Does renting a room in a homestead property destroy the unique protections of a Florida homesteaded property?  The Second District Court of Appeal said no. Homestead property which is rented to tenants loses protection from creditors (and therefore the homestead exemptions) if the rented portion contains completely separate living quarters or common areas, such as separate living rooms and kitchens, and can be divided by imaginary horizontal or vertical lines, such as duplexes and triplexes.

In Anderson, the Decedent died owning a 4 bedroom house.  At the time his death, the Decedent lived in one bedroom and rented the other 3 bedrooms to tenants.  The Decedent had $38,000 in judgment liens at the time of his death, and a creditor was attempting to enforce these against the Decedent’s estate.

The Decedent’s son petitioned the probate court, seeking a judicial determination that the Decedent’s entire home was protected homestead, and therefore exempt from creditor claims.  In response, the creditor argued that 75% of the value of the home should not be protected – because it was rented to tenants – and therefore it could be used to pay creditor claims.  The trial court agreed with the creditor, but the Second District Court of Appeal reversed.  The Second District held that, despite the 3 rooms being rented, the entire house was indeed protected homestead.  The Anderson court reversed and remanded the case back to the trial court, with instructions to grant the petition and enter an order reflecting that the entirety of the property at issue was the homestead of the decedent.

In support of their decision, the Second District looked to a prior Second District 1992 opinion, First Leasing & Funding of Florida, Inc. v. Fiedler, 591 So. 2d 1152 (Fla. 2d DCA 1992).  In that case, the Second District suggested a 2-part analysis to determine whether to extend the homestead exception to an entire property when a portion was rented by the owner.  This analysis required considering whether (1) the residence was merely a fraction of the entire property, and (2) whether the property could be severed from the rest of the property, such as by using an imaginary line.

The difference is easier to imagine in comparing a single-family home with a duplex or triplex.  In a single-family home, where bedrooms are rented but common areas are shared is not subject to dividing, and courts have found that these are not severable so the entire property is homestead.  However, a duplex or triplex could be divided by an imaginary horizontal or vertical line; the homestead protections would govern only the part of the property where the owner resided and not the other part.

This is consistent with public policy and protection of homestead to an entire property from the reach of a judgment creditor, so that upon the death of the owner, the property would pass to the heirs.  This is a Florida constitutional protection, and analyzed by the Florida Supreme Court:

As a matter of public policy, the purpose of the homestead exemption is to promote the stability and welfare of the state by securing to the householder a home, so that the homeowner and his or her heirs may live beyond the reach of financial misfortune and the demands of creditors who have given credit under such law.

Snyder v. Davis, 699 So. 2d 999, 1002 (Fla. 1997)(further citation omitted).

In sum, if you are faced with real property which is subject to homestead exemption, and the owner of the real property has died, your probate lawyer should be advised of same in the event any creditor seeks to make claim on the property.