Homestead Depends on Timing
Timing is a key element in asset protection as evidenced by this story submitted by a caller last week. . A man owned two adjacent lots. He lived in a house on one lot. The adjoining lot was vacant. He and his family wanted to build their new home on the vacant lot. So, he sold his residence to a third party and used some of the sale proceeds to pay a contractor to begin construction of his new home on his vacant lot. He and his family rented an apartment during construction. Approximately two weeks prior to obtaining a Certificate of Occupancy on the new home and moving in a civil court entered a money judgment against the caller. He asked whether his new home is protected homestead.
I don't believe this caller has any homestead protection from the judgment. Even though he owns the lot where his new house is being built, the caller is not entitled to homestead protection until he actually resides in the property after a Certificate of Occupancy. His intention to make the new home a homestead does not warrant protection. As soon as the judgment was recorded it became a lien on the home under construction. Moving into the home after the judgment attaches will not clear the judgment. The caller will have homestead protection against future judgments, but his protection will be subject to the judgment recorded before he actually resided in the property as a permanent residence.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
I don't think that comment is accurate. As far as I know, assuming the first lot was homestead property, the proceeds from the sale of a homestead property are protected the same as the actual home. The man should be protected.
If the two lots are in an unincorporated area, I believe that both would be protected under homestead laws. That one residence was sold may affect this; I don't know that for sure.
I also believe the proceeds from the sale of the first residence are protected.