Florida Asset Protection : Asset Protection Law & Planning in Florida - Florida Homestead Exemption

From time to time I receive questions about Florida residency for in-state tuition at Florida universities. Having college age children myself I looked into this issue several years ago. The residency rules for purposes of school tuition for undergraduate and graduate students under the age of 25 are significantly different from the law of residency for asset protection purposes. Just because a person is a Florida resident for purposes of asset exemptions does not mean the same person is a resident for purposes of in-state tuition. Florida has a separate set of rules for tuition residency. Florida's rules are very similar to the in-state tuition tests in other states. School tuition is beyond the scope of this blog. Those interested in qualification for in-state tuition in Florida should examine those separate rules which are clearly stated on the websites of most Florida colleges and universities.

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A common homestead question is whether or not a homeowner can rent out part of a homestead property and retain homestead protection from creditors. A client this past week owned a four unit apartment building which is currently rented to four tenants. He proposed to move into one of the four units and assert homestead protection as to the entire property. I am fairly sure that courts would not extend homestead protection over the entire building. There are several bankruptcy cases which have declined homestead protection to those parts of a property that were physically separate and were used primarily for the production of income. Duplexes where one unit is rented to someone other than an immediate family member, and the other unit occupied by the owner are considered homestead only up to half of the value. Courts do not permit people to convert multi-unit investment properties, such as apartments or motels, to homestead by the owner's occupancy of a single unit therein.

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Several people who are contemplating voluntary foreclosure have asked me whether they should continue paying their homeowner or condominium dues during the foreclosure process. I have recommended that homeowners stop paying homeowner dues if they are voluntarily surrendering their homes to their mortgage lender. I believed that the homeowners due would be paid by the party who ultimately purchases the property from the mortgage lender in order to clear the HOA's lien on the property. I have changed my opinion after another attorney pointed out a Florida statute that may impose personal liability for homeowner's dues. Florida Statute 718.116(1)(a) states that homeowners are personally liable for assessments by a condominium association. Florida Statute 720.3085 states that homeowners are personally liable for assessments by a homeowners association.

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A Florida resident's homestead is protected even if he is not residing the house temporarily as long as he intends to return the same property and considers the property to be his primary residence. If and when the facts indicate that the owner intends to abandon the homestead as a primary residence the homestead protection is lost. Abandonment is clear when the debtor sells the homestead property. A Florida bankruptcy court recently considered the question of whether a debtor shows his intent to abandon his homestead when he signs a contract to sell the property. A debtor executed a contract to sell, clearly intending and hoping to sell his homestead and then move, and prior to closing the sale the debtor filed bankruptcy.

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Another attorney told me about a hearing where his client, a judgment debtor, lost $4,000 he had held in a tenants by entireties account because the debtor failed to verify all the documents which were signed when he and his wife opened the bank account. The debtor and his wife together went to their bank to open a tenants by entireties checking account . They signed bank forms. Subsequently, they received written bank statements which were titled as husband and wife, tenants by entireties. A judgment was entered against the husband. The husband's judgment creditor garnished the joint account, and the creditor issued a subpoena of all bank records regarding the account. The debtor's attorney filed a motion to dissolve the writ of garnishment on the grounds that it was clearly titled as a tenants by entireties account. The court denied the motion and sustained the creditor's writ of garnishment.

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A large proportion of people seeking bankruptcy or asset protection advice are homeowners facing mortgage foreclosure. Up to now, most of my clients report that their mortgage lender and mortgage service company were reluctant to modify mortgage terms and payments although an increasing number of mortgage lenders had eased procedures for short-sale approval. This past Saturday's Wall Street Journal had two articles about mortgage lenders' new programs to help homeowners avoid foreclosure by mutual modification of mortgage terms. Examined closely, these new programs, while welcome, apply to a limited segment of homeowners with problem mortgages and upside down houses. Continue Reading...

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