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06-19-14 It's The Law - Homestead Is Not Without Quirks

It's The Law

Homestead Is Not Without Quirks

(06/19/14)

Question:

My friend owns a home but he does not live in it. He claims it gets Florida's homestead tax break. How can that be?

Answer:

Florida homestead is a complicated animal. The statutes and the Constitution provide special treatment for homestead in form of exemption from creditor claims, restriction on transfer of title at death and property exemption. Cases construing Florida law in one of those areas do not necessarily extend to the others.

Special tax treatment of Florida homestead is based on Florida's Constitution. Article VII, Subsection 6, provides exemptions from property taxes for "every person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner..." The Constitution further provides that ownership may be by equitable title, by the entireties (husband and wife) jointly or even indirectly by stock ownership or membership in a corporation owning title or a lease initially in excess of 98 years. Not more than one exemption is allowed any individual or family unit or with respect to any individual property.

For property worth more than $75,000, the exemption can total $50,000 plus additional exemptions which may include veterans, widows and widowers, disability, deployed military and surviving spouse of military veterans or first responders who died in the line of duty. That makes homestead status quite valuable. But, homestead tax benefits are not automatic. Application must be timely made with the County Property Appraiser and must be refiled annually. When a homeowner delays filing until years after acquiring property, the effective date of the homestead benefits is the date of filing. It is not retroactive.

Article VII, Subsection 4 of the Constitution, is known as the Save Our Homes amendment. It limits increase in assessed value for homestead property to lesser of 3% per year or increase in the consumer price index. Over the years, Florida courts and Florida's Attorney General have been asked if Florida's homestead tax exemption applied to different circumstances. The courts and Attorney General have consistently noted that the Constitutional homestead exemption attached to "any estate in land" owned by a natural person.

Trustee or beneficiary of a trust can qualify for homestead tax treatment, as long as the person seeking to qualify satisfies residence and other requirements of the Constitution and statues. The primary requirement is that the property be the primary residence of the person seeking homestead status. The County Property Appraiser generally requests a copy of any trust when property previously qualified as homestead is transferred to a trust. The Property Appraiser reviews the trust to make sure the beneficial ownership and right to reside in the property continues in the person who qualified the property for homestead prior to the transfer. If it does, homestead status continues without interruption.

A life estate has been held to be sufficient to qualify for homestead treatment. Under a life estate, property is deeded to a person for his or her life with a provision that the property automatically passes to another person when the life estate owner dies.

The title holder does not have to reside in the property for it to qualify for homestead tax treatment. Florida's Constitution and statues clearly state that homestead property does not have to be occupied by the owner, but may be occupied by others who are "legally or naturally dependent upon the owner" to qualify for homestead tax treatment. In 1982, Florida's Attorney General issued an opinion that property owned by an out-of-state owner could qualify for homestead tax treatment if occupied as the permanent residence of the owner's child or children while attending college.

Multiple owners create additional issues. If owned as a tenancy by entireties (husband and wife survivorship) or joint tenants with right of survivorship and only one owner qualifies for homestead, that owner may generally apply for and obtain homestead tax treatment for the entire property. If the property is owned as tenants in common, partnership or otherwise, an owner is limited to homestead tax benefit in proportion to the owner's ownership interest.

Perhaps most interesting is that a buyer of real property can qualify the property for homestead tax benefits if the buyer takes occupancy, even before closing on the purchase. The buyer under a contract for sale has an equitable ownership interest in property which qualifies for homestead exemption, even if the contract is not recorded in the public records. The buyer must make application through the Property Appraiser and the Property Appraiser will generally add the buyers name to the tax records without removing the seller's name. The exemption will apply even if the seller continues to pay the taxes.

Because the financial benefit of homestead qualification can be significant, attention should be paid to that detail in almost every residential sale. Good legal and tax advice in this context can be worth a lot.

By: William G. Morris, Esquire

William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.

Questions for this column can be sent to: William G. Morris, e-mail: wgmorrislaw@embarqmail.com or by fax, (239) 642-0722 or

The Marco Island Eagle

Other articles of interest can be viewed at our website, www.wgmorrislaw.com.