As long as a property qualifies as the owner's homestead, Article X, Section 4(a)(1) of Florida's Constitution prevents judgment liens from attaching to it:
“There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on” a natural person’s homestead.
But what if the owner sells the property and invests the sale proceeds in securities while looking to buy a replacement homestead? Can a judgment creditor grab the proceeds, or are they still protected?
These questions were answered as to sale proceeds held in a most conservative, safe form - a bank account (actually, an attorney’s trust account) in Orange Brevard County Plumbing & Heating Co. v. LaCroix, 137 So.2d 201 (Fla. 1962), which held them protected from creditors as long as these criteria are met:
- there must be a good faith intention, prior to and at the time of the sale, to reinvest the proceeds in another homestead within a reasonable time;
- the funds must not be commingled with other monies; and,
- the proceeds must be kept separate and apart and held for the sole purpose of acquiring another home.
The limits of this protection were tested recently in JBK Associates, Inc. v. Sill Bros., Inc., 41 FLW S189a (Fla. 2016), which concerned proceeds invested in a less-safe form - mutual funds and stocks.
JBK obtained a large judgment against Patrick Sill, who owned a homestead property with more than $400,000 in equity. Sill sold the home. He opened a Wells Fargo Advisors brokerage account titled "FL Homestead Account" for the proceeds, investing them in a variety of mutual funds and stocks. JBK's efforts to garnish the Wells Fargo Advisors account were rejected by the trial court and the Fourth District Court of Appeal, which each concluded that because Sill had expressed the intent to use these funds to purchase, and in fact ultimately did purchase, a new homestead with these funds within a reasonable time, the funds retained their protection from creditors.
The Florida Supreme Court agreed, and wasn't bothered that Sill chose relatively more risky securities investments over the safety of a bank account.
"In today’s economic climate, in which traditional bank accounts do not garner any significant amount of interest earnings, we do not believe placing the proceeds from the sale of a homestead in the type of safe investment account at issue here demonstrates an intent so different from reinvestment in a new homestead within a reasonable time as to violate Orange Brevard."
While JBK is silent on how long this protection lasts (established in Orange Brevard as the mythical “reasonable time”), it expands the type of investment in which the proceeds may be placed. Florida’s homestead protection is to be liberally construed in favor of the property owner. Speculative vehicles such as futures contracts and options are likely still out of the question. But those intending to purchase a new homestead with the proceeds within a reasonable time now have more choices as to where to hold the funds than traditional bank accounts while they hunt for a new home.
- Florida’s Narrow Take on Force Majeure Clauses
- What Does “Ordinary Wear And Tear” In A Commercial Lease Really Mean?
- Landlord Liable for Subtenants' Trademark Infringement
- Landlord Loses Additional Rent Dispute Based on Lease Language
- My Dog Ate My Lease Renewal Notice
- The continuing lease guaranty that didn’t continue after all
- Court stops foreclosing lender from getting rents collected by property owner
- Could an eviction lawsuit result in a tenant paying less rent?
- A Pricey Drafting Error in a Jewelry Store Lease
- What happens when a lease doesn’t say how to calculate rent after renewal?
- Business of Real Estate
- Liens and encumbrances
- Americans with Disabilities Act
- Ad Valorem Assessments
- Attorneys' Fees
- Loan guaranties
- Promissory Notes
- Restrictive Covenants
- Commercial Brokerage
- Cyber fraud
- email hacking
- Property Tax
- Lis Pendens
- Partnerships and LLCs
- Creditor's Rights
- March 2020
- October 2019
- August 2019
- July 2019
- May 2019
- February 2019
- July 2018
- June 2018
- May 2018
- March 2018
- February 2018
- January 2018
- October 2017
- August 2017
- July 2017
- June 2017
- May 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016