I have had many clients who did not qualify for homestead protection because their primary residences was situated on a lot over ½ acre in lot size within the City limits. These clients usually ask whether they can claim a homestead exemption on the just the portion of the lot where their house sits if that lot portion is less than the ½ acre limit.
A Florida bankruptcy case considered a debtor who owned a house situated on a lot over one acre in size within a city. The majority of the lot was submerged under a lake. Before filing Chapter 7 bankruptcy the debtor executed a deed conveying the submerged land. He retained less than ½ acre where his house was located. Evidence showed that the intent of the conveyance was to protect the house in bankruptcy by qualifying for the Florida homestead exemption.
The court said that the debtor was not disqualified from a homestead exemption because the purpose of the deed was to protect the property in bankruptcy. There is not a fraudulent transfer exemption to homestead protection. Nevertheless, the bankruptcy court did find that applicable municipal ordinances required city approval for the deed, and because the debtor neither received nor applied for approval the subdivision of the land was not legal. Even though the debtor executed and recorded a deed transferring part of his property and reducing the size of his residential lot the debtor’s failure to comply with local law meant that the transfers were not valid. The court ordered the entire land sold and that the homestead exemption be applied pro rata based upon the land area that pertained to the residential use. 2019 WL 1528105
The debtor may appeal this case so the final result is not known. However, judgment debtors who own large residential lots within a city may carve out part of the property for homestead protection if they legally can subdivide their land according to local land use and zoning regulations.