Florida is known as a “debtor-friendly” state, and one of the greatest protections afforded debtors under the Florida Constitution is the homestead exemption. Article X, Section 4, of the Florida Constitution states that creditors cannot force the sale of the debtor’s primary residence in order to satisfy a judgment or lien. This homeowner protection is also codified in the Florida Statutes in Chapter 222.
Florida’s homestead protection applies to the primary residence up to one-half acre within a municipality and up to 160 contiguous acres outside of a municipality. Fla. Const. Art. X, §4(a)(1). As long as those acreage requirements are met, it does not matter if the primary residence is worth 4 million dollars; creditors are unable to seize the homesteaded property. There are only four exceptions to the homestead protection:
- Liens and judgments for the payment of taxes and assessments on real property.
- Liens and judgments for obligations contracted for the purchase of real property.
- Liens and judgments for labor, services, or materials furnished to repair or improve real property.
- Liens and judgments for other obligations contracted for house, field, or other labor performed on real property.
Fla. Stat. § 222.01(5)(a-d). Aside from those four exceptions, all other creditors are precluded from using the debtor’s primary residence to satisfy a judgment. There is also homestead protection for tax purposes. Florida’s homestead exemption, as it pertains to property taxes, reduces the home’s value for assessment of property taxes by as much as $50,000.00. Fla. Stat. § 196.031(1)(a).
A Florida homeowner may own multiple properties, but he or she can only designate one as homestead property (the primary residence), and as described above, once designated, that property enjoys protection from creditors and avails certain tax benefits. Effective July 1, 2013, there has been a slight change to Florida’s homestead protection that could prove detrimental to unwary homeowners and advantageous to the meticulous creditor. The legislature amended Section 196.061, Florida Statutes, to provide that the rental of a dwelling designated to be homestead for tax purposes shall be considered abandoned until the owner physically occupies the dwelling. Specifically, the amended law reads as follows:
The rental of all or substantially all of a dwelling previously claimed to be homestead for tax purposes shall constitute the abandonment of such dwelling as a homestead, and the abandonment continues until the dwelling is physically occupied by the owner. Fla. Stat. § 196.061(1).
This section does not apply to members of the United States Armed Forces who may rent out their homestead while being deployed. Fla. Stat. § 196.061(2). The text of Section 196.061, Florida Statutes, explains that it applies to a “homestead for tax purposes,” but because a Florida homeowner can only designate one property as his or her homestead, it remains to be seen how this change may also apply to creditor protection on that homestead.
For creditor protection under Florida’s homestead exemption, the claimed property must be the homeowner’s primary residence. However, what if a Florida resident owns two Florida properties, designates one as his homestead, but rents both out while he travels to Asia for a lengthy business trip? Or, as another example, what if the Florida resident rents both out while he spends the winter in his cabin in Denver?
It seems that such scenarios would destroy the homestead protection for tax purposes, but an astute creditor could argue that an abandonment of a homestead is just that—an abandonment of homestead for all purposes—meaning that the creditor protection is now void as well. Whether such an argument would be successful in Florida’s District Courts of Appeal or the Supreme Court is up for speculation, but a crafty creditor would understand how putting forth such an argument could coerce an uncooperative debtor into presenting an acceptable offer to settle the debt owed.