A homestead is a land and buildings occupied by the owner as a home for himself/herself and family, protected by homestead law from his creditors. A homestead law allows an individual to register a portion of his/her real and personal property as homestead. The purpose is to make the registered portion of the individual’s estate off-limits to most creditors. The homestead law is for the preservation of the family farm, home, or other assets in the face of severe economic conditions.
The rules governing the nature of property entitled to be registered as homestead property adhere to regional patterns. Real property subject to the homestead exemptions vary in value. Property subject to homestead exemption is described in each homestead statutes. An undivided interest in real estate, accompanied by the exclusive occupancy of the premises by the owner of such interest and his/her family as a home, is sufficient to support a homestead exemption.
Usually, a homestead land includes buildings and other improvements essential or convenient to the use or enjoyment of the land as a homestead. A homestead is the place where the head of the family resides with his dependents. The homestead includes land used for the family’s comfort and sustenance, adjoining or appurtenant to the homestead. Most jurisdictions include within homestead, the land used as a means of living.
House used as residence is necessarily embraced in the word homestead[i]. Homestead generally signifies a dwelling house with customary appurtenances. Homestead includes buildings that are necessary for use where the family resides[ii]. When a chattel is annexed to land as fixture, acquiring the character of realty, the homestead exemption extends to the chattel and the land to which it is affixed. A homestead right can be attached to a chattel when the chattel is annexed to the freehold. The chattel must become a fixture and must acquire the character of realty[iii]. A building independent of the land supporting it can acquire a homestead right. However, the head of the family must own and occupy the house. The head of the family need not have interest in the house. The statutory phrase “occupied” must not be construed narrowly. Narrow construction deprive a debtor of a homestead exemption which s/ he would be entitled to[iv].
A person can claim a homestead that encompasses more than one tract of land. An owner can occupy two tracts of land. An owner of two contiguous tracts of agricultural land can have dwelling-house in each. Both tracts may be worked by one owner. The owner sometimes residing in the one house and sometimes resides in the other. The fact of such tenancy did not bar the owner of the right to select the lands as a homestead[v].
A claim to statutory exemption for homestead is limited to:
- Value; and
- character of the land as urban or rural.
A homestead declaration protects property from creditors up to the level of the exemption. The statutory protection will not extend to that portion of a debtor’s land exceeding statutory limit. When the homestead exceeds the statutory amount, a creditor can enforce his/her claims against the excess. Usually state constitutional provisions describe the monetary limit on the amount of an exemption that a debtor can claim. Moreover, such statues contain area limits on the exemption. Most states impose a dollar limit on debtors’ homestead exemptions. However, in some states homestead exemption is unlimited.
Moreover, a homestead holder has a right to hold as exemption money or profit derived from the use of homestead. Additionally, rent is included in profit derived from the use of homestead[vi]. However, there is no provision in the constitution or laws specifically exempting rents arising from a homestead. The statutes on homestead exemption are to be construed liberally to comport with their beneficent spirit of protecting the family home[vii].
Some statutes exempt money gained from the sale of a homestead property. For a debtor to exempt money gained from the sale of a homestead property, the debtor must establish some link between the money at issue and the homestead in question. A debtor may claim the homestead exemption with respect to the proceeds of the sale of his/her residence. A debtor must claim exemption before s/he reinvests those proceeds into another residence. Additionally, s/he can demonstrate his/her intention to make such a reinvestment within a reasonable time[viii].
In some jurisdictions, an owner is entitled to receive the amount of the homestead exemption on sale of the homestead property. The sale can be conducted voluntarily by the owner or involuntarily by the sheriff pursuant to writ of execution[ix].
In order to claim a homestead exemption a homestead holder must enjoy the ownership and occupation of the homestead. A person’s homestead right in property will not rise higher than the right, title, or interest that s/he owns in the homestead property[x]. Exclusive occupancy of the property by the claimant and family as a home has been held to be a requirement for exemption. However, two separate homestead estates cannot coextensively exist in the same premises at the same time.
[i] Cullers v. James, 1 S.W. 314, 315 (Tex. 1886).
[ii] In re Snellings, 10 B.R. 949 (Bankr. W.D. Va. 1981).
[iii] Gann v. Montgomery, 210 S.W.2d 255, 258 (Tex. Civ. App. 1948).
[iv] In re Wells, 132 B.R. 966, 968 (Bankr. D.N.M. 1991).
[v] McCarthy v. Kelley, 63 Mont. 233, 238 (Mont. 1922).
[vi] Sticka v. Casserino (In re Casserino), 379 F.3d 1069, 1074 (9th Cir. 2004).
[vii] Dwyer v. Cempellin, 424 Mass. 26 (Mass. 1996).
[viii] In re Huth, 122 B.R. 724, 726 (Bankr. E.D. Mo. 1988).
[ix] Van Bogaert v. Avery, 271 Cal. App. 2d 492, 497 (Cal. App. 2d Dist. 1969).
[x] Proviso Township High School Dist. v. Hynes, 84 Ill. 2d 229, 232 (Ill. 1980).