Florida’s Second District Court of Appeals, in the May 2020 opinion of Anderson v. Pets, held that a decedent’s constitutionally protected homestead protections were not lost by renting out rooms in his Florida homestead property. The creditors of decedent’s estate could not satisfy their liens from decedent’s homestead property. This is one more in a long line of decisions affording the utmost protection to homestead property, in line with Florida’s Constitution.
The Facts Of Anderson v. Pets
Richard Anderson II (“Anderson”) filed a petition seeking a determination from the Florida probate court that his deceased father’s residence was constitutionally protected homestead. As is standard with Florida homestead petitions, the petition asked the probate court to enter an order “determining that the Property constituted the exempt homestead of the decedent, title to which, upon decedent’s death, descended and the constitutional exemption from claims inured” pursuant to article X, section 4 of the Florida Constitution.
Creditors of the decedent’s estate filed a statement of claim in the probate case for judgment liens totaling almost $40,000.
The Florida probate court entered an order finding that the home was occupied as decedent’s homestead, and that decedent rented out three rooms of the home. The Florida probate court found that the rented portion of the home lost its constitutional homestead protection, ruling that 75% of the decedent’s property was not homestead at the time of his death, and thus subject to the judgment liens filed by the creditors. The remaining 25% passed to decedent’s heirs and was protected homestead beyond the reach of decedent’s creditors.
Florida’s Constitutional Protection of Homestead Property Is Liberally Construed
The constitution of Florida protects a person’s homestead property from forced sale and creditors. Article X, section 4, of the Florida Constitution. Read the Complete Guide To Florida Homestead, where we discuss the constitutional protections and more.
The constitutional provision protecting homestead property is liberally construed:
Further, “the ‘burden is on the objecting party to make a strong showing that the claimant is not entitled to the claimed exemption.’ ” Id. (quoting In re Binko, 258 B.R. 515, 517 (Bankr. S.D. Fla. 2001)). Accordingly, the burden of persuasion rests upon Ms. Letosky. Because “[i]t is well settled that homestead property devised to an heir is protected from forced sale to pay creditors’ claims of the decedent and administrative expenses of the estate under Article X, Section 4 of Florida’s Constitution,” Estate of Shefner v. Shefner-Holden, 2 So. 3d 1076, 1078 (Fla. 3d DCA 2009), the strong burden will require heavy lifting.
Does Florida Homestead Lose Its Constitutional Protections Because Rooms Are Rented Out?
No, when rooms of a Florida homestead single family residence are rented out, the property maintains its homestead status. The Court of Appeals analyzed several pertinent cases in reaching its decision.
First Leasing & Funding of Florida, Inc. v. Fiedler
First, in First Leasing & Funding of Florida, Inc. v. Fiedler, 591 So. 2d 1152 (Fla. 2d DCA 1992), a creditor attempted to levy a judgment against a triplex apartment. The owner lived in a portion of the apartment, and was renting out the other apartments. The court determined that the entire triplex was entitled to homestead protection and was insulated from the creditor’s reach.
The appeals court applied the rationale in First Leasing in determining that the Florida probate court erred by not extending the homestead protections to the entire property, stating:
In First Leasing, this court suggested a two-part analytical framework in determining if the homestead exemption extends to the entire property: first, the court must determine whether the debtor’s residence is a fraction of the entire property; and second, the court must determine whether the property can be severed-that is, by using an imaginary line the residence can be severed from the remainder of the property. 591 So. 2d at 1153. Applying this test to the single-family residence at issue here, the answer to each question is no. Mr. Anderson’s father resided in the home and, like the tenants, shared the common areas of the house. Further, the rented bedrooms in the home cannot be severed from the residence by an imaginary line without destroying its utility as a single-family residence. Thus, under First Leasing, the probate court erred by not affording homestead protection to the entirety of the property.
In re Bornstein
In In re Bornstein, 355 B.R. 462 (Bankr. M.D. Fla. 2005), the issue was whether a debtor, who lived on one side of a duplex and was renting out the rooms on the other side, could claim the total value of the duplex as exempt Florida homestead.
The court stated that the homestead exemption limits the homestead exemption “to the residence of the owner or the owner’s family.” Importantly, the bankruptcy court also noted that “single-family residences are distinguishable from the duplex at issue in that case.”
In re Ballato
In In re Ballato, 318 B.R. 205 (Bankr. M.D. Fla. 2004), the issue was whether the presence of persons living in the home who were unrelated to the homeowner eliminated the homeowner’s homestead exemption. The court stated:
In the instant case, it is undisputed that the Property is a single-family residence, and that there are no severable portions of the Property being used for income-producing purposes. Even assuming, as [the creditor] asserts, that unrelated persons were living with [the homeowner], and further assuming that those persons were paying rent for the use and occupancy of portions of the Property, the fact that the Property is a single-family residence distinguishes it from the cases cited above.
In re Makarewicz
In yet another bankruptcy case, In re Makarewicz, 130 B.R. 620 (Bankr. S.D. Fla. 1991) the court held that:
[A] “divisibility” test should be used to determine whether the homestead exemption is available: is the rented unit “susceptible to division by perpendicular and/or horizontal lines” and is the rented unit “lawfully conveyable as an independent parcel under existing law.”
A Single-Family Residence That Constitutes Florida Homestead Is Not Typically Subject To Dividing
The language of the Florida constitution is clear and unambiguous. The Florida constitutional homestead exemption is limited to the residence of the owner or the owner’s family. Here, the common areas and rented rooms could not be severed from the residence by an imaginary line, and each area was not separately conveyable as an independent parcel. “A single-family residence that constitutes homestead is typically not subject to dividing. Therefore, the renting of the three bedrooms did not eliminate the homeowner’s claim of homestead exemption to the entire property.”
In conclusion, the court noted the public policy of the Florida homestead exemption to promote stability and welfare of the state by securing the home from an owner’s financial misfortune and demands of creditors, and stated:
“It is well settled that homestead property devised to an heir is protected from forced sale to pay creditors’ claims of the decedent and administrative expenses of the estate under Article X, Section 4 of Florida’s Constitution.” Estate of Shefner, 2 So. 3d at 1078. We hold that article X, section 4, of the Florida Constitution, under the facts presented here, protects the homestead from the reach of a judgment creditor so that upon the death of the homestead property owner, the property passed directly to the heirs.
Written in 1987 and still a true representation today: “In the century which has passed since the enactment of Florida’s first homestead exemption clause, in 1885, not a single reported case has declared a residential unit occupied by the owner as his family home to be non-exempt simply because the owner conducted business activities within those premises.” Edward Leasing Corp. v. Uhlig, 652 F. Supp. 1409, 1416 (S.D. Fla. 1987).
The property remained the Florida homestead of the decedent, even though he was renting out three of the rooms upon his death. To learn more about homestead, read our Complete Guide to Florida Homestead.