Information and Advice About Buying
Southwest Florida Real Estate

Since 1996, real estate attorney Raymond J. Bowie has published a regular real estate column in the Naples Daily News giving readers information and advice. A selection of Mr. Bowie’s columns is provided as a public service by the links below.

Click Below to Read Mr. Bowie’s Column on the Particular Subject:

  • Florida Homestead Benefits

Florida's Constitutional Homestead:
Like the Energizer Bunny, It Keeps On Going
By: Raymond J. Bowie, Esq.

Like a certain battery-operated bunny of advertising fame, Florida's constitutional homestead just keeps on going and going, seemingly indestructible and indefatigable, to the frustration of even its most powerful opponents.

Homestead is the legal principle that protects a Floridian’s residence from the claims of creditors and greedy heirs. Under Article X, Section 4 of our state’s Constitution, the real property where the owner or a member of his family makes a permanent residence is exempt from seizure or forced sale for payment of debts.

This past month, the Florida Supreme Court in effect recharged the bunny's batteries. In the case of Havoco vs. Hill (June 21, 2001), the state's highest court held even where a debtor owes a $15,000,000 judgment for fraudulent conduct, the debtor can thereafter file bankruptcy, wrongfully transfer money to buy a big new home in Florida, move in, and have the property totally protected from the reach of the defrauded creditors.

The recent Florida Supreme Court decision was not, in fact, any big surprise. Indeed, the Hill decision follows in the trend of a long line of similar cases in which Florida courts have strongly protected Floridians' homestead rights.

Under the Florida Constitution, as interpreted by the courts, three general requirements need to be met for a property to qualify for homestead protection:

  1. Ownership: The real estate must be owned by a natural person as opposed to a corporation or business entity. However, because a trust is not considered a legal entity, a beneficiary under a trust may be deemed an equitable owner of the real estate held by the trust, and hence the trust beneficiary residing on a property would be entitled to claim it as his homestead. And co-ownership of a property by multiple owners is OK, but each owner’s homestead would extend only to their share of ownership interest.
  2. Residence: To claim homestead, either the property's owner or a member of his family must actually reside on the property. US citizenship is not required if permanent residency status is met. The residency test for homestead is whether the owner or a family member intends to reside permanently on the property, as must be shown by public actions. This could be voter registration, vehicle licensing, telephone listings, tax return filings, or even securing a building permit and beginning construction of a home on a vacant lot. The property owner does not have to reside on the property if it is instead occupied by a member of his family, defined as his spouse or legal dependent. However, even in this situation, a property owner could not claim more than one homestead, and it must be either where he himself resides or where a qualified family member resides.
  3. Type of Property: The Florida Constitution places limits as to the size of the real estate qualified for homestead, but not as to value. The property can be no larger than 1/2 acre inside a municipality (city) or 160 acres outside a municipality. But could a debtor liquidate $20 million in other assets to buy a $20 million house to avoid creditors? Absolutely, because there are no limits on value. Homestead can include any type of real estate owned, including condo and coop units, the owner’s residential unit in a rental apartment building or commercial property, or even mobile homes, motor homes and houseboats located on leased land provided they have permanent connections for utilities.

The Florida Constitution does allow a few exceptions to the protection afforded homestead. Debts incurred by the home owner for mortgages, property taxes and assessments, home improvements and Federal tax liens can still attach even to homestead property. But other than those, generally speaking no matter how big the debt, or how nefarious the home owner, or how unjust to the wronged party, a person’s homestead property cannot be taken by creditors.

Homestead also protects the interests of property owner's spouse and minor children. A married homestead owner, even if he owns the homestead solely in his own name, cannot sell, mortgage, lien or otherwise dispose of the property without the joinder of his spouse. It also protects spousal and family interests when a homestead owner dies. If a homestead owner should die survived by a spouse or minor child, owner cannot pass the property under his will to any other persons. Instead, the surviving spouse automatically receives a “life estate” in the property (ownership for the spouse’s lifetime), and thereafter the property passes to the owner’s lineal descendants in being at the time of his death. If there are no descendants, the surviving spouse takes the owner’s entire interest in the property.

So strong is the protection afforded homestead that it may continue even after the owner moves out of the property, sells the property, or dies owning the property.

  • If a homestead owner should die, the homestead property remains free from creditors’ claims – provided it passes by will or by intestate succession (i.e. where the owner dies without a will) to the owner’s surviving spouse or heirs at law. This may have the effect of forever placing the property or its proceeds beyond creditors’ reach. But be careful: If the property or any portion of it were to pass to non-heirs instead, the decedent's creditors could seize any such portion passing to persons who are not heirs of the deceased owner. Also take heed: If the deceased owner’s will directs the homestead be sold instead of passing title directly to heirs, creditors can attack the sale proceeds.
  • Also, homestead protection continues whenever a homestead owner is involuntarily forced to leave his homestead property, such as when the property is damaged by a fire or casualty, or when the owner must temporarily relocate due to business requirements, or must undergo a lengthy hospitalization or even indefinite institutionalization. Here, Florida courts have ruled that the property remains homestead as long as the owner did not intend to abandon the property as his homestead, but instead intended to return to reside in the property when able to do so.
  • Even further, in the case of In re Beebe, a bankruptcy court held that property owners could still claim homestead protection for a property they had vacated with no intent to return, provided they continued attempting to sell the property in order to reinvest the proceeds in a new homestead property.
  • And when a homestead property is sold by the owner, the proceeds from the sale continue to be protected from creditors, provided the owner doesn’t mix the sale proceeds with his other funds, and provided he shows a good faith intent to reinvest the proceeds in another homestead within a reasonable time of the sale

There is, however, always a concern that the proceeds from sale of a homestead property might become vulnerable to creditors if not properly handled. The net sales proceeds should never be mingled with other general funds of the homestead seller, but kept separate and apart specifically for the purpose of acquiring another homestead, advisably escrowed with the closing agent until such time as the funds are needed to be applied directly to purchase a new homestead. And all of the net proceeds from the sale of the old homestead should be applied to the purchase of the new homestead. If any surplus remains from the sale of the old homestead, it may be seized by creditors.

Can homestead protection be lost? Sure. It’s lost if an owner sells his homestead and fails to reinvest the sale proceeds in another homestead within a reasonable time. It’s lost if an owner dies and his homestead property passes to persons who are not his spouse or heirs at law. It’s also lost if the decedent’s will directs the homestead be sold before the title to it vests in the heirs. And it can be lost if the owner “abandons” the property as his residence, meaning there is evidence showing he moved out intending to live elsewhere.

But as recently reaffirmed by the Florida Supreme Court, one way homestead cannot be lost is by the owner's being a crook, thief, scoundrel or international war criminal. Even if the homestead property was acquired directly using funds derived from a crime, a fraud or the theft by a dictator of the national treasury of a third world nation, no creditor – whether it be wronged creditors, crime victims, or the international court of justice at The Hague – is going to reach the Florida homestead of the perpetrator. Ask O.J. Simpson. Augusto Pinochet and Slobodan Miloshevec should have had better legal counsel.

As our state's Supreme Court reaffirmed in its recent Havoco vs. Hill decision: "The homestead provision of our Constitution… create no personal qualifications touching the moral character of the resident, nor do they undertake to exclude the vicious, the criminal, or the immoral from the benefits so provided. The law provides for punishment of persons convicted of illegal acts, but forfeiture of homestead rights guaranteed by our Constitution is not part of the punishment."

And so, the Energizer bunny of Florida's constitutional homestead keeps on going and going and going.

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