Homestead Adandonment-When is your homestead not your homestead anymore?
Although there are exceptions, Florida has an uncapped homestead exemption that permits homeowners to protect the full value of the equity in their homesteads from most of their creditors’ claims. Combined with the absence of a state income tax (and idyllic weather), Florida remains an attractive place to call home for people looking to either live here less than year around or to protect wealth, or both.
A homestead owner is not required to reside in their homestead to receive the exemption’s protection. However, as a recent case demonstrated, the bounds of the homestead protection afforded to a non-homestead resident claiming homestead protection to the property or its sale proceeds are limited.
In re Erik Martinez, Case No. 18-10307-BKC-MAM, the debtor was not residing in his homestead when he filed bankruptcy in 2018 and claimed his homestead exemption. The debtor owned a home that was subject to a 2016 purchase and sale agreement. When the debtor entered into that agreement, he had already entered into an agreement to purchase another property he intended to remodel and make his homestead. That property was never purchased. The debtor lived in various locations until the term of the tenancy of the occupant of his purported homestead expired-he used the down payment from the purchase and sale agreement as advanced rent. When the debtor filed bankruptcy, the optionee/purchaser still resided in the property the debtor was claiming exempt as his homestead.
Judge Mora recognized that the law is clear in Florida: the proceeds of a sale of a homestead retain their homestead character after a sale so long as the debtor has a good faith intention to reinvest the proceeds into another homestead. There are two tests to determine whether a debtor is entitled to homestead protection. The first is actual occupancy. When the debtor is not occupying the homestead on the day they file a bankruptcy petition or when an execution occurs, courts look to subjective intent. Since subjective intent is, well, subjective, courts look for objective proof to evidence that intent. Indicia of the requisite intent include commingling or use of sale proceeds, driver’s licenses, property tax status and payments, voting records, tax returns, billing addresses, the reason and duration of the debtor’s absence from the subject property, and any history of use or occupancy of the subject property during their absence or another property during their absence.
Even though homestead laws are to be liberally construed in favor of the homeowner, when a person making a claim of homestead exemption is not residing in that property, they bear the heavy burden of proving their subjective intent objectively. Understanding these considerations and planning in advance is the key to defeating claims of homestead abandonment.