acre, courts have ruled that owners are limited to the one-half acre exemption, even if zoning does not allow for legal subdivision.  In re Baxt, 188 B.R. 322 (Bankr.S.D.Fla.1995); In re Bell, 252 B.R. 562 (Bankr. M.D. Fla. 2000).

For example, if long time owners possess a one-acre property before the property was annexed into a municipality, they will still be able to fully claim a homestead exemption after the property is annexed into the municipality.  However, if they decide to sell the property post-annexation, the buyer will not be afforded homestead protection as it would not meet the one-half acre requirements of Art. X Sec. 4 the of the Florida Constitution. Therefore, without homestead status, the property may be sold to satisfy debts the owners may acquire.

Inheritance

A homeowner may un/intentionally waive their homestead rights when transferring or changing the type of ownership. A recent Fourth District Court of Appeal case, Thayer v. Hawthorne, discussed the implications of inheritance and creditor protection. In this case, the court examined the language of a deed to determine whether a mother waived her homestead rights when she executed a warranty deed conveying the property to herself and husband as tenants in common.  The court concluded that the mother did not waive her homestead rights because “language waiving a constitutional right must be able to be clearly understood as waiving the right,” and the language of her deed was “insufficient to constitute a written waiver of homestead rights.” Thayer v. Hawthorn, No. 4D22-244, 2023 WL 4094864, at *4 (Fla. Dist. Ct. App. June 21, 2023).

Conclusion

As annexation and transactions continue, those acquiring larger lots should be cognizant that the rights enjoyed by the current owner may not pass to them as part of the purchase.  

Please contact BMUL+Z’s attorneys if you would like to discuss options:

Thomas Zeichman (Bankruptcy and Creditor Rights)

This blog is made available by Beighley, Myrick, Udell, Lynne + Zeichman, P.A. (“BMUL+Z” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Beighley, Myrick, Udell, Lynne + Zeichman, P.A., its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship.

Photo Credit: House in hand isolated on white by Marco Verch under Creative Commons 2.0

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